Bill Gates on digital currency becoming big in Kenya and India -but not bitcoin?

[StarfishPrime]

This is all about where Bitcoin *could* be gaining traction.

It seems that mobile operators are moving into this space instead, using proprietary interfaces and electronic accounts in local currencies.

Bill Gates talks about "digital currency" and its potential impact (at approx 10:20 into the interview):

http://www.charlierose.com/view/interview/12436
(link from the Coinbase blog)

More about mobile payment / digital currency in Kenya:

http://c251808.r8.cf3.rackcdn.com/86336_small_5.pdf

Comments?

[BladeMcCool]

Until mobile customers in these places gain access to a real internet connection they'll be locked into whatever their mobile providers allow. The moment they can do an SSL protected request to a website with their phones (or even better, send arbitrary protocol data to arbitrary IP addresses) that will all change. For now, they could theoretically use a dial-in telephone banking style interface like BitcoinIVR or something similar but that may be cumbersome and burn precious minutes to use it while also requiring them to trust the IVR operator.

They need internet access to really be able to use bitcoin. I dont think thats really possible on the <$20 phones these people can currently afford.

[matthewh3]

You can buy Android powered smartphone's for less than £40 now brand new.  It won't be long until there even cheaper and smartphone adoption in Africa and India really takes off then with it possibly bitcoin adoption too.  I've read there are bitcoin SMS wallets being developed?  A way is needed tho to make bitcoins to seem more attractive to them then Mpesa already is. 

[Stephen Gornick]

More about mobile payment / digital currency in Kenya:

http://c251808.r8.cf3.rackcdn.com/86336_small_5.pdf

Comments?

Yes,  ... M-PESA is not a "digital currency".  It is a representative currency

In exchange for cash deposits, Safaricom issues a commodity known as “e‐float,” measured in the same units as money, which is held in an account under the user’s name.
[...]
The cash collected by M‐PESA in exchange for e‐float is deposited in bank accounts held by Safaricom.

- http://www.mit.edu/~tavneet/M-PESA.pdf (PDF)
 - http://docs.google.com/viewer?url=www.mit.edu%2F~tavneet%2FM-PESA.pdf  (Web view of PDF)

So even though this e-float money is referred to as being airtime (and can be redeemed for airtime), it is a current account, denominated in the nation's fiat currency and every unit purchased is held in deposit at a bank.  M-PESA e-float is thus a representative currency and not a digital currency.

Also, there is further discussion about this interview here:

It took me just fifteen minutes of listening to Bill Gates on Charlie Rose to confirm that billionaires don't and won't like Bitcoin.

Mr. Gates throws around a lot of "we did this" type of statements, and what he really means is "we used our power and influence to get governments to do this".  I'm not saying the accomplishments were bad, but anything that lessen's a billionaire's influence will not be something the billionaires will support.
[...]

A few takeaways from that:

1.) For government spending where there is the need for transparency, there's no reason why triple-entry accounting shouldn't be mandatory.    Most of that can be done today, without the need for Bitcoin even.

2.) Mr. Gates might want to have someone explain to him the difference between a "digital currency" and "mobile banking", "electronic currency", "representative money", etc.

3.) ill Gates once said in an interview that he reads every page of The Economist.  If he still does, then he'ld know that it is not just Kenya where mobile banking and mobile payments are widely used:

[Stephen Gornick]

You can buy Android powered smartphone's for less than £40 now brand new.

It probably isn't the cost of the phone that is excessively prohibitive, but the cost of the Internet/web mobile data service on top of voice/text.  Fortunately, these smartphones are functional with just a Wi-Fi connection and no mobile data service is needed.  (I'm presuming a person can use a smartphone but only subscribe to standard voice/text, or maybe not, I'm not sure.)  If merchant and local exchange agents can provide Wi-Fi (at the least for accessing the blockchain or for web-based Bitcoin EWallets) then not every Bitcoin user with one of these smartphones ends up having to pay for Internet/web data subscriptions.  But still a £40 device used just for use as a digital currency wallet is not going to foster wide adoption.

I've read there are bitcoin SMS wallets being developed?

There is Coinapult's SMS wallet, but that only works for U.S. and Canadian mobile numbers.  WalletBit just launched an SMS mobile wallet that eventually supposedly can send to unregistered mobiles but today it required an Internet/web data connection to be able to follow the Claim URL.

A way is needed tho to make bitcoins to seem more attractive to them then Mpesa already is.

Well, technically an SMS EWallet system that works like hoow M-PESA works is easy to build.   (Coinapult built theirs in a matter of weeks, if I remember correctly.)   The problem is that text messaging is not secure.   There is no ability to know if the text came from the handset or if it was spoofed.     M-PESA doesn't have this problem because merchants are supposed to get info from a sender's gov't ID when a purchase is made and when redeeming or exhanging M-PESA e-float for fiat (i.e., exchanging out).

