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    Categories: General

    Here is why bitcoin is worth 70% more in Nigeria than in America

    December 6th, 2016 by William

    tl;dr - Bitcoin is trading at a 70% premium in Nigeria because the MMM ponzi scheme is at peak popularity in that country. The foreign masterminds of MMM cannot access local payment channels. Thus, they incentivize participation in bitcoin in order to extract value from the system.

    As I write this article, bitcoin is trading at ₦404,000 in Nigeria ($1280 USD). This is a 70% premium over the price in the United States ($730 USD) and is accompanied by increasing trade volumes.

    The bitc...

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    Categories: Opinion

    MMM Global Republic of Bitcoin: Crypto's Next Scandal?

    October 17th, 2015 by William

    Recently I came across a scam of alarming proportions. It is called “MMM Global Republic of Bitcoin.” Those who follow Ponzi schemes will immediately recognize the name MMM. In the 1990s, Russian fraudster Sergey Mavrodi ran one of Russia’s largest Ponzi schemes with the same name. Savvy marketing and promises of 1000%+ returns suckered tens of thousands of people into investing their savings in Mavrodi’s scheme. By 1994, when MMM’s offices were closed due to tax evasion, Mavrodi owed his investors beween 100 billion and 3 trillion rubles (between tens of millions and billions of dollars). Mavrodi spent a few years in jail, but by 2011, he was responsible for at least two other pyramid schemes.

    Now Mavrodi is back in business, bigger and badder than ever. This time he is using Bitcoin.

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    Categories: General, Columns

    In-depth Review: BitPesa

    July 27th, 2014 by William
    Last week I reported on two Bitcoin startups in Africa that are working to cash in on the remittance business: Kenya-based BitPesa and Ghana-based Kitiwa. These startups are working to leverage Bitcoin’s low transaction fees to reduce the cost of sending money across international borders.

    In this week’s column, I give a detailed review of BitPesa, based on four test transactions. My tests reveal that BitPesa is indeed a convenient, comparatively low-cost way of remitting money to Kenya.

    I found that the total fees for using BitPesa are slightly higher than the advertised 3%. However, BitPesa is still more economical than other options like Western Union. Moreover, BitPesa enables micro remittances, which are not currently practical through established money transfer services.

    What is BitPesa?

    BitPesa is a remittance service based in Kenya that allows users to exchange Bitcoin for Kenyan Shillings that are sent directly to a recipient’s mobile money account.

    Mobile money is a growing phenomena in Africa and around the world. People deposit money into an account associated with their cellphone number, then use their phones to buy things in shops, to send money to other mobile money accounts, or to cash out into paper currency.

    Kenya’s Safaricom owns the M-Pesa service, which is at the vanguard of the mobile money movement. Almost every adult in Kenya owns an M-Pesa account, and a third of the country’s GDP passes through the system. Users are assessed fees when transferring money between accounts and when exchanging mobile money for cash. These fees make mobile money a lucrative business, and Safaricom is now East Africa’s most profitable company.

    BitPesa, which works seamlessly with M-Pesa and competing mobile money platforms, allows people outside of Kenya to upload BitCoin and specify a Kenyan phone number to electronically receive Shillings in return. As stated, BitPesa advertises a 3% fee for this service.

    Not Available in All Markets

    I initially attempted to test BitPesa from my home in New York City. However, the system blocked me from creating an account, likely due to the United States' stringent money transfer laws.

    Currently I am traveling in England, where I successfully opened a BitPesa account and completed four test transactions.  

    Account Registration

    The registration process for BitPesa is trivial, requiring only a name, email address, mailing address and date of birth. Users must also check a box that permits BitPesa to confirm their identity information.


    After registering, users are asked to input the quantity of Pound Sterling (£) that they would like to remit to Kenya. This sum is immediately translated into the quantity of Kenyan Shillings (KSH) that will be received and the amount of Bitcoin (BTC) that is required to process the transaction.

    The user then specifies a person to receive the money by inputing their name, email address and mobile money phone number.

    A Bitcoin address is subsequently generated and a 10 minute countdown timer is initiated. The user must deposit the indicated amount of Bitcoin to the specified address in order to complete the transaction.

    In all of my test transactions, the recipients’ mobile money accounts were credited after one confirmation on the BitCoin network, which took between 2 and 15 minutes.

    Identification Required for Subsequent Transactions

    After the first transaction, BitPesa will not work until the user uploads a government-issued identity document.

