Crypto Currency Startup Wala Using Ethereum Micropayments Changing Crypto Perspective
Wala, a crypto currency startup in South Africa is changing the view of digital currencies not only in Africa, but in the entire world. Scalability, or the ability to have multiple transactions per second has been a challenge to the crypto world, but Wala has invented an ingenious way of going around this challenge.
Apparently, citizens in Uganda, South Africa and Zimbabwe are spending on average 27 cents on mobile airtime and are using a digital token to top up. With scalability challenge looming on crypto payments and transactions, this seems like a made-up story, but it is actually happening.
According to Wala’s Chief Executive Officer (CEO) Trica Martinez, digital currency may just be the way out for a financial revolution in Africa. As of the moment, this company has managed to raise $1.2 million as a startup capital after selling Dala, an Ethereum based token during an Initial Coin Offering (ICO) last December.
Wala has already established a client base with more than 57, 000 wallets in the three countries. The company is now enabling 6,300 transactions daily. Most of these transactions are below $1. These transactions have just confirmed that digital currency transactions are not just for the tech savvy but can be for every one if only the right mechanism is put in place. They have just shown to the whole world that it is possible to use cryptocurrency even in the remotest of place in the developing world.
The Wala team says that using cryptocurrency has significantly changed the manner in which they carry out their business. Initially, they were facilitating their clients’ payments using a mobile app and going through local banks. This model was not only slow, but also expensive since the banks charge fees for nearly every function. This model was eating into the company’s profits significantly hurting their business model, so they had to come up with a solution. They found using cryptocurrency as a viable solution, since it could allow peer-to-peer payments with much lower fees.
Wala has now more than 100, 000 merchants offering goods and services through their platform. Users are able to not only buy air time, but also pay for services such as paying for electricity bills, paying school fees and buying other merchandise using the Dala token. The interesting aspect of this system is that users can transact across 10 markets in three different companies. That means a user in Uganda can pay electricity bill for his household in South Africa.
But How Is This Possible? You May Ask
Wala has a devised an ingenious method for facilitating these microtransactions on the Ethereum blockchain. This technology is called microraiden, that is a slimmed-down version of raiden. It is a technology that bears similarities with to bitcoin’s lightning network, that works by pushing out transactions off the chain to try and scale them up.
This technology enables decentralized app developers to create channels that only receive payments. It is different from its original version that enables multiple channels and transactions hopping bidirectionally.
With Ethereum transaction fees ranging from $0.17 to $4.15, Wala’s microtransactions could have been very expensive and thus not viable. This technology has helped lower down this fee to almost nil. Wala receives all the users’ payments and batches them on to the Ethereum blockchain. Wala meets the transaction fee incurred from these transactions using the capital raised from the ICO and from the venture capital.
As their business grows, scaling and transaction cost might present more challenges in the future. Wala is working on that to ensure that this does not become a problem. For instance, the company is looking to work with different blockchains simultaneously according to their Chief Operating Officer (COO), Samer Saab. Multiple blockchains according to Saab could provide a kind of a buffer between the users of dala and the effects that may occur at the base layer.
System Is Centralized
The vision of multiple blockchain is at the moment just that-a vision. For now, Wala is controlling all the payments and transactions to get around the challenges of costs and speed of transactions. Wala acts as the middleman and the custodian between their users and the Ethereum blockchain.
This is critical considering that they know their users’ habits and are thus able to cope with arising issues easily. Martinez says that it is important to understand users considering the rate at which they share their phones, delete and install apps, change their phones and other habits.
Despite this, the company still has a plan to decentralize in the future to meet the essence of cryptocurrency. This plan will depend on how the Ethereum network scales in the future.
In the meantime, the main focus for Wala, says Martinez is to make the dala token more attractive than cash. She asserts that banks are not a competition, but cash money. Wala is in line with achieving this offering bonus tokens to individuals that refer their friends to use the Wala platform and by extension the dala token. The company is also looking forward to setting up a ‘microjobs platform’ that will provide users with an opportunity of earning the tokens by carrying out simple tasks like filling research surveys and taking pictures among others.
Wala, in their bid to establish an African currency are planning to expand their operations to 11 other countries in Africa and Europe. Among these countries include the United Kingdom (UK). They have identified the critical part cross border payments play on many African economies and the manner in which these payments are slowed down by expensive bureaucracies.
The World Bank says that Africa is the most expensive continent to remit money to. A Quartz report confirmed World Banks observation saying that remittances to Africa, and especially sub-Saharan Africa cost to an excess of 9.7% of the money sent. If the Wala platform can make the dala token become a global currency, the cost of these transactions would reduce significantly. Furthermore, consumers will be in a position to use the received tokens to purchase products or pay for services directly from the app.
Wala is at the moment covering the costs of operation to establish the platform. In the long run though, the platform will need to monetize the app to run itself. As of now, the company is getting revenue from buying commodities like air time in bulk at a discount, and then retailing the same to the market place.
Martinez has said, however, that Wala is looking forward for some partnership later on as the business grows. Among those Wala is looking forward to partner with are British Trading firm Block Commodities who are set to give out $10 million in dala loans to small scale farmers as well as partnering with other financial institutions. Wala will accrue revenue from the interest payments of these loans.
Among other financial institutions that Wala is planning to partner with include banks in Zimbabwe, as well as the global microfinance bank FINCA that are to offer the same loan products and savings services. Wala will also hook the dala token to a stable currency like the US dollar since local currencies are a bit unstable. This could be the future of African financial revolution if this project will be sustainable