So this system would work until scammers figure out that fusnd from a person's account can be spent by simply spoofing a text message from a mobile number.  That would probably have a half-life measured in days.

Thus it could very well be that there is no method where bitcoin would work with feature phones by themselves.  But smartphones change all that as you can do client-side encryption on the phone before transmission (over SMS/text messaging even) or simply use a secure channel (e.g., https) on an Internet/web data connection (subscription or Wi-Fi).   [Edit: This is assuming the mobile itself is a secure operating system, which is something that I'm not comfortable believing.  If you buy an $80 smartphone from a carrier, is it a managed device where the carrier can put software on the device?  If it isn't open source, you can't prove they aren't able to do that.]

[BkkCoins]

Using feature phones for transferring value is also popular in Thailand. I never really do this myself but my girlfriend says it's fairly common now.

The thing is we have a russian company here (http://www.webmoney-thailand.com) which will fund your phone from Bitcoin so this acts as an international bridge for what is essentially a local phone-money system. I've used this several times to put money on local users phones from my Bitcoins and it's worked well.

This service has a reverse transfer for getting bitcoin from local phones value as well but the exchange rate in that direction isn't nearly as good (and I've never gone that way).

My point is that it's quite feasible and even fairly easy for someone to setup a buy/sell service that allows moving in and out of local phone payments into a more international Bitcoin system. The only thing really needed here is a bit of web programming and the willingness to hold a suitable balance in local phone money.

It's less than having a fully Bitcoin system but it enables working with feature phones.

[matthewh3]

You can buy Android powered smartphone's for less than £40 now brand new.

It probably isn't the cost of the phone that is excessively prohibitive, but the cost of the Internet/web mobile data service on top of voice/text.  Fortunately, these smartphones are functional with just a Wi-Fi connection and no mobile data service is needed.  (I'm presuming a person can use a smartphone but only subscribe to standard voice/text, or maybe not, I'm not sure.)  If merchant and local exchange agents can provide Wi-Fi (at the least for accessing the blockchain or for web-based Bitcoin EWallets) then not every Bitcoin user with one of these smartphones ends up having to pay for Internet/web data subscriptions.  But still a £40 device used just for use as a digital currency wallet is not going to foster wide adoption.

Due to landlines being so expensive, unless their using a MiFi router then their probably going to connect with GPRS or possibly 3G.  The main thing about smartphone penetration is tho that they can use QR codes and possibly Bluetooth to pay merchants and each other.  It's kinda a chicken-and-egg thing with being if bitcoin usage grew in these emerging markets.  Then it'd be very popular with remittances from family and friends overseas.

Also mobile providers in Africa (not sure about India) are starting to sell credit based on data amounts rather than voice minutes.  The mobile-web is very popular in Africa over GPRS with some mobile providers throwing in free access to Wikipedia with top ups.

[kjlimo]

I think I recall people saying that you can't buy a smart phone and use it for only phone/text... assuming you go through a cell phone carrier (not sure how else you can "use" a phone).

However, some of those people may have said this was changed recently. 

So it's my understanding that you would need two phones... one for "phone/text" and the other for "wifi" b/c the cell phone providers don't allow you to use the device that is most cost effective b/c it eats into their bottom line.

spoiler alert: they don't make any money on the phones and could care less if you buy some fancy phone, they just want you to subscribe to their overpriced data plan...  that's their sole existence.

But with tablets coming around, buying two devices has become even more of the norm, so it's likely for the phone providers to continue their stance and not allow you to have a smart phone with only "phone/text" abilities.

[TheButterZone]

iPod Touch? WiFi, SIP over WiFi...

[weex]

Using feature phones for transferring value is also popular in Thailand. I never really do this myself but my girlfriend says it's fairly common now.

The thing is we have a russian company here (http://www.webmoney-thailand.com) which will fund your phone from Bitcoin so this acts as an international bridge for what is essentially a local phone-money system. I've used this several times to put money on local users phones from my Bitcoins and it's worked well.

This service has a reverse transfer for getting bitcoin from local phones value as well but the exchange rate in that direction isn't nearly as good (and I've never gone that way).

My point is that it's quite feasible and even fairly easy for someone to setup a buy/sell service that allows moving in and out of local phone payments into a more international Bitcoin system. The only thing really needed here is a bit of web programming and the willingness to hold a suitable balance in local phone money.

It's less than having a fully Bitcoin system but it enables working with feature phones.