    Fees and Exchange Rates

    I completed four test transactions in the amounts of £1, £2, £5 and £6. The table below details each of these transactions:

    Amount sent Amount received Bitcoin used
    £1 KSH 145 .00283
    £2 KSH 289 .00566
    £5 KSH 723 .01416
    £6 KSH 868 .01699

    At the time of testing, the market exchange rate for Bitcoin was 1 BTC = £353.73. The following table shows that this is roughly the same exchange rate that BitPesa used in calculating the Bitcoin required for each transaction:

    Amount sent (£)

    Bitcoin used (BTC)

    BitPesa's exchange rate (£/BTC)

    Market exchange rate at time of transaction (£/BTC)


    1  0.00283  353.36  353.73  -0.37
    2  0.00565  353.98  353.73  0.25
    5  0.01412  354.11  353.73  0.38
    6  0.01695  353.98  353.73  0.25

    At the time of testing, the market exchange rate for Kenyan Shillings was £1 = KSH 149.23. The table below illustrates that BitPesa’s fees were indeed approximately 3%:

    Amount sent (£)

    Amount received (KSH)

    BitPesa's exchange rate (KSH/£)

    Market exchange rate (KSH/£)

    BitPesa's fee*

    1 144 144.00 149.14 3.45%
    2 289 144.50 149.14 3.11%
    5 723 144.60 149.14 3.04%
    6 868 144.67 149.14 3.00%

    *(Market Rate – BitPesa's Rate)/Market Rate, expressed as percentage

    It should be noted that the above calculations do not include the costs of purchasing BitCoin. I buy Bitcoin in the United States, on a low cost exchange, for a 1% fee plus $0.15. This increases the total transaction cost to about 4% from BitPesa’s advertised 3%.

    Not everyone desiring to send money to Kenya will be able to access low-cost exchanges. Immigrants who are undocumented or do not have bank accounts will likely have to purchase their Bitcoin with cash, at up to 10% above the market rate.

    Additionally, the above calculations do not include Bitcoin miners’ fees paid to transfer Bitcoin from a user’s wallet to BitPesa’s site. For each of the above test transactions, I paid a negligible .0001 BTC ($0.06) using my Mycelium smartphone wallet.

    Finally, receivers in Kenya must pay additional fees to Safaricom to withdraw cash from the M-Pesa network or to send money to another M-Pesa user. In the above £5 (KSH 723) transaction, the receiver would pay KSH 33 (4.5%) to send to another M-Pesa account or KSH 27 (3.7%) to withdraw cash.

    Not all M-Pesa transactions accrue fees, however. Buying airtime on the Safaricom network is free, as are transactions within Kenya’s mushrooming network of M-Pesa merchants. For instance, the recipient of my test transactions uses M-Pesa to buy gasoline and does not pay transaction fees to do so.

    Comparison with Existing Methods of Money Transfer

    Western Union is one of the world’s most well-established money transfer companies. In the United Kingdom, Western Union allows people to send money online, from their bank account to a Kenyan mobile money account like M-Pesa. The chart below uses Western Union’s fee calculator to determine the effective exchange rate for various remittance amounts:

    Amount sent (£)

    Western Union transfer fee (£)

    Total used (£)

    Amount received (KSH)

    Effective exchange rate (KSH/£)*

    2 2 4 295.24 73.81
    5 2 7 738.27 105.47
    10 2 12 1476.2 123.02
    50 4.9 54.9 7380.98 134.44
    100 4.9 104.9 14761.96 140.72
    500 19.9 519.9 73809.82 141.97
            *higher is better


    Compare this to BitPesa’s effective exchange rates in the table below:

    Amount sent (£)

    1% Bitcoin purchase fee (£)

    Total used (£)

    Amount received (KSH)

    Effective exchange rate (KSH/£)

    2 0.02 2.02 289 143.07
    5 0.05 5.05 723 143.17
    10 0.10 10.10 1447 143.27
    50 0.50 50.50 7235 143.27
    100 1.00 101.00 14470 143.27
    500 5.00 505.00 72349 143.27

    This comparison reveals that BitPesa yields a better exchange rate in all cases. Importantly, savings are particularly pronounced for small transactions. These “micro-remittances” in the range of £2 - £10 ($4 - $20) are impractical via established money transfer companies like Western Union.


    BitPesa—one of Africa’s first Bitcoin startups—could make waves in the international remittance market. In addition to offering competitive exchange rates across the board, BitPesa also enables micro remittances. This may be the company’s strongest selling point for Kenyans living abroad, who often encounter situations where they wish to quickly send home small sums. BitPesa thus destabilizes the prevailing business model for money transfer services where smaller remittances accrue far higher fees than larger remittances, as illustrated in the Western Union table above. 

    BitPesa is also appealing in its convenience. Using the service is almost effortless once a person is comfortable with buying BitCoin and transferring it between wallets. BitPesa thus allows users to send money from their laptops or smartphones, eliminating the frustration of standing in long queues at brick-and-mortar money transfer outlets.

    There are drawbacks to using BitPesa, however. For instance, the service is not available in the United States, which will undoubtedly frustrate a number of potential users there.

    The extreme volatility of Bitcoin is a second potential drawback. Users who purchase Bitcoin and do not immediately send it might find that the value of their Bitcoin decreases (or increases) drastically in a matter of days or hours. Receivers are not directly affected by this volatility, however, because BitPesa converts Bitcoin into Shillings as soon as it enters the platform. In fact, receivers do not need to know anything at all about Bitcoin, or even that it was used in the transaction.

