The proliferation of cryptocurrency “accelerators” signifies the increasing intrigue with cryptocurrencies, including Bitcoin, Ethereum, and Dogecoin. The accelerators help people access cryptocurrencies and become “miners” of different currencies with a promise of increasing personal wealth and contributing to the growth of the currencies phenomenon.
Advocates of cryptocurrency production and trading suggest that new currencies will improve access to banking, facilitate local and international transfers, and offer an opportunity to avoid the costs of fluctuating local currencies. Moreover, there are arguments that it diversifies economic power, which is particularly attractive in a highly unequal and corruption-prone environment. It all sounds promising.
Concerns with cryptocurrencies?
But, recent reports have pointed out serious concerns with cryptocurrencies, including adverse environmental impacts. For one, the creation of coins requires significant energy and computing resources. At a more personal level, an individual could lose significant wealth because the value of cryptocurrencies is highly unpredictable. In the face of unpredictability, no person (including Elon Musk), country, or economy supports the value of a cryptocurrency at the time of writing.
Like traditional currencies, the worth of a currency is a perception of its value and what it can purchase. However, in contrast to traditional currencies, the value is not sustained or supported by a formal entity (like a state or government), such that declines in perceived value will not result in centralized intervention. It is quite possible that the value of a cryptocurrency could bottom out at any time without recourse to the currency holder.
Cryptocurrency meets the scam economy
In Nigeria, Amos Sewanu Omotade-Sparks, a local technology entrepreneur, had a dream in 2017 to develop a new cryptocurrency that would end poverty in short order. Omotade-Sparks set out to create Pinkoin and a debit card option allowing Pinkoin to be used. Underlying Pinkoin was Omotade-Sparks’ Inksnation infrastructure for managing the cryptocurrency’s maintenance.
According to Techbuild, like some cryptocurrency purveyors, Omotade-Sparks suggested that Pinkoin would democratize money and give more power to the people, with peoples’ support. It was this combination of a message of empowerment and opportunity that drew some Nigerians to this domestic brand. Moreover, Omotade-Sparks was a crafty marketer for Pinkoin and Inksnation. Inksnation has a Facebook page with nearly 17,000 followers and an active feed. The images on the Facebook page emphasize wealth and religious overtones (more on this later). Other Facebook pages celebrate the currency.
However, the tune has changed on some pages, more recently, some of the Facebook pages issued threats to the government for labeling the company and those involved as scammers. Platforms, such as Techbuild, mention this issue of a scam or ponzi scheme but agree with Inksnation’s assertion of legitimacy by staying at “This looks like a well-planned system that is set to succeed, all things being equal. Therefore, it can be said to be legit.” These comments are against the backdrop of an investigation by the Economic and Financial Crime Commission (EFCC) of Omotade-Sparks and his exploits. Securities and Exchange Commission of Nigeria (SEC) has also voiced concerns about Omotade-Sparks’ activities.
In May 2021, after avoiding arrest, Omotade-Sparks was arrested by the EFCC on a nearly 75,000 USD ponzi scam.
Some cursory evidence of the scam can be seen in suspect ratings of the Pinkoin app in which people have lacked access to funds through the platform.
Although Omotade-Sparks is yet to be convicted of any crime, the story of Omotade-Sparks is a cautionary tale where speculation in the cryptocurrency space may be combined with uncouth financial activity. One of the ironies is that Omotade-Sparks’ company complimented the rise of EFCC chief Abdulrasheed Bawa (below) and now the organization is under investigation.
The rise of Zugacoin
The Inksnation group has pivoted since the arrest of Omotade-Sparks. Overnight they began promoting a new coin called “Zugacoin.” The new coin was founded by Archbishop Sam Zuga, also known as “Jehovah’s Field Marshall,” to improve the lives of young people and to avoid the need of taking loans from China. An artist even rendered an animated futuristic town created with the wealth of Zugacoin called “SmartCity.” Zugacoin was launched by the Samsuga Foundation and is presently promoted on Zuga’s social media accounts. As he promotes the currency in his name, Zuga resists attempts by the Nigerian government to regulate cryptocurrencies.
This form of risky investment preys on the trust that many have in temporal religious authority. The ultimate result is the potential relationship between an organization under investigation by the EFCC and a religious figure. Although the pro-poor message is welcome, the solution is not. The comments on the SmartCity video including one that suggests that someone lost all their money in Zugacoin and other online commentary indicate a devil’s bargain with the temptation of fast money without building real value — a new billionaire’s club of sorts.
It can be expected that similar schemes will continue to arise in the highly unregulated cryptocurrency space combined with economic stagnation and currencies with declining value. Ultimately, regulation needs to be a proactive rather than a reactive exercise given that the pace of “innovation” speeds ahead often without a true understanding of the short and long-term consequences.