Bitcoin Forum

Africa is certainly prime for the picking.  Mobile SMS text messaging money transfers are the norm over there.
Bitcoin could certainly make a splash. 

Africa is certainly prime for the picking.  Mobile SMS text messaging money transfers are the norm over there.

How does Mobile SMS money transfer work in Africa? 

The system used in Africa is based on the GSM standard that lets the operator put simple menus on the users screen:

http://en.wikipedia.org/wiki/Unstructured_Supplementary_Service_Data

Sounds like they use USSD and the SIM toolkit for the M-Pesa system.  Unfortunately any cell operator based system requires the operator and thus also the the government to support it.  An ideal system would bypass as much as possible any requirement for government or big business support.

I've been thinking of how you could do SMS based Bitcoin transactions with low cost hardware (ie. no smart phones/internet) and still be secure; I think you could do it all with two SIM cards.  One SIM card could be from the operator and thus have the ability to send/receive simple SMS messages.  A second SIM card could be independently produced that acts as a Bitcoin wallet and contain SIM Toolkit software necessary to communicate with a Bitcoin SMS gateway to create transactions and check for confirmations.    This second SIM card would not have any ability to log into the cell providers network, but should be able to check and queue up SMS messages in the phone's memory.

Programming for SIM toolkit is a PITA, but simulators are available so a proof of concept wouldn't be too hard to produce.

Sounds like they use USSD and the SIM toolkit for the M-Pesa system.  Unfortunately any cell operator based system requires the operator and thus also the the government to support it.  An ideal system would bypass as much as possible any requirement for government or big business support.

I've been thinking of how you could do SMS based Bitcoin transactions with low cost hardware (ie. no smart phones/internet) and still be secure; I think you could do it all with two SIM cards.  One SIM card could be from the operator and thus have the ability to send/receive simple SMS messages.  A second SIM card could be independently produced that acts as a Bitcoin wallet and contain SIM Toolkit software necessary to communicate with a Bitcoin SMS gateway to create transactions and check for confirmations.    This second SIM card would not have any ability to log into the cell providers network, but should be able to check and queue up SMS messages in the phone's memory.

Programming for SIM toolkit is a PITA, but simulators are available so a proof of concept wouldn't be too hard to produce.

Unless people are using dual SIM phones, this is going to be a pain in the ass.  SIM cards are small and easily lost and swapping out SIM cards is a nuisance in many phones.  A lot of pre-paid phones are also locked to particular networks and will only accept SIM cards from those networks - you'd need to either configure existing cards issued by the network or people would need to get their phones unlocked.

There's a limit to how much trouble people will go to in order to make transactions.  You also need to look at what the effective fees on microtransactions would be.  The infrastructure with which the second SIM communicated would not be free, but it would need to be affordable - how do you make it affordable if you're not using the towers of existing providers to route communication with the Bitcoin SMS gateway?

People swap SIMs all the time to save money when traveling by using a local pre-paid GSM card.  It's not elegant, but it could work.

Cheap Android phones are starting to take over even in Africa. I tried the Bitcoin Wallet app on a phone being sold in Kenya for about $80, it worked fine.

By the time Bitcoin has become big/interesting enough to make real headway in poorer countries the concept of a non-smart phone won't exist. As Apple is unlikely to ever make a real assault on the low end of the market, I think almost all of these devices will be cheap Chinese-manufactured Androids, which is perfect for us.

Western Union and MTN also announced today that they will provide 9,000 branded mobile “Yellow Phones” to Ugandans. Customers who receive these phones must already have an active MTN Mobile Money account or sign up for one in order to use the new remittance service. The phones will be given away via ongoing promotions throughout Uganda over the next few months.

