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Africa’s internet penetration rate – the number of internet users divided by the continent’s total population – is hovering around 43%. That means roughly 741 million people don’t have Internet access in Africa. The global Internet penetration rate is roughly 60%.
Given the lack of Internet connectivity and lack of affluence, it shouldn’t be surprising that most folks 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 sitting at approximately 45% of all inhabitants, solving the conundrum of banking Africa’s unbanked – providing basic financial services like payments, savings and credit – requires some imagination.
The Idea: Machankura
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 mother tongue. The 29-year-old computer science researcher and developer hopes to live up to his name by providing fellow 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 who’s interested in using bitcoin and living on bitcoin should be able to do so easily.”
The concept itself isn’t 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 with no bank account or Internet connection.
M-Pesa and services like it are known as “mobile money,” and about a third of adults in sub-Saharan Africa now have a mobile money account. Safaricom generated $765 million in revenue from M-Pesa in 2021.
Mobile money uses mobile phone signals instead of the Internet – specifically, a communications protocol called Unstructured Supplementary Service Data (USSD), which is similar to the more widely known Short Message Service (SMS) texting protocol.
But mobile money doesn’t have global interoperability, and that’s where bitcoin comes in.
“A lot of African bitcoiners were asking the question, ‘How do we get people on feature phones the ability 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 do I do with it?’”
Ngako’s University of Pretoria computer science degree gave him the technical chops to not only build nodes, but also to understand the significance of Bitcoin. He also worked as a software developer at Amazon Web Services (AWS) for one and a half years.
At that point, Ngako was already intimately familiar with 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.
How Machankura works
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 resident country. A registration menu is brought up and the user is asked to create a five-digit PIN. Sending bitcoin incurs a 1% transaction fee, which is Machankura’s revenue source.
After successfully registering, users are presented with a subsequent menu that allows them to send, receive and redeem bitcoin by pressing the number on their feature phone corresponding to the desired menu option.
One particularly convenient feature is Machankura’s integration with personalized Lightning addresses.
Standard Lightning invoice addresses can be over 200 alphanumeric characters long, which exceeds the 182 USSD character limit. Personalized Lightning addresses are the length of a typical email handle (e.g., firstname.lastname@example.org), making them much easier to type out on feature phones with multi-press text entry where each digit represents multiple letters.
“If you have a feature phone, you can’t type out 60 characters without making a mistake,” Ngako explained. “And even if you do 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 currently lives. Ngako wants it in all 54, but he understands how ambitious a goal that is. The service has only managed to attract 3,000 users but Ngako expects an inflection point is around the corner.
One of the biggest obstacles he’s facing today is getting people without Internet access to acquire and use bitcoin.
“There’s really not too many bitcoin on-ramps that work for people without an Internet connected device,” Ngako said. “The only one that I can say works for people without internet connected devices is Azteco. So far, Azteco only has a big vendor network in South Africa where you can go to pretty much any store in the country and buy a voucher that 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 leverage antitrust laws in such situations, failing that he’ll be forced to “orange pill” the African continent, converting users into bitcoiners one at a time.
In Kenya, Machankura not only competes with monopolistic telecom giants pushing different flavors of mobile money, but other startups with USSD-based crypto solutions like 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.
“Ultimately, Bitcoin has the biggest network effects,” Ngako said. “If you are running a solution on Stellar, then you’re firstly promoting Stellar and then promoting the solution. People have heard about bitcoin even in the most remote places in Africa. Also, I don’t think there’s been this overall optimization for payments in the other cryptocurrencies. Everything is an on-chain transaction. Very few have a second layer implementation that is as widely adopted as the Lightning Network.”
If Ngako sounds a bit like a bitcoin maximalist – someone who believes bitcoin is the only cryptocurrency worth its salt – it’s because he is (the non-toxic kind).
Ngako’s perspective on the nature of money changed in 2017 when he dove down the crypto rabbit hole in pursuit of quick profits.
“I was trying to find the next bitcoin and took my money and put it in all these s**tcoins,” Ngako explained. “Then 2018 – a bear market. That was a good thing for me because my s**tcoining days were very limited.”
That negative bear market experience motivated the young developer to abandon the plethora of speculative tokens and instead focus solely on Bitcoin and the mechanics and philosophy behind it. He pored through books like Saifedean Ammous’ 2018 book, “The Bitcoin Standard,” and Ludwig von Mises’ 1940 classic, “Human Action.” He came out of that phase a newly converted bitcoin maximalist.
After that conversion, Ngako also realized the literature that had affected him so deeply wasn’t available in any African language, so he launched Exonumia Africa, a nonprofit focused on translating Bitcoin literature into African languages.
“Translating ‘The Bitcoin Standard’ into Swahili is a work in progress that got sidelined by Machankura,” Ngako said. “We still want to do it.”
It’s not clear when Ngako will resume his translation work. Right now, his sole focus is growing Machankura by raising capital and hiring his first three employees.
“I’m still bootstrapping,” Ngako said “I’ll have a team of at least three people in April that I’ll be working with full time, but for now, I’m still the only person working on this.”