How Nigerians Beat Bitcoin Scams

The fall of 2016 was a sad period for Nigerians, over 3 million people lost their life savings to MMM. Though the government threatened to shut down all bank accounts associated with a scheme, participants still continued with bitcoin until MMM crashed.

Despite this sad occurrence, many participants were convinced that Bitcoin was the future. “It was MMM that made Nigerians understand how Bitcoin worked,” says Lucky Uwakwe, co-founder of Blockchain Solutions Ltd., a cryptocurrency consulting firm in Lagos.

Today, Nigerians are trading about $4.7 million in Bitcoin a week, Uwakwe says, up from about $300,000 per week a year ago. That’s No. 23 globally, according to researcher CryptoCompare—far below the more than $1 billion traded daily in U.S. dollars or Japanese yen, but comparable to the volume of activity in Chinese yuan or Indian rupees.

“The growth has been crazy,” says David Ajala, who runs NairaEx, one of about a dozen digital currency exchanges in Nigeria. “It took us two years to get 10,000 customers. Within the last year, we’ve added 90,000.”

According to Adeolu Fadele, founder of the Cryptographic Development Initiative of Nigeria, “A lot of people have had their fingers burned,” as Phony traders have flooded Nigeria’s cryptocurrency exchanges, messaging apps, and even the streets of Lagos and other cities, promising people fast money and disappearing once they’ve taken theirs.

NEW APPROACH BY AMINU

To curb the scam menace, Nigerians such as Aminu has begun to develop informal groups of traders who take an old-school approach to verifying transactions. After several friends of Aminu’s lost thousands of dollars to scammers, they set up an informal exchange on the messaging app Telegram, trading among themselves. When other friends sought to join the group, Aminu would review their identification and banking documents—comparing passports and papers with the faces in front of him. Sometimes he’d even act as a trusted broker, holding a buyer’s money in escrow until the seller came through with the Bitcoin transfer. Over the past year, he says, his group has grown to almost 800 members.

This sort of facilitator is mostly a digital aboki, the kind of black-market money-changer who lurks outside high-end Nigerian hotels to swap plastic sacks full of weather-beaten naira for stacks of $100 bills and euros. As these informal Bitcoin-centric networks grow and multiply, Aminu says, they’re increasingly populated by people who trade digital currency as a full-time occupation. Because of all this informal trading, the size of Nigeria’s market is probably much more significant than what the public exchanges report, says Uwakwe, the consultant.

Also read: $30 million worth Tether tokens hacked

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Franklin Odoemenam

I'm a cryptocurrency enthusiast, researcher, and blogger. Find all his articles, written on cryptocurrencies during the period

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