Its hard for Bitcoin to compete in Africa with free smart phones

http://pymnts.com/news/businesswire-feed/2012/march/28/western-union-mtn-announce-launch-of-mobile-money-transfer-service-in-uganda-provides-9000-branded-mobile-phones-20120328005318/ (http://pymnts.com/news/businesswire-feed/2012/march/28/western-union-mtn-announce-launch-of-mobile-money-transfer-service-in-uganda-provides-9000-branded-mobile-phones-20120328005318/)

Cheap Android phones are starting to take over even in Africa. I tried the Bitcoin Wallet app on a phone being sold in Kenya for about $80, it worked fine.

Well, if they are android phones, that just gives them a free way to run a bitcoin app. Even though the phone will be free,

One business where the poorest continent is miles ahead

There were 20 countries in which more than 10% of adults say they used mobile money at some point in 2011.

Of those, 15 are African.

In Kenya, Sudan and Gabon half or more of adults used mobile money.

Most mobile-phone transactions are tiny. Market traders, for example, use mobile phones to pay peasant farmers for a single bag of cassava or maize-meal. One of the most successful mobile-phone products in Kenya is a SIM card costing just a few cents—but that is all people need for the occasional transaction.

Mobile phones are also used to bank remittances from family members abroad.  This may explain why mobile money has done so well in Somalia, a country which barely has a government, but where a third of adults said they used mobile money last year. Somalia is one of the countries that most depends on remittances: one study found that 80% of the capital for start-up firms came from the diaspora

NYT article on the international money transfer business atm, ie WU $10 fee to send $50 = 20% & a rip off exchange rate on top of that too

http://www.nytimes.com/2012/06/02/business/new-rules-for-money-transfers-but-few-limits.html?_r=1

This is already possible. Coinapult (https://bitcointalk.org/annoyance.php) allows controlling bitcoin funds via SMS

What I am concerned with is "the Linode problem".  All these mobiles are managed devices.   They can be fully controlled by someone other than the owner of the device.  Yes, they are managed by the carrier but possibly that carrier has people that cannot be trusted or, just as bad, has people who don't maintain secure systems themselves such as what reportedly is what happened at Linode.

I don't know where you buy your phone and what deal you have with your carrier. Both my android and iPhone were purchased at full price and unlocked and my SIMs purchased independently. My carrier is in no position to snoop into or alter any apps on my phones.

This is the type of threat I'm describing:
 - http://www.theverge.com/2012/5/18/3028207/zte-score-backdoor-vulnerability-confirmed-skate
 - http://security.stackexchange.com/questions/15076/i-found-that-the-company-i-work-for-is-putting-a-backdoor-into-mobile-phones

Carrier IQ, the now infamous “rootkit” or “keylogger”, is not just for Android, Symbian, BlackBerry, and even webOS. In fact, up through and including iOS 5, Apple has included a copy of Carrier IQ on the iPhone. However, it does appears to be disabled along with diagnostics enabled on iOS 5; older versions may send back information in more cases.

Iphones come pre-installed with the keylogger made by CarrierIQ
http://blog.chpwn.com/post/13572216737

Read the page you linked to. It is not a key logger.

Would you mind sharing how you"nuked" your Android?

Cheap Android phones are starting to take over even in Africa. I tried the Bitcoin Wallet app on a phone being sold in Kenya for about $80, it worked fine.

By the time Bitcoin has become big/interesting enough to make real headway in poorer countries the concept of a non-smart phone won't exist. As Apple is unlikely to ever make a real assault on the low end of the market, I think almost all of these devices will be cheap Chinese-manufactured Androids, which is perfect for us.

Perhaps the real problem with introducing Bitcoin in Africa (or any other developing economy) is to identify the killer application that will motivate people to give it a try.  The only really compelling application I've heard of would be remittances from abroad.  I have read that currently those with out bank accounts must rely on Western Union and pay up to a 20% transfer fee.

