All You Need to Know About Cryptos in Nigeria

All You Need to Know About Cryptos in Nigeria

By Chibuike Osigwe

Since the 2009 emergence of bitcoin – the first cryptocurrency – as a medium of exchange and store of value, several similar assets backed by other entities have followed in its steps. They include  major altcoins (alternative coins) such as ethereum, tether, dogecoin, stable coins and non fungible tokens (NTFs).

Although many are familiar with the most popular ones named above, there are over 12,000 different crypto coins in circulation with a value of more than 1.5 trillion dollars, according to Coin Market Cap, a data platform that tracks crypto assets.

What is Cryptocurrency?

In the crypto space, not all assets and terms are cryptocurrencies, although they are classified as such by many, especially by early investors.

Crypto assets are digital assets that leverage cryptography, consensus computer codes, distributed ledgers, peer-to-peer or blockchain technology to function either as a store of value, medium of exchange, unit of account or a decentralized application (DApp). They range from bitcoins, through security tokens to NFTs.

On the other hand, cryptocurrencies are peer-to-peer electronic cash systems. A cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Unlike the normal centralized traditional currencies such as the U.S.dollar and the Nigerian naira, they are not transferred with any intermediary like banks. Instead, the transactions and exchange are distributed among cryptocurrency’s users via the internet. Typical examples include; Bitcoin, Tether and Dogecoin.

Some cryptocurrencies, other than being just a medium of exchange are also associated with blockchain-based platforms. These are distributed computing platforms and operating systems, usually open source, featuring smart contract and application functionality. 

These platforms are the building blocks of decentralized apps. A typical example is ether (ETH), which is the native coin of the ethereum blockchain platform. Ether is the crypto that you actually buy and not ethereum, which is a platform or a blockchain network. 


Unlike bitcoin that is rigid and solely used as a medium of exchange, anyone can build and use other decentralized applications (DApps), run and develop cryptocurrencies on ethereum. Dogecoin, the popular meme coin, together with the stable coin tether run on ethereum. Other examples of cryptos associated with blockchain based platforms are ripple (XRP) and stellar (XLM).

It’s worth noting that cryptocurrencies are different from the Central Bank Digital Currencies (CBDC) that is being proposed and implemented by various countries. While there are similarities in the technology used, CBDCs are different from cryptocurrencies. The major difference is that central bank digital currencies are centralized legal tenders that can be used and accepted for payments anywhere in the country. They operate like the money you see when you check your bank accounts online. The digital naira, otherwise called the enaira, for example, would be issued by the Central Bank of Nigeria and held in citizens’ digital wallet.

Other Types of Crypto Assets

Apart from cryptocurrencies, which are fully independent coins that run on their own blockchain, there are tokens, stablecoins, non-fungible tokens, or NFTs, and decentralized apps. They can still be used as a means of exchange, but that is not their primary purpose. A lot of decentralized applications have tokens and coins associated with them.

Tokens are digital assets defined by a project or smart contract and built on a specific blockchain. They use the blockchain of the parent platform they are based on. The main use of tokens are to serve a particular purpose in decentralized finance (DeFi) projects. There are security tokens and utility tokens.

Utility tokens are designed specifically to help people use a product or service. They help in capitalizing or financing projects for startups, companies or even development groups. The use of utility token is limited to the particular ecosystem that it is designed for. These ecosystem or products are mostly decentralized applications, online exchanges called decentralized exchanges  or financial services, which we know as decentralized finance (DeFi). According to the decentralized application tracker, State of the DApps, there are over 2,500 decentralized applications available and over 1,900 of them are running on the Ethereum blockchain. Notable examples of utility token include

Uniswap (UNI), Aave (AAVE), Tatcoin (TAT), and Chiliz (CHZ)

  • Uniswap is the native token of the Decentralized Exchange, Uniswap. It’s the most popular decentralized exchange (DEX) so far. Unlike centralized crypto exchanges, it doesn’t take control of users’ funds.
  • Aave is a decentralized finance platform or app that allows its participants to lend and borrow crypto. Lenders earn interest in form of the native token, Aave. According to the online tracker DeFi Pulse, it’s currently the largest DeFi app, based on over 13 billion dollars locked up in the app.
  • Tatcoin, founded in Nigeria, is the native token of the ABiTNetwork ecosystem and serves as a transnational currency for all its products. These products include crypto trading, agriculture, crowdfunding and real estate.
  • Chiliz is the utility token that powers, a platform that allows its users trade fan tokens of their favorite sports team. Chiliz (CHZ) is used as the liquidating token for all the fan tokens in the Chiliz Exchange. That is, with a Chiliz token, you can buy the fan token of any sport team. Fan tokens are a type of crypto or token that enable holders to vote on decisions related to their favorite sports team.