    In sum, BitPesa appears poised to disrupt the international remittance market by offering competitive fees, by enabling micro remittances, and by offering users a convenient way of sending money. It is an up-and-coming company to watch in Africa's fledgling Bitcoin ecosystem.

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    Categories: General, Columns

    Bitcoin Startups in Africa

    July 18th, 2014 by William

    Backup below (dhimmel):

    One frequently mentioned use case for cryptocurrency is as a conduit for international remittances. Currently, more than 200 million people live outside of their birth countries and these people send home over half a trillion dollars per year to relatives and friends. Money takes circuitous routes between wallets in Atlanta and hands in Accra (or the other way around). These routes are shaped by densely interlinked networks of national and international governments, laws, organizations, corporations, technologies, currencies and human relationships. This nexus of interrelated forces and actors constantly reshapes the channels through which people working abroad send money home. This column will draw attention to interesting developments in this space that have a bearing on cryptocurrency and other decentralized technologies.

    One company that is currently basking in the Bitcoin buzz is BitPesa, a startup seeking to enable BitCoin remittances to Kenya. BitPesa, which opened for service this month, charges a 3% fee to exchange BitCoin into Kenyan Shillings and deposit this money into a specified mobile money account.

    BitPesa works seamlessly with its namesake M-Pesa, the viral electronic cash network owned by Safaricom, Kenya’s leading cellular provider. M-Pesa is like a privatized currency—users deposit money with Safaricom, and this balance is linked to their phone number. Users can then beam these funds to other people’s phones or spend them at an ever-expanding network of M-Pesa merchants. Currently M-Pesa can be used to buy groceries, pay bills, hire cabs, and much more. In fact, some reports argue that 31% of Kenya’s GDP passes through the M-Pesa network. SafariCom is now East Africa’s most profitable company and has expanded into markets around the world, spawning competitors like Econet’s EcoCash based in Zimbabwe. 

    BitPesa claims that users around the world will be able to deposit BitCoin onto their platform and designate M-Pesa accounts in Kenya to receive Shillings. The conversion is done automatically so recipients in Kenya receive the money on their cellphones within minutes. Recipients do not require a BitCoin address or need to worry about market volatility. Senders, on the other hand, must find their own ways to buy BitCoin, although BitPesa has online tutorials about how to do this. Importantly, it should be noted that the fees associated with acquiring BitCoin are not included in BitPesa’s 3% calculation.

    BitPesa is not currently available in the United States, likely due to stringent American restrictions on international money transfer. It is, however, available in the United Kingdom where I will be traveling tomorrow. Is there a reader from Kenya who would be willing to help me test the BitPesa system? Please let me know ASAP in the comments section or in the forums and I will use the service to send you a small amount of BitCoin.

    BitPesa is a good example of a company using BitCoin to cash in on the business of sending money from “rich” countries to “poor” countries. Kitiwa, on the other hand, is a notable BitCoin startup based in Ghana that works the other way around. Kitiwa allows people in Accra to buy BitCoin with local currency in order to make online payments and send money abroad. This service is needed in Ghana because payment networks like Visa and PayPal routinely block people living there (and in other African countries) from using their systems.

    Kitiwa users begin by opening a BitCoin address, and the Kitiwa website contains a tutorial on using Blockchain.info to do this. Users then then pay for BitCoin with MPower Payments, a Ghanian mobile payments startup that allows people to fund purchase with their bank accounts, credit cards or mobile money accounts. Users can then use their BitCoin to pay for internet services like web hosting, send money to relatives living abroad or hire overseas consultants. The Kitiwa website even has a tutorial on how to use BitCoin to shop on Amazon.com through Gyft.

    These developments in Africa’s BitCoin ecosystem occur just as banks in the United States are pulling out of the remittance business. Laws aimed at money laundering and the financing of terrorism have increased costs for banks, which are responding by axing services. As Michael Corkery recently reported

    “JPMorgan Chase and Bank of America have scrapped low-cost services that allowed Mexican immigrants to send money to their families across the border. The Spanish bank BBVA is reportedly exploring the sale of its unit that wires money to Mexico and across Latin America. And in perhaps the deepest retrenchment by a bank, Citigroup’s Banamex USA unit has now closed many of its branches in Texas, California and Arizona that catered to Mexicans living in the United States and stopped most remittances to Mexico as it faces a federal investigation related to money laundering controls.”  

    In a recent op-ed the New York Times argued that banks’ move away from the remittance business will result in migrants paying higher fees to send money home, and that a possible solution would be for the World Bank to act as a centralized remittance clearinghouse. Many BitCoin enthusiasts are probably hoping that the opposite happens—that the banks' withdrawal will create openings that can be filled by BitCoin startups like BitPesa and Kitiwa. We will see what happens.

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