Smartphones are now at 50% penetration in the U.S. (with 2/3rd of all new phones sold being smartphones as well):

https://i.imgur.com/ZPUu4.jpg (http://www.businessinsider.com/chart-of-the-day-smartphone-penetration-2012-3)

 - http://www.businessinsider.com/chart-of-the-day-smartphone-penetration-2012-3


What I am concerned with is "the Linode problem".  All these mobiles are managed devices.   They can be fully controlled by someone other than the owner of the device.  Yes, they are managed by the carrier but possibly that carrier has people that cannot be trusted or, just as bad, has people who don't maintain secure systems themselves such as what reportedly is what happened at Linode.

The importance is thiis.  An attack that defrauds M-Pesa's customers en mass means Safaricom figures out at some point that there's a problem, halts all affected systems to prevent further losses, and in the end eats some, most or all of the customer's losses.  A similar attack through the managed services of the mobile network to steal bitcoins from mobiles means just that the individual mobile user alone loses out.  Just like how Linode disavowed any responsibility to Slush, Bitcoinica, etc. for the tens of thousands of bitcoins lost, Safaricom would likely maintain the same position.

So, this is a fundamental question -- is the practice of storing bitcoin private keys on the mobile something that exposes it to too much risk to where it shouldn't even be considered?  i.e., bitcoin apps for mobile need to be under the same model that mobile banking (like M-Pesa) uses?

could the problem be solved with cold storage? like a thumbdrive with a wallet.dat file and some level of encryption?  A thumb drive could make a great vault for someone store their wealth cheaply and with a relatively high level of security in a third world country. 

You still need to load the thumb drive / SD card into a trusted network connected computing device to do transactions. I would prefer a stripped down phone over some PC anytime. And, a phone is a lot cheaper plus easier to operate. BitcoinSpinner can actually almost do this seamlessly. A village can share a stripped down android phone and each user has his own QR-code backup on paper. To do a transaction you restore your backup, do your transaction, and restore some empty account. Your private keys are only in memory until you restore the empty account. A "clear" button could be added to eliminate the last step.
Thoughts?

The business officially opened in early 2011 after receiving approval from the Central Bank of Nigeria.

Paga now employs 68 and has more than 42,000 Nigerian customers who can transfer money, purchase airtime credit, and pay bills with their cell phones using the system. Investors in the company include Timothy Draper, founder of global venture capital firm Draper Fisher Jurvetson

He dialed a colleague's cell phone number in Nigeria and punched in the amount of money he wanted to transfer to her from his Paga account, followed by his PIN number. After a few moments, a recorded voice confirmed the transaction, while a text message alerted his colleague about how much money had been sent. The entire process took about 35 seconds. There's no charge to pay bills or add cell phone airtime, but mobile money senders are charged a fee based on the amount transferred.

The company has a network of 550 agents, typically mom-and-pop merchants who already run grocery stores or pharmacies. Customers can go to those agents to deposit cash into their Paga accounts, and then conduct mobile transactions using those funds. The company also has a partnership with several Nigerian banks that accept Paga account deposits. So far, Oviosu said the average transaction size is modest, about 3,000 Nigerian naira, which is the equivalent of about $20 U.S.

Now that Bitcoin Nordic accepts payments using CashU, which in turn accepts UKash vouchers for adding funds, bitcoins can now be purchased in quite a few more countries...

cashU is a prepaid payment service. To buy bitcoins using cashU you need to create a cashU payment account.
....

Price
Price will be MtGox USD 24 hour average +15% at the time of processing which is currently 8.721991 USD.

Well, Western Union isn't cheap either, but really, do we expect people to pick up something quite novel and challenging (where you have to care yourself for security and infrastructure, especially if you're a merchant) at such a premium?

Of course the added expenses in converting from cash through payment intermediaries like CashU will limit bitcoin's usefulness in the instances where that is needed.  But compare the costs to Western Union though and to other methods of sending money from one part of a country to another, or internationally within Africa or overseas, and this doesn't end up being such an uncompetitive rate.