Securities tokens are crypto assets that derive their value from other assets, whether physical or digital, which can be traded. Simply put; they are the digital forms of traditional equities like stocks, bonds, exchange-traded funds (ETFs), options and futures. Any traditional equity can be turned into a security token. Investors who own securities tokens can profit from the performance of the token just like the traditional securities and sometimes they earn dividends in the form of additional token. Securities tokens are subject to regulations, hence they are highly regulated by Securities and Exchange Commissions. There aren’t a lot of them out there but most notable example is Blockchain Capital (BCap), the world’s first ever tokenized investment fund and by extension the blockchain industry’s very first securities token.

Another form of crypto token is the NFTs (the Non-Fungible Tokens). They are simply digital assets that represent real-world objects like art, music, games, videos and writings. They are similar to other crypto assets as they run on blockchain technology, though somewhat different. 

As the name implies, they are non-fungible assets, which means that they are unique and cannot be directly interchangeable with each other, unlike fungible assets such as gold, dollar and bitcoin. Fungible assets or tokens have the same properties with another unit of the same token. For example, one ether or bitcoin is the same everywhere no matter the wallet it is stored in. And one U.S. dollar or naira is the same everywhere in the world. 

NFTs a boost to digital art

On the other hand, a unit of any NFT asset is different from the same unit of the same asset. Typical example of NFTs is Axie, the native token of the blockchain-based gaming platform Axie Infinity (AXS), where players earn Axie tokens and cryptos. Here, each Axie is a non-fungible token, with different attributes that are different from one another depending on your wins, and can be sold on the Axie Marketplace.

Crypto assets, whether cryptocurrencies or tokens, are easily liquidated using stablecoins, especially in countries like Nigeria and India, where it is difficult to liquidate crypto to cash directly to your bank accounts when using online exchanges. Stablecoin is a type of crypto asset whose price is pegged to that of a traditional currency, like the US Dollar or Euro. They are not as volatile as other crypto assets, hence stable. Notable examples are tether (USDT), binance (BUSD), USD Coin (USDC) and Dai (DAI) – all pegged to the US Dollar.

Cryptocurrency and Blockchain

Blockchain is the technology in which cryptocurrencies and other crypto assets are built upon. It is a system that allows a group of connected computers or nodes to maintain a single, updated and secure ledger that is immutable, which is then distributed all across the network or the connected computers. The distributed ledger records transactions in the form of a high- level computer code. These codes form “blocks” that are then linked together on a “chain” of the previous block or cryptocurrency transactions.

It’s comparable to writing down daily expenses in a book. Each page is similar to a block, and the entire book, a group of pages or blocks, linked together in a chain to form a blockchain.

With blockchain, everybody who uses cryptocurrency has their own copy of the book to create a combined transaction record. New transactions are logged instantaneously as it happens and every copy of the book is updated at the same time with new transactions and information, keeping all the records identical and accurate.

Cryptocurrencies are mined using blockchain technology. Mining here involves creating a new block of crypto transactions. In simple terms; creating a new cryptocurrency or coin. Miners are powerful computers with software that execute operations based on the blockchain protocol. 

The operations include the computation and verification of transactions, broadcasting and completion of  blocks, creation of new blocks, validation of transactions by means of consensus and then confirming transactions. All these operations are done using computer codes, with validation criteria setup before all the crypto transactions.

Using the book example, the miners in this case are like the book editors who validate and confirm the contents of the book, using already set rules and criteria; but in this case the book editors are in form of computer codes. At this point, a lot of people seem to get confused as we assume miners to be ‘humans’. Well, they are, since the computers, including the codes and softwares, are controlled and owned by humans. Humans write computer codes. So inductively, miners include the computers, the softwares and persons who control them.

Mining of cryptocurrencies is not an easy task especially for major coins such as bitcoin, as it has become difficult over the years requiring a high and large network of computers. Before now, early miners can mine coins  in the comfort of their room, with just a small laptop computer. That has change over the years as the mining process now has become more energy intensive, thereby creating  energy concerns.

Miners compete among themselves to create a new coin in the process called “Proof of Work” or “Proof of Stake,” depending on the blockchain protocol used. Bitcoin Blockchain Protocol uses proof of work process to validate new coins, where the winning miner who completes the very difficult puzzle of creating new bitcoin is rewarded with ” a miner’s fee.”

This puzzle gets more difficult as more coins are created. Blockchain protocols like ethereum use a proof of stake process to validate new coin creation where miners stake some amount of coin for a chance to participate in the process. The amount of transactions each person can verify to create a coin is limited to the amount of cryptocurrency that they are willing to stake. Here, the odds that you’ll be the chosen miner increases with the amount you front or stake.

