What exactly is CoinAfriq?

This is a question that comes up a lot. What exactly is CoinAfriq? What is a digital currency? How does it differ from traditional currency? These are all great questions, so let’s start delving into them!

What is a digital currency?

Digital currency is a secure form of monetary value. Traditional currencies (today) are often referred to as Fiat Currencies. They are government legal tender, but not backed by a tangible asset or commodity. In the old days, currency for example was backed by real assets such as precious metals (gold, silver,etc.).

The problem with Fiat Currency is that it is prone to inflation, in fact in some cases even hyperinflation (for example the Weimar Republic in Germany[1]). Due to international disagreements, political unrest and conflicts, a fiat currency can become so inflated that it’s functionally useless for most people – imagine paying a million bucks for bread!

Fiat currencies can also lose backing, that happens if the government or central bank either refuses to acknowledge its value or is unable to. A great example on our own continent would be Zimbabwe, in which hyperinflation occurred with the Zimbabwean Dollar.[2]

Digital currency differs. There are no centralised institutions, no government, no bank can decide to create more CoinAfriq, nor change any terms of use. A digital currency is truly yours, with no third party needed. It is secured by advanced security procedures often referred to as cryptography – in short, your data is fully encrypted. Furthermore, its open to anyone, all you need is an internet connection and a digital wallet.

It’s like cash – just digital. You can send payments to anyone without the need of a bank, and unlike hard cash, it’s secure and not prone to theft. Keep your wallet safe, and you’re set.

What is CoinAfriq then?

CoinAfriq is a digital currency. Where we differ with other digital currencies (for example BitCoin or Ether Coin) is we used a more secure system of cryptography than what is currently used by digital currencies.

We work on a Proof of Stake system, but with a twist. Ours is called Nominative Proof of Stake.

Fancy words, but what do they mean?

The first digital currency that was secure was BitCoin. BitCoin laid the foundation, but many improvements could and were made. For one, BitCoin used a consensus system called Proof of Work. This system worked by having individuals or business with computers mine new currency. The problem with this approach is on multiple fronts.

The first is what is often referred to as the 51% attack. This basically means unauthorised production and spending of meaning, commonly referred to as double-spending in the financial world. Good money is verifiably scarce, if money can be spent more than once, it gets devalued and is plagued with inflation. It also breaks users trust and devalues the currency.

Another problem is the entry barrier gets raised. A powerful computer will be able to mine faster than an entry level computer, leading to a situation where only those already blessed with financial resources can truly make money. Some even buy ASICs – specialised machines to min more which monetarily prohibitive for most people. To mitigate this issue, some people have joined what is often called mining pools. Here another problem becomes apparent – more centralisation. Control is the problem with centralisation, because these mining farms essentially control all the rewards.

The other huge problem is environmental concerns.
Mining coins is very intensive and expensive in terms of computer hardware and electricity. The more electricity used, the more it affects our planet. Furthermore, the computational works has no other purpose except to provide security to the network that provides open access on the underlying side. The problem is so severe that the University of Cambridge in 2018 estimated that BitCoin’s energy consumption was equivalent of Switzerland. In addition the Vice-Chair of the European Securities and Markets Authority, Erik Thedéen, called on the EU to ban Proof of Work in favour of Proof of Stake. Ethereum moved to Proof of Stake on the 15th of September 2022 in an event known as The Merge. This lowered their energy consumption by 99%.

Traditional Proof of Stake has much lower energy emissions, but that doesn’t sadly mean that its without fault either…

In some cases, traditional Proof of Stake can be less secure than Proof of Work – not words you want to hear when talking about finances. The other problem with the traditional Proof of Stake model is centralisation – those who have the most monetary value in digital currency could have a major influence on the management and direction of the digital currency.

To solve this problem, various models were developed. Each had strengths and weaknesses. We chose a consensus called Nominated Proof of Stake. Like a committee, it involves an election of validators using a verifiable random function.

Put simply, it allows token holders to nominate validators to represent them in the block validation process. Only nominated validators can participate in block formation and each individual nominator can nominate a specific number of validators. 

To follow, these networks automatically distribute the stake among the participating validators evenly with penalization mechanisms for both validators and nominators in case of malicious activities.

This means – a fair, democratic system that incentivises validators to act honestly.

But what about malicious actors?

A criticism often applied to Proof of Stake models is that there could malicious actors. This is a very valid concern as not everyone online is an honest person. This problem has been referred to as the Byzantine Generals Problem. Fortunately, we’ve addressed this.

Our network is fully Byzantine Fault Tolerant – validators are chosen on the amount of nominations they receive and the stake they hold. Nominators only select validators they believe to be trustworthy and reliable.

Should a malicious actor be found, we use BFT algorithms to ensure that only the correct block is added to the blockchain. In addition there are methods of punishment for malicious and malfunctioning nodes – validators stand to lose their stake if they fail to perform their role.