The Computer Society of Kenya

Since 1986


Frida June 23, 2017

Last week, KICTAnet organised a policy brief for the ICT community about Bitcoin and the Blockchain revolution, which is steadily gaining ground locally and breaking records globally.

So what exactly is Bitcoin and how does it differ from Blockchain? What are the risks and benefits of adopting these technologies at the individual, enterprise and national level?

The audience included ICT Cabinet Secretary Joe Mucheru and thought leaders from academia, the private sector, civil society and the media.

First to be discussed and cleared off the table were the definitions. Bitcoin is defined as a cryptocurrency, which is not the same thing as electronic money or mobile money. Bitcoin is a digital currency, in the same league as the US dollar, the euro or the Kenyan shilling.

A year ago the Central Bank of Kenya (CBK) issued a circular cautioning banks to treat Bitcoin as a risk, given that it was not a legal tender. This sent a chill around software developers experimenting in financial technology.


Wearing the hat of the Central Bank governor, one can understand where he was coming from. Here is a currency that is not owned by anyone, is being minted and distributed by computers online and is spreading like wildfire.

Worse still, Bitcoin customers have no central agency to run to in the event they are swindled. 

The caution from the Central Bank would sound timely, but only if you are thinking from the traditional fiscal perspective.

Blockchain, the technology that is powering Bitcoin, is by design not supposed to have any centralised trust agency to run to in case of disputes. This is because disputes are pre-empted and not allowed to occur in the first place through computing protocols.

Only validated and trustworthy transactions are processed while fraudulent transactions are automatically rejected. The trust is therefore in-built within the protocol, which is being executed by a global network of participating computers.


The philosophy behind Blockchain is that placing trust in a centralised agency run by human beings is less reliable than placing trust in some standard open algorithm that anyone and everyone is free to access and scrutinise - in terms of how it is functioning.

Blockchain technology, therefore, decentralises trust agencies by distributing the function of trust among competing interconnected computers that are crunching some algorithm across the globe. "Trust-in-Code" is one of the buzzwords you get to hear in many Blockchain conferences.

Global computers, therefore, keep an open, public database and validate records or transactions that need to be entered into the database. Anyone is free to join and start participating or transacting by simply downloading a digital wallet and completing the installation process.

Through computer rather than human consensus, only records that have been validated as authentic are accepted into the public database or public ledger, as it is commonly known.

Any attempt to subsequently or illegally change previous records requires global consensus of computing resources and is considered mathematically impossible.


This is because newly validated transactions are mathematically connected and built on top of previously validated transactions forming a continuous chain of trusted blocks of transactions – hence the term Blockchain technology.

This is one of the strongest features of Blockchain technologies — the fact that the validation process is through an open, mathematical consensus rather than through closed, centralised agencies that are often prone to manipulation or compromise.

Furthermore, validated records remain immutable and cannot be illegally altered, unless the perpetrators get to hack and own a majority of the global computing resources that are currently acting independently of each other, which is another unlikely event, given the decentralised nature of global computers.

The immutability feature within the Blockchain technology is what has powered Bitcoin and other cryptocurrencies into high value global fame.

It is also the same feature that makes Blockchain technology applicable to many other diverse fields that are prone to fraud such as insurance claims, land transactions, election transactions and academic certifications, among others.


Another advantage of Blockchain is that the time and cost for validating and cross-checking transactions is minimal, compared with the traditional centralised systems where, for example, a credit card transaction can take between three to four days before being validated and settled.

Given all these benefits, Mr Mucheru was challenged to reverse the chilling effect the terse circular from the Central Bank had caused in the fintech innovators community.

He, however, argued that the circular never stopped anyone from innovating around financial services, and innovators should therefore continue experimenting and pushing into new frontiers.

Furthermore, he added that the government is already exploring Blockchain opportunities in the public sector and urged innovators to take the lead in proposing Blockchain solutions.

It does seem like the sky is the limit, but it remains to be seen if the political will exists to embrace Blockchain solutions particularly in notorious departments such as lands, transport and immigration.

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