Recent months have not been kind to proponents of Bitcoin, the virtual peer-to-peer currency that soared to a value of over $30 last summer on a surge of public interest and media reports.
The currency operates over the Internet with no central control. But now its 15 minutes of fame appear to be over. Reports of a $500,000 digital heist last year were followed by wild volatility in the value of a bitcoin, which has now dropped to around $5. Last month, one large exchange where bitcoins could be traded for dollars unexpectedly closed because of what it called “increasing regulation.”
Now some in the Bitcoin community, a blend of people motivated by libertarian politics and commitment to open-source software, are beginning to wonder if their pet currency may have brighter prospects in the developing economies of Africa. German software developer Rüdiger Koch, a consultant to the U.K.-based bitcoin exchange Intersango, recently traveled to speak at the Mobile Money Africa event in Lagos, Nigeria. There, Koch told the audience of businesspeople and government officials that Bitcoin could support a system of robust, low-fee mobile payments for anyone whose cell phone has a camera.
“Many of them were interested in how Bitcoin could be useful,” says Koch. His talk in Nigeria was intended to launch a dialogue that could lead Intersango or others to launch practical Bitcoin-based mobile payment systems for Africa. Koch has also visited several African embassies in Berlin to introduce government officials to the currency.
The first version of the software needed to create and exchange bitcoins made its mysterious appearance on the Internet in 2009 (a person identifying online as Satoshi Nakamoto, who has never come forward publicly, created that software and the underlying system). The coins are impossible to fake and can be created and used without any central authority, such as a central bank. The work of generating bitcoins and verifying transactions is shared among the users of the software, all protected by sophisticated mathematics.
In the United States and Europe, Bitcoin’s meteoric rise was mostly driven by speculators; hardly anyone used the currency to actually pay for goods and services. Koch thinks things could be different in Africa, where a universal, electronic currency could solve real problems. Fast-growing African economies such as those of Kenya and Nigeria rely heavily on cash transactions, particularly in rural areas where there are no ATMs and few people have bank accounts. In some places, large networks of illegal money changers are used for cross-border payments.