Because proof of stake removes energy-intensive equation and puzzle solving, it’s much more efficient than proof of work, allowing for faster verification or confirmation times for transactions.

Based on access limits, blockchain can be classified into public, private and permissioned. public blockchain is an open source protocol where anyone can join and proffer changes to the code. It’s supported by public participants and transactions are publicly observable. Typical example are bitcoin and ethereum. 

In private blockchain, access to the blockchain network is limited to selected participants, just like within an organization. Restriction helps to simplify block creation. Examples are ripple and hyperledger. Permissioned or consortium blockchain is mainly for collaborating parties, like a group of Healthcare Organizations. It has benefit of public blockchain, but allowing only users with permission to collaborate and transact.

One of the applications used in blockchain is the Smart Contract. In 2013, a framework for code execution was introduced by ethereum founders to enable decentralized applications on the ethereum blockchain. As stated earlier, these applications accomplish more than just a transfer of value as they are the origin of the Decentralized Finance (DeFi) we hear today. By definition, Smart Contract is a piece of code deployed to a blockchain node to enhance its functionality. These codes add a layer of logic and computation to the trust infrastructure supported by the blockchain and are written in high level programming languages such as Solidity.

So apart from crypto, blockchain technology are use in other areas like goods transfer, healthcare, digital media, crowd funding and operations, remote services, identify management, digital currencies, decentralized applications  and decentralized finance.

Binance is the world’s biggest crypto exchange.

How to Use Cryptocurrencies 

To use any cryptocurrency, you have to own a crypto wallet. A cryptocurency wallet is a device or service which stores the public and private keys for crypto transactions. Unlike what many think, cryptocurrencies aren’t stored in wallets, rather they are just there on the blockchain. A wallet simply designates the amount of crypto in the blockchain that you own by storing your public and private keys to that amount.

Physical crypto wallets include paper and hardware wallets like Nano S and external drives. For these kinds of wallets, you are incharge of your private and public keys, hence less susceptible to hack. Hardware wallets are mostly used by large crypto owners. Nevertheless, there’s a risk of not accessing your crypto when you misplace or no longer have access to the wallets. Same also when you have forgotten or no longer have access to your wallet login details or its backup. 

Software wallets work exactly like the physical wallets except that in this case, your public and private keys are stored in a program or software instead of a physical device or medium. Here you’re still in control of your keys. Since the wallet is a computer program, you are more susceptible to hack whenever your computer is online. You can still lose access to your crypto when you no longer have access to the computer program either due to deletion or virus and in few cases when you no longer have access to the program login details.

Service wallets are the most commonly used. Typical example is the exchange wallets offered by different cryptocurrency pot exchanges like binance, coinbase and quidax. Here, the exchange or service provider is in control of your public and private keys by safeguarding it, using the best technology possible which normally can’t be done by an average crypto owner. One big advantage of using an exchange is that you can trade, send or exchange cryptocurrencies easily unlike when using a physical or software wallet. You have access to the exchange via their designated websites and applications. You can retrieve you login details easily after undergoing their security checks.

Exchange wallets are susceptible to high-level hack and cyber attacks, and since your keys are in control of another party, trust becomes an issue. Nevertheless, it is the best choice for an average crypto user, especially for those with no or little tech skills.

Cryptocurrencies are sent and received by compatible wallets via specific wallet addresses. These addresses are random sets of alphanumerics, consisting of 26 to 35 characters generated by a wallet. They are needed to send and receive cryptocurrencies.

Wallet addresses are like bank account numbers, while your public and private keys are like the username and password used for online banking. But due to the immutability of cryptocurrencies like bitcoin, you lose your coins forever when you don’t have access to your keys”

Commonly, people use crypto as an alternative investment to stocks and bonds as they seem to be a store of value. Some people refer to bitcoin as a “digital gold.” In any case, it comes with its own risks just like other forms of investment. 

Bitcoin was recently approved as the legal tender in El Salvador. The country bought over 700 bitcoin and is currently in the process of selling to its citizens. China on the other hand recently banned all crypto transactions in the country and terming it, “illega.” The U.S., on the contrary, has said it has no intention of outlawing the cryptocurrency. 

One can use cryptocurrencies to make purchases, but it’s not a form of payment with mainstream acceptance as of now. Quite a lot of service providers and online retailers like Overstock and Namecheap accept cryptocurrencies, but it’s far from the norm. 