M-pesa's key strength, besides the digital value transfer is their network of cash handling locations and that's fine. Once the value is digital, and M-pesa transactions appear to be irreversible (any confirmation?), this is exchanger type of service is the next logical step. Whether it can be very centralized without being shut down is a big question.

M-pesa carefully records the ID of users who deposit or withdraw cash from the system. I'm sure they would flag a user who has too much activity.

If I wanted to pay someone in Kenya for something, I'm sure they'd be a web programmer or something so could deal with Bitcoin through a blockchain.info wallet. Perhaps they'll find the most immediate value from Bitcoin for nteracting with businesses outside Kenya that accept Bitcoin but don't trust other payments from Kenya.

[BkkCoins]

M-pesa carefully records the ID of users who deposit or withdraw cash from the system. I'm sure they would flag a user who has too much activity.

That's interesting. In Thailand you can get a sim card over the counter almost anywhere (7-11, many stalls in markets, etc) without any ID and then transfer money using it in any phone. You can buy cards to add cash value at any 7-11 without any kind of ID. I'm not sure if there is a limit as I've never had more than about $10 on my phone. At many market stalls you just give them cash and they use their own phone to add to your phone balance, while you wait, never any questions asked.

There may actually be rules about ID but Thai people are very, very rule resistant. The majority of people here rarely follow any rules when it's a hassle for them. It can be both very annoying and very liberating.

[weex]

These videos show M-Pesa's process.

Part 1 https://www.youtube.com/watch?v=M9HGzwSfWZk
Part 2 https://www.youtube.com/watch?v=h0Zq1cRRT1k

[Stephen Gornick]

and M-pesa transactions appear to be irreversible (any confirmation?)

The agent that sent can call a number (#234) and reach M-PESA customer service to have the transaction reversed:
 - https://www.youtube.com/watch?v=M9HGzwSfWZk#t=380s

Heh, this is interesting.   At the end of the first talk the process of having to record the transaction details and identity verification in a log book (pen and paper), then how the service is reliant on timely text messaging delivery

Then the second video is mostly about the fees paid and commissions earned, with some discussion over the tiers  (one company has one or more locations, each location has one or more agents.   Commissions are paid by Safaricom for transactions).

I don't know how many of these 45,000 M-PESA agents know about bitcoin, but it is either going to be seen as an opportunity by them to buy and sell bitcoin instead of (or in addition to) M-PESA, or it will be seen as a threat (because Bitcoin can displace M-PESA fairly easily) and that business goes to individual traders who then compete on price -- the lowest fees and inventory of cash or coins will be what results in a trader being successful or not.

[kiba]

This doesn't belong in the press sect, yo!

[Stephen Gornick]

I think I recall people saying that you can't buy a smart phone and use it for only phone/text... assuming you go through a cell phone carrier (not sure how else you can "use" a phone).

In the U.S. that is correct -- the carriers will not let you subscribe to voice only or just voice+text without data as well if you have a smartphone.
"Each of the four major wireless providers requires that you sign up for a data plan if you use a smartphone on their service, whether your device is fully paid for or not."
 - http://news.cnet.com/8301-1035_3-57555091-94/can-you-ditch-your-smartphone-data-plan-for-wi-fi

I wouldn't doubt carriers elsewhere have the same policy.

So, even though the smartphone is under a $100 that doesn't mean everyone will have one (due to the cost of the data service).    If there was no other options, it is conceivable that a $100 wi-fi enabled smartphone could be commonly used (with no voice or data service), but I suspect the hardware wallet efforts will be both less expensive and more suitable.

In the meantime, those with smartphones and data plans are able to use Bitcoin mobile apps or mobile-enabled websites now.

M-pesa's key strength, besides the digital value transfer is their network of cash handling locations

Incidentally I just read that SafariCom now offers to loans to subscribers (through M-PESA) and offers interest-bearing deposit accounts:
 - http://www.vodafone.com/content/index/media/group_press_releases/2012/m-shwari.html

[weex]

I don't know how many of these 45,000 M-PESA agents know about bitcoin, but it is either going to be seen as an opportunity by them to buy and sell bitcoin instead of (or in addition to) M-PESA, or it will be seen as a threat (because Bitcoin can displace M-PESA fairly easily) and that business goes to individual traders who then compete on price -- the lowest fees and inventory of cash or coins will be what results in a trader being successful or not.

Unfortunately, they have signed exclusivity agreements with Safaricom at least when it comes to working for other mobile money providers. Maybe Bitcoin is far enough out of that classification to not cause a problem.

Also, I just read http://www.amazon.com/Money-Real-Quick-Guardian-ebook/dp/B007FPP7NI and highly recommend it. I couldn't help but think of Bitcoin when it comes to all the scenarios described within where M-Pesa has enabled really important new financial transactions.