As Bitcoin adoption grows, Nigeria Offers Self-custody Lessons To The Developing World

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Bitcoin magazine | Shinobi | Jan 28, 2022

As Bitcoin becomes more widely accepted in Nigeria, the country offers lessons in self-custody practices for Bitcoiners in developing nations.

Nigeria's ground-up growth in the face of systematic government opposition to the use of Bitcoin is an inspirational story and a very valuable case study in terms of Bitcoin's ability to thrive in an adversarial environment, but it also illuminates some of the unique obstacles for users in a developing country such as Nigeria.

Corruption is a massive problem in the country, as evidenced by the scandal surrounding the SARS police unit that instigated this massive public perception shift of Bitcoin in the first place. This introduces a lot of issues in terms of importing any kind of hardware device related to Bitcoin.

Anything coming into the country, which is essentially any hardware wallet that could be used to store bitcoin (because no major wallets are produced in Nigeria) must first pass through customs before getting into the hands of the user ordering it.

This is a big potential risk to the user attempting to acquire a more secure mechanism for storing their coins.

See: An Analysis of Bitcoin’s Use in Illicit Finance

It is very possible that customs agents could tamper with devices entering the country in a way that could lead to compromising people's bitcoin when the device is initialized and coins are sent to it. They could even completely replace the device with a malicious one.

Most hardware wallet manufacturers take some steps to package their devices in such a way as to make such tampering evident, but not every company's solutions to this problem is of equal quality, and some manufacturers do not engage in such practices at all. Some manufacturers have multiple layers of checks in the packaging, as well as combinations of checks on the actual device itself. Some companies simply employ basic tamper-proof stickers that cannot be resealed after opening.

Another factor related to the dynamic of self custody is simply the economics of interacting with the blockchain. Many Nigerians simply keep their coins on exchanges in custodial wallets because of the simplicity of managing things, and the economics of dealing with their own transactions on chain. This presents a big risk with the coming wave of FATF Travel Rule compliance rippling across the world right now. Countries like Estonia have already moved to increase KYC requirements in the process of implementing the FATF Travel Rule policies in legislation, and it is very possible that other countries might follow a similar example over the next year.

See: Payments without banks goes mainstream with Twitter on Bitcoin Lightning Network

Places like Nigeria are demonstrating that Bitcoin can indeed thrive in an environment where government's are being openly hostile to its existence. Outside of the box thinking along the lines of community banks and multisig collaborative custody can provide tools to people in such an environment which allow them to make more optimal tradeoffs between the security and utility of their interactions with Bitcoin. If people embrace them, Bitcoin has a very bright future ahead in places like Nigeria, and so will the people who use it.

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