Analyst and Data Scientist Matt Ahlborg of UsefulTulips.org compiled research earlier this year revealing how Bitcoin is being more widely adopted in oppressed economies around the globe. The research challenges recent comments from entrepreneur Mark Cuban stating that there is “no chance” for Bitcoin to become a reliable currency.
The data, says Ahlborg, suggests that “Bitcoin is working as Satoshi intended”. When Satoshi Nakamoto, the pseudonymous creator of Bitcoin published the Bitcoin whitepaper back in 2009 it was clear that the inventor wanted to offer citizens a new type of currency that was not controlled by corrupt governments or banks. However, a few years later Nakamoto appeared to abandon the project and since then there has been some debate as to whether it still follows his original vision.
Ahlborg attempts to answer this question through an analysis of data from the peer-to-peer Bitcoin trading site Localbitcoins.com. The site has been around for almost as long as Bitcoin itself and is one of the easiest ways to buy Bitcoin without involving a bank or third-party platform. This makes it accessible to anybody, anywhere in the world, particularly in countries where cryptocurrencies are banned and banks won’t deal with them.
One of two factors that influenced Ahlborg’s decision to use Localbitcoins.com is that the majority of transactions are fiat-to-crypto and the second is the high fees. Together, these factors reduce the high prevalence of speculative trading that is commonly found on other exchanges.
Adoption in developing nations
The overall goal of the research was to discover the impact Bitcoin is having in various countries and compare its utilization against socioeconomic indicators to reveal whether it is truly being used as originally intended.
To some degree, the analysis appears to have found certain trends that favor the proposition, although Ahlborg admits that the data is limited by what is available through Localbitcoins.com. In the early years, it appears Bitcoin was more heavily utilized in countries with economic freedom, such as North American or EU countries. Over time, though, as knowledge of its existence spreads, Bitcoin seems to have become more attractive in developing nations, particularly ones with economic restrictions.
To balance out the perceived global inequality between Internet connectivity and wealth, Ahlberg created and equation that uses GDP, population, Internet penetration and Bitcoin’s volume and price to create a metric for each country. Countries that came out with a high metric included Russia, Nigeria, Kenya, Venezuela, and Panama.
Through this, we can see that political and economic conditions are particularly influential to the adoption of Bitcoin. The recent economic crisis in Venezuela, sanctions imposed on Russia, and China banning Bitcoin all appear to have increased its utilization in those countries. Other factors include the lack of Paypal in West Africa, a Ponzi scheme in South Africa, and offshore banking in Panama.
Read the full analysis here.