Crypto Wallet Machankura Lets Africans Use Bitcoin With Basic Mobile Phones – Crypto Projects to Watch 2023

Africa’s internet penetration rate – the number of internet users divided by the continent’s total population – hovers around 43%. This means that approximately 741 million people do not have Internet access in Africa. The global Internet penetration rate is approximately 60%.

Given the lack of Internet connectivity and lack of affluence, it shouldn’t be surprising that most people on the continent aren’t lining up to buy the latest Apple iPhone. Instead, most Africans use old school phones with limited functionality known as feature phones.

With no internet, no smartphones and an unbanked population of about 45% of the population, it takes some imagination to solve the banking conundrum in Africa’s unbanked – providing basic financial services such as payments, savings and credit.

Kgothatso Ngako, CEO and founder of Machankura, grew up in Mamelodi, a township just northeast of Pretoria, South Africa’s administrative capital. In the streets of South Africa’s townships, “machankura” is slang for money.

His own name, Kgothatso, means comfort in Sotho, Ngako’s native language. The 29-year-old computer scientist and developer hopes to live up to his name by giving other Africans easy access to payments. He has developed a non-custodial digital wallet that allows people to send and receive bitcoin (BTC) without a smartphone or internet connection.

“I started Machankura to make bitcoin more accessible in communities where not everyone has an Internet-connected device,” Ngako told CoinDesk in an interview. “Anyone interested in using bitcoin and living on bitcoin should be able to do so easily.”

The concept itself is not new. In 2007, two mobile network providers in Kenya – Vodafone and Safaricom – created M-Pesa, a service that uses digital wallets on basic feature phones to provide payments, credit and savings in local currency without a bank account or Internet connection.

Mobile money uses mobile phone signals instead of the Internet – specifically, a communication protocol called Unstructured Supplementary Service Data (USSD), which is similar to the more familiar Short Message Service (SMS) protocol.

But mobile money doesn’t have global interoperability, which is where bitcoin comes in.

“A lot of African bitcoiners asked the question ‘How do we get people on feature phones to send and receive bitcoin?'” Ngako explained. “This was a recurring conversation. I was running a Bitcoin node and a Lightning node, and I was also asking myself, ‘OK, what am I going to do with that?'”

Ngako’s University of Pretoria computer science degree gave him the technical chops to not only build nodes but also understand the meaning of Bitcoin. He also worked as a software developer at Amazon Web Services (AWS) for a year and a half.

At the time, Ngako was already well versed in both USSD – from his experience with mobile technology firms including South Africa’s Pattern Matched Technologies – and bitcoin.

“I learned about Pattern Matched 10 years ago,” Ngako said. “I knew you could deploy your own USSD thing.” And that’s exactly what he did in May 2022 when he unveiled Machankura.

Machankura combines USSD technology with Bitcoin’s Lightning Network – a layer 2 scaling system that enables cheaper and faster bitcoin transactions.

To send bitcoin, Machankura users simply dial a special code for their home country. A registration menu appears and the user is asked to create a five-digit PIN code. Sending bitcoin incurs a 1% transaction fee, which is Machankura’s source of income.

After successful registration, users are presented with a subsequent menu that allows them to send, receive and redeem bitcoin by pressing the number on the feature phone corresponding to the desired menu option.

Standard Lightning billing addresses can be over 200 alphanumeric characters long, exceeding the 182 USSD character limit. Personalized Lightning addresses are the length of a typical email handle (eg, [email protected]), making them much easier to type on feature phones with multi-touch input where each digit represents multiple letters.

“If you have a feature phone, you can’t type 60 characters without making a mistake,” Ngako explained. “And even if you make a mistake, you can’t see that you made a mistake to correct it. Using a Lightning address is great.”

So far, Machankura has debuted in eight African countries – Nigeria, Ghana, Kenya, Malawi, Namibia, South Africa, Uganda and Zambia – where more than a third of the African population lives today. Ngako wants it in all 54, but he understands how ambitious that goal is. The service has only managed to attract 3,000 users, but Ngako expects a turning point is around the corner.

One of the biggest obstacles he faces today is getting people without Internet access to acquire and use bitcoin.

“There aren’t really too many bitcoin ramps that work for people without an Internet-connected device,” Ngako said. “The only one I can say works for people without internet connected devices is Azteco. So far Azteco only has a large supplier network in South Africa where you can go to pretty much any store in the country and buy a voucher which you can then redeem for bitcoin. But that is not the case in other African countries.”

Another challenge Ngako faces is working with mobile service providers in each country to deploy Machankura on their infrastructure. Many of these service providers already have their own mobile money implementations and see Machankura as a direct threat to their existing products. Ngako hopes to take advantage of antitrust laws in such situations, without being forced to “orange pill” the African continent, converting users to bitcoiners one at a time.

In Kenya, Machankura is not only competing with monopolistic telecom giants pushing different varieties of mobile money, but other startups with USSD-based crypto solutions such as Kotani Pay have also entered the scene.

Kotani Pay is similar to Machankura, but it uses Stellar, whose token is XLM, instead of Bitcoin. Ngako says a Stellar-based system is deeply flawed.

“At the end of the day, Bitcoin has the biggest network effects,” Ngako said. “If you run a solution on Stellar, you first market Stellar and then you market the solution. People have heard of bitcoin even in the most remote places in Africa. Also, I don’t think there has been this general optimization for payments in the other cryptocurrencies. Everything is a chain transaction. Very few have a second-layer implementation as widespread as the Lightning Network.”

If Ngako sounds a bit like a bitcoin maximalist—someone who believes bitcoin is the only cryptocurrency worth its salt—that’s because he is (the non-toxic kind).

Ngako’s perspective on the nature of money changed in 2017 as he dove down the crypto rabbit hole in search of a quick profit.

“I was trying to find the next bitcoin and took my money and put it in all these s**tcoins,” Ngako explained. “So 2018 – a bear market. It was a good thing for me because my s**tcoining days were very limited.”

The negative experience of the bear market motivated the young developer to leave the crowd of speculative tokens and instead focus exclusively on Bitcoin and the mechanics and philosophy behind it. He studied books such as Saifedean Ammous’s 2018 book, “The Bitcoin Standard,” and Ludwig von Mises’ 1940 classic, “Human Action.” He emerged from that phase as a newly converted bitcoin maximalist.

After that conversion, Ngako also realized that the literature that had affected him so deeply was not available in any African language, so he launched Exonumia Africa, a non-profit organization focused on translating Bitcoin literature into African languages.

“Translating ‘The Bitcoin Standard’ into Swahili is a work in progress that was sidelined by Machankura,” Ngako said. – We still want to do it.

It is not clear when Ngako will resume translation work. Right now, his only focus is growing Machankura by raising capital and hiring the first three employees.

“I’m still starting startups,” Ngako said. “I’ll have a team of at least three people by April that I’ll be working with full-time, but for now I’m still the only person working on this.”