Here's an example of why this matters:

https://i.imgur.com/hmDNU.jpg
 - http://pymnts.com/commentary/Tips-for-2012-Understanding-Payment-Behavior-of-African-Households-A-Vast-and-Untapped-Market/

That shows that more than half of remittances do not use mobile payments.

Few mobile payment networks support international remittance transactions being one reason for that.  
 - http://technology.cgap.org/2012/03/21/what-do-international-remittances-mean-for-mobile-money-cgap-releases-study-on-remittances

But bitcoins won't just be useful as an alternative to Western Union for remittance transfers for the continent.  They'll be useful for a wide variety of transactions -- they can be used to pay for a commercial shipment electronically so that the delivery driver isn't carrying large amounts of cash, for instance.  Bitcoins will be useful for travelers who wish to convert out of the currency in one country and then used to acquire local currency in the next.

So even with a high level of friction when buying bitcoins using CashU, once bitcoins are acquired they can circulate without being converted back to fiat outside the local community.  

This is sure to happen since anyone can function as an exchange.  This exchange function is one that has almost no barrier to entry and could be profitable for those who begin to offer this service.  The techies at the cyber-cafe are likely one example of where these first exchanges will occur  -- especially since that's where tourists are found.   Or those already operating as exchange agents might start participating as adding bitcoin to the mix is just a small additional effort.

Keep this in mind ... with each Western Union transaction sucking a minimum of 10% of the payment, and mobile payments in the 5% range for smaller payments (e.g., under $40 range), bitcoins when purchased through CashU even don't need to change hands twice before they've become a better value as a payment system than had the same amount of funds been transferred through the alternatives.

The key though is that previously there was no way to seed this.  This CashU option actually gives the ability for entrepreneurial individuals on the ground there to get bitcoins into their hands so that they have something to use to start trading.

Next what is needed are some stories of actual bitcoin commerce occurring.  For instance, there are many tech and business incubators on the continent  - a perfect place for bitcoins to begin circulating among a small group of willing participants who generally are among the early adopters and wouldn't entirely resist trying something new like this.  Here's an example:

 - http://www.meltwater.org/who-we-are/our-campus/

The system used in Africa is based on the GSM standard that lets the operator put simple menus on the users screen:

http://en.wikipedia.org/wiki/Unstructured_Supplementary_Service_Data

Here's a post from another thread that directly responds to this:

I've talked to a couple of start-up entrepreneurs - Pule Mmolotsi, who is testing out an Oyster-like card for public transportation in the country.
[...]
in the past two years there has been an interesting phenomenon in Africa - the proliferation of tech hubs and incubators.
[...]
There are now more than 50 tech hubs, labs, incubators and accelerators in Africa, covering more than 20 countries. In Nairobi, we have six.
[...]
if we had waited for the government to create the iHub in Kenya, we would still be waiting today.
[...]
Innovation comes from the edges, so it comes as no surprise that innovators are found in the margins. They are the misfits among us, the ones who see and do things differently.
[...]
The tech hubs in Africa provide a home for those with new and innovative ideas, create an atmosphere where they are encouraged to try new things, and most importantly are able to meet like-minded individuals they can grow with.

A central bank ceiling on over-the-counter dollar transactions at banks has sent Ghana's class of China-bound traders into street-side foreign-exchange bureaus that normally cater to fanny-pack-clad tourists. Chinese importers often show up just before flights back to China desperate to buy $100,000.

Kenyans will be able to send and receive Bitcoin and convert it to and from an M-Pesa balance. You can also buy and invest in Bitcoin. Though what stands out the most is probably the fact that the Kenyan diaspora will now compete with international transfer companies such as Western Union. Exchanging money will thus be made much cheaper as Bitcoin only charge US$0.04.
Kipochi works on all mobile phones, having SMS, USSD and HTML5 frontends, as well as a desktop computers

Here's an interesting development:

https://bitcointalk.org/index.php?topic=252238.0

Individuals can just send money to each other without being an agent,