However, this might change in the near future as tech giants like Microsoft, Tesla and  payments giant, Paypal, have adapted cryptos to their payment process. Recently, Twitter announced that they will let users send and receive tips on their app using bitcoin, as part of a bigger push to help users make money from their service. Here, content creators can get tips in the form of cryptos and other tokens. The feature has currently been rolled out to all iOS users while that of Android will be available in the coming days.

Different Ways to Invest in Crypto

Analysts hold mixed opinions about investing in cryptocurrencies as they are seen as speculative assets by some and the future of finance by others. But, like other equities, a lot of factors need to be considered before one can invest in any crypto asset. Notably, knowing your investment objectives, risk tolerance, a good understanding of the type of crypto asset and having a good investment strategy is essential. 

For example, investing in a newly developed token is riskier than that of a long known cryptocurrency, although the former is more likely to bring more returns. While bitcoin has doubled in value year-to-date reaching a price of over 64,000 dollars, it also lost more than the gains in the same period, plunging to under $29,000.

Trading either long term or short term is the most common way of investing in cryptos. Investors sometimes can make a 100 percent gain due to its high volatility. Some coins, especially tokens, have recorded 1,000 percent returns, though these opportunities are quite few. 

Only a few traders actually managed to catch these spikes and cash out on time. But catching those high-price surges is not the only way for crypto investors to make money. The recent rise in decentralized finance  provides other alternatives.

The following are potentially additional sources of profitable investment;

  • Staking: Here, crypto investors get rewarded in crypto or token for putting up some amount of crypto or tokens on a particular crypto staking platform as a collateral for transaction validation. According to Staking Rewards, a leading data provider for staking, the staking market cap is over $600 billion with an average reward rate of 14.95% for 232 crypto assets. Top examples include Cardano (ADA), Solana (SOL), Ethereum (ETH) and Polkado (DOT).
  • Lending: The quick rise in DeFi has led to the adoption of many crypto- lending applications (DApps) or platforms. Here, users or lenders can deposit their crypto coins to various lending platforms for low-risk yield return. These returns or interests are usually inform of the native token of the lending platform or in some cases other cryptos like bitcoin, ethereum or other altcoins. Aave (AAVE), Maker (MKR) and InstaDApp (INST) are currently the one of the top lending protocols at the moment offering returns in coins like Ethereum.
  • Liquidity Provision: Crypto investors can earn fees and tokens from providing liquidity, which is one of the main components of the DeFi platform. Here, high percentage returns on the amount provide a pool of funds used reward investors who provide funds to the platforms. Some percentage of fees generated by transactions within the pool are also rewarded to investors. A notable platform that offers this is a decentralized exchange, QuickSwap (QUICK).
  • Yield Farming: Here, crypto investors maximizes returns by investing early in DeFi projects. Just like a farmer who plants his crop at the early planting season so as to get a bountiful harvest, investors put their crypto to work in a way as to get the highest possible yield with low risk. These new and emerging projects or protocols usually need crypto as a way of mining for liquidity and in turn offer high return and yields to depositors or so-called “Yield Farmers” who deposited their crypto. The high yields are mostly paid in the native token of the platform. DinoSwap (DINO) is a good example of such platform, where yield farmers are rewarded with its native token DINO.

Being a Good Crypto Investor

Nowadays, investing especially in cryptocurrency is as easy as a few clicks on your phone, with cryptos the rave in financial news, social media and when interacting with friends. Hence, it is tempting to dive in as everyone wants to partake in this emerging 2-trillion-dollar market that has gotten the attention of financial regulators all over the world. However, depending on your financial objectives, situation and risk tolerance, cryptos might not be the right investment for you at the moment or ever.

Cryptos, just like any form of investment, has its risks. So, creating a strong foundation and learning everything that you can about cryptos is very important. This will help you determine if this emerging asset is the right one for you. A good understanding of its operation will give you a glimpse of the right crypto projects to invest in. 

This is part of the due diligence carried out by every good investor. It helps investors to be able to recognize shaky and cloned crypto projects otherwise called “shit coins” which are vulnerable to hacks and scams, such as Rug Pull, otherwise called “Pump and Dump.”. Here, the price of a crypto coin or token automatically plunges or moves to zero within a short time frame due to deliberate sell-off or withdrawal by the founders. 

According to Tokensniffer, a notable platform that tracks crypto hacks and scams, over 42,000 tokens and 2,250 scams or hacks have been tracked at the moment. This makes due diligence very important in crypto investments. If you invest in cryptos, think of it as dead money. Money that you will never get back. At the end of the day, it is going to be a speculative investment.

Of course, this is not always the case, not even likely, but a call for a good risk and investment management plan. It is good to start small with spare cash, when you get a glimpse of the market and how it works, then you can allocate more funds.

Chibuike Osigwe is an Abuja-based data analyst.