Cryptocurrency without the internet for emerging markets

Innovators are now seriously courting ideas of having cryptocurrencies without the internet for emerging markets, due to slow connectivity rates.

The permeation of cryptocurrency in Africa is considerably smaller compared to its global rivals. According to a recent report, 2020: State of Cryptocurrency in Africa, only Nigeria and South Africa have beaten the global 7% ownership of cryptocurrency (percentage of internet users aged 16 to 64), at 11% and 13% respectively.

Digital market giants such as Kenya are below the ownership par at 5% after Ghana's 6%. However, other factors are limiting the extent of cryptocurrency use in most African countries.

"Although researchers have identified high ownership rates in certain countries, there is a significant lack of the typical infrastructure we see elsewhere such as nodes, mining operations, supporting merchants, ATMs and exchanges," the report suggests.

It explains: "Of the 10,267 Bitcoin nodes worldwide, just 20 (0.2%) are located in Africa. For Ethereum nodes, the number is smaller (12), but the percentage about the same (0.2%). Of the nodes that do exist, the vast majority are based in South Africa."

It indicates a lack of low-level adoption of the technology on the continent, the report commented.

Coupled with other reasons, internet access plays a huge part in employing more cryptocurrency enthusiasts. This is lacking in most peri-urban and rural areas, where the majority of potential users reside.

In certain aspects, experts expected the cryptocurrency use to surge in emerging markets thanks to the prevalence of mobile money. However, mobile money has thrived because the basic infrastructure is a simple telecom network and it is not dependant on internet connectivity, something that cryptocurrency heavily relies on. Interestingly, some projects are working to ensure crypto trade can happen without the internet, something that could attract more users in less connected regions.


Cryptocurrency over radio waves

This idea has been around for a while now, with several companies seeking to utilise the rarely used old technology to enable cryptocurrency trade. An article on details some of the experiments to send cryptocurrency by radio waves as early as in 2018:

"A New Zealand developer transported crypto from a distance of 12.6km away, entirely offline, using only a network-disconnected Android phone and four portable antennas. Though as his Twitter recount acknowledges, it took one heck of a prep, including setting up relay stations," the article said.

Pioneers still say that it might take a lot of configuring the old tech to work with the new tech to relay cryptocurrency. Also, governments own these radio waves and it would be a legal workaround to ensure that developers can access these signals and cement them for their new roles.

The article continues: "Bitcoin might have been invented on the internet for the internet, but it can straddle both the digital and analogue worlds. Cryptocurrencies like bitcoin walk the line between money under the mattress and cash in the bank. As these trailblazers show, bitcoin can straddle those worlds not only functionally, but also technically."


Cryptocurrency over satellite transmissions

Where radio signals become stringent, satellites shine. Satellite transmissions are still a technology that is largely used in telecommunication and internet network distribution. Some researchers are looking into ways of using the massive coverage of satellites to distribute cryptocurrency without the need for internet.

Even as the shift of broadcast moves from satellites to cheaper technologies such as over the top applications, satellites would also need to shift their use to other areas other than communication.

Projects like Blockstream Satellite are early pioneers in innovating over the satellite technology to bypass the need for a network. In May, the company unveiled its advanced technology that would be faster and can enable users to download a full node without internet connectivity.

Users need to purchase a consumer-grade satellite receiver and will require a Linux system to receive the broadcast. The kit goes for about USD 300 to USD 800, a cost that will be out of reach for many in the continent.

The Blockstream Satellite currently supports Bitcoin as its main cryptocurrency.


Cryptocurrency over mobile networks

mCoin launched in Africa two years ago with a promise to avail the text as a way to distribute cryptocurrency in Africa. At the launch, the developers, OneM Communications said coupling the text technology and blockchain could bridge the cryptocurrency gap in emerging regions.

Cardano, another cryptocurrency developer, aims to develop a microchip that will allow users transact without the need for connectivity, just like mobile money.

Charles Hoskinson, creator of Cardano, says that the double limit of smartphone and internet connectivity will force crypto innovators to chart another path to reach the unreached.

"So when you look at that, you say, well, OK, 98 per cent are mostly offline and not banked or digital. So if I was building a money system for them, it would probably be a bad idea to say, ‘oh, you have to use an always online, purely digital currency," he said.

According to Hoskinson, such an internet-less network can be built with a blockchain backend that can be verified by other existing phones in the network.

He explained that: "What you do is you create a hierarchy where those two per cent basically become like micro banks and then they can manage the issuance of these tokens to people and then their local phones or infrastructure can verify". 

The closest imitation of cryptocurrency isn't mobile money but reward points such as Safaricom's Bonga points. Bonga points are digital points one earns when they transact on the networks, like buying airtime or purchasing goods with MPesa. Users can send points to each other and even buy goods and services.  

Even though centralised, the practice of using digital points as currencies can be a fertile learning ground - a nationwide sandbox - to examine how cryptocurrencies can flourish in Africa.

Why should we think about cryptocurrency without the internet? The obvious reason is the lack of massive penetration of the internet in Africa. Further, the broadband cost pushes many users away from the system.

But secondly, intermittent internet shutdowns witnessed across the continent can mean doom for a thriving financial tool as cryptocurrency. It could massively damage a progressing crypto move.

Thirdly, Africa is under-connected and underbanked. Cryptocurrency without the internet could be part of the solution in immensely growing the financial reach.