Africa may not need web3 or web2. Hello, web2.5

Blockchain pundits in Africa have no doubts that the continent is primed for web3 adoption. They acknowledge that volatile African currencies are surging demand for crypto; fragmented and tedious traditional fiat systems are giving way to a preference for seamless and transparent systems; and a raving appetite for innovation is drawing more youths to the blockchain. But a deeper look into the continent’s technology adoption trends reveals that core web3 products, with all their decentralisation, anonymity, and transparency offerings, continue to struggle with adoption. This trend supports the argument that Africa might not be ready for web3, despite the obvious limitations of prevalent web2 technologies. Enter web2.5, a term that describes the integration of web3’s technology, the blockchain, into traditional web2 systems. “Africa is better suited for web2.5 technologies as they create a path to wider adoption of blockchain and crypto, which are the foundations of a web3 world,” said Nelson Elemi, founder of tokenisation startup TrendX.

The semantics of web2.5 are not universal, but the idea that 2.5 lies between 2 and 3 conveys a transitional connotation for the web. For Ike Orizu, CEO of Jamit, a startup building a podcast platform on the blockchain, the term refers to the integration of web2 payments infrastructure, which are predominantly fiat-based, into web3 solutions. Other experts opine that web2.5 is the incorporation of blockchain tech in building out tech products that are currently serving the African market. However web2.5’s coin is flipped, the idea of having platforms with both centralised and decentralised elements seems to be Africa’s careful path to the continental adoption of the next iteration of the internet.

According to CV VC’s 2022 African Blockchain Report, the most funded web3 startups on the continent, aside from crypto exchanges, are fintechs startups that rely on blockchain technologies to drive their operations. Some of these startups, which include Maplerad, Syarpa, Ejara, Kotani Pay, and MFS Africa, leverage blockchain technology and cryptocurrency to power their settlements and instant banking services. Of these startups, Kotani Pay is probably the most notable with the web3 label, still, the startup is closest to rural and semi-urban Africans, who use their feature phones to make mobile money withdrawals from their Kotani Pay crypto wallets—a clear use case that combines web2 and web3 technologies.

“There’s an obvious lack of Africa-native web3 products that are mainstream on the continent. If the story of Africans and crypto will go beyond our P2P records, we must experiment more with web2.5. That’s our surest bet for crypto and blockchain adoption,” said Kenechukwu Eze, who works as a governance analyst with StableLab, a decentralised governance firm. Eze stressed that DAOs are yet to take off in Africa despite our cultural leanings towards communities. “We are community-oriented, but taking this to the blockchain at scale is not something I foresee anytime soon.

On-chain Africa must shed its western skin

Crypto and blockchain adoption in Africa has over time tried to mirror trends in developed climes like in The Americas and Europe. First, it was launching Africa-focused crypto exchanges as far back as 2013, when there was hardly enough data to represent folks with an interest in the nascent technology. Expectedly, many such experiments failed, including Kenya’s Kipochi, Zimbabwe’s Golix, and Nigeria’s Bitpaya, which was run by the current founders of HouseAfrica, a startup digitising and verifying land ownership on the blockchain.

Today, data supports Africans' interest in crypto; the continent is touted as one of the world’s fastest adopters of the technology. And crypto exchanges are thriving as a result, with several Africa-native exchanges gaining significant market share. Quidax listed its native token on CoinMarketCap in 2022, the same year African crypto exchanges VALR and Kucoin drew in over $210 million combined in investments. These promising adoption levels may suggest that crypto-friendly Africans have validated the coin exchange business model, but it gives no green light to other web3 verticals, irrespective of how successful they are across the globe.

DAOs, decentralised finance (DeFi) protocols, and digital identities are some of the ways Western blockchain-ers have embraced the technology. De-Fi protocols enable lending, borrowing, trading, and “yield farming” for crypto earnings. DAOs draw in folks with common interests and leverage decentralised leadership to achieve community goals, such as buying an original US constitution or mobilising donations for Ukraine’s war victims. These do not stoke Africans. Even the crypto-hungry sub-Saharans mostly touch crypto pegged to the US dollar: stablecoins—as they hedge against local currency devaluation and inflations. “I’ve been in the African crypto space long enough to say that there’s hardly any DeFi or DAO project with significant adoption. At best, we have a bunch of Africans dipping their feet in global web3 projects,” StableLab’s Eze said.

Blockchain is vastly recognised as an industry in global markets, but in Africa, the technology may be best acknowledged as an enabler. For instance, despite blockchain’s—or crypto’s—evident ability to power the seamless movement of money or digital assets, it could still be out of place to name it a fintech vertical. Infusing blockchain technology and crypto into fintech verticals such as payments, wallets, insuretech, and investech creates possibilities for scale while offering speed and ease to adopters. Francophone-based Ejara is doing this with its crypto-powered platform that enables locals access to fractionalised investments in some of the world’s best stocks. The startup raised $8 million last year in a round co-led by Anthemis and crypto-focused Dragonfly Capital.

Africa’s future and web 2.5

In an earlier interview with Eghosa Omoigui, the veteran tech investor who runs an 8 million dollar blockchain fund, he shared his convictions about Africa’s adoption of web3 technologies. “The lack of physical and digital infrastructure [in Africa] creates a vacuum; the lack of trust in centralised authority creates an opportunity. Also, the demographic arc offers an inquisitive, increasingly digitally native and community-focused user population that desires the standardisation and truth that blockchain arguably provides,” he said.

While Omoigui’s estimations of a blockchain-ingrained Africa are correct, the timing for this to become a reality is left to be seen. “We got our Flutterwave and Paystack about 15 years after the US had Paypal. It’s going to take a while for web3 technologies to be mainstream in Africa,” said Jamit’s Orizu. “This is why,” he continued “I’m okay with web 2.5 solutions as far as they are augmenting solutions already existing in the market. But for novel ideas, I’d say we build it as a dApp.”

Africa is no doubt on the cusp of a digital revolution. By 2050, one in four humans will be African, and the world will be radically, technologically advanced—the kind of environment that peaks the utility of blockchain technology. Undoubtedly, Africa’s crystal ball has web3 in it, alongside other epoch-defining technologies such as AI and robotics. But today, and in the next decade which poses mixed growth prospects for Africa, it's crucial to introspect and ask: What truly serves our present needs? If web3 isn't the answer, as previously referenced data suggests, then steering our focus towards what works best would be a profound service to the continent. In other words, hello, web2.5!