Bitcoin-Inspired Digital Currency to Power Mobile Savings App

A nonprofit experiments with using digital currency to give poor teenagers their first experience of financial services.
Proponents of the digital currency Bitcoin have often argued that money made out of computer code could help poor people access financial services. But so far applications for the technology have been almost exclusively aimed at people with Internet access and smartphones. Now a South African nonprofit is preparing to give the idea its first real test.
In the next few months, some teenage girls in poor areas of South Africa will be offered the chance to test out a kind of digital savings account operated via text messages. It will be offered as a new feature on a mobile social network service the girls already use. The savings feature will let people earn and save mobile airtime credit, which is used in addition to government-backed money as a currency in some countries.
Behind the scenes, the new service is powered by a digital currency calledStellar, which was inspired by Bitcoin. All savings balances and transfers will be represented using stellars, as the currency’s units are known.
Stellar, like Bitcoin, is based on a system that uses cryptographic software to create digital tokens that can’t be counterfeited. But Stellar differs from Bitcoin in that it is designed to act as an intermediary between conventional currencies and assets, to speed up transfers between them, and not as a means of payment in its own right. Development of Stellar is being undertaken by a nonprofit, the Stellar Development Foundation, backed by $3 million from the payments company Stripe (see ‘Increasing the GDP of the Internet’).

This post was published at Technology Review on February 20, 2015.