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Bitcoin and M-Pesa; What Stands between Them

Being a Kenyan, who uses both the mobile money service and bitcoin, it made me think about how the two technologies compare.

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Bitcoin and M-Pesa; What Stands between Them

I came across a link about M-Pesa on the Bitcoin subreddit with the headline ‘Kenya's M-Pesa mobile payment service is beating bitcoin’. Being a Kenyan, who uses both the mobile money service and bitcoin, it made me think about how the two technologies compare.

M-Pesa is perhaps the most told financial story to come out of Kenya. This is because many in the West find it almost unbelievable that more than a half the population of a country can rely solely on their simply-featured phones to receive, send, and even save money.

Indeed, those rooting for Bitcoin and other cryptocurrencies have received inspiration from this success. Perhaps because both of these ways of dealing with money are digital, some assume that they are competitors.

This perspective ignores the fact that it is feasible they can complement each other in this area, bringing financial services to the unbanked, especially in the developing world. An excellent example in this regard is Bitpesa, which facilitates locals to receive money in their M-Pesa accounts, which is remitted in the form of bitcoins from outside of the country.

Whatever the case, Bitcoin and M-Pesa are fundamentally two distinct technologies.

Single point of vulnerability

First and foremost, M-Pesa is and will remain a centralized solution from a corporate entity, which makes it vulnerable to single-point attacks. For instance, if some smart fellow hacked the server system, the damage that could be done can only be imagined.

Being a centralized platform does expose users to occasional system failures. When this has happened in the past, businesses and individuals have had their daily financial plans and activities ruined.

Once, a friend told me he thought that it was very risky that we as a country depend on a single business entity to handle close to 50% of money flow.

Of course, that is not to say that Safaricom, the company behind the service, is not doing a good job in securing the system. The fact that it is centralized makes the risk all too real though.

It is important to mention that M-Pesa is not the only mobile money service in Kenya. All the other three telecommunication companies in the country have similar services. Safaricom just happens to be a very dominant player.

On its part, Bitcoin is service that will still work even if a disaster hit and destroyed half of the internet infrastructure. In fact, total failure is only possible if there is a total annihilation of what we know today as the internet.

The fee and privacy factors

Another factor that differentiates M-Pesa and Bitcoin are the fees charged on transactions. Currently, the former charges up to 6% of the value transacted. On the other hand, Bitcoin transaction fees are almost negligible, with the distance between the sender and the receiver not coming into play in this regard.

It’s also important to note that M-Pesa is a local closed system, while Bitcoin is decentralized and accessible worldwide.

The blockchain, the platform on which Bitcoin operates, is pseudo-anonymous. All your transactions are available for anyone on the network to see, but only if they know what public address belongs to you.

The same sort of issue happens with M-Pesa; records of your transactions are kept under your name and National Identification number. While, unlike on the blockchain, this information is not public, one thing that many people might not be comfortable with is the access that third parties have to it.

This is not only possible through a system security breach, but also through demands made by an authority such as the court, government agencies, or even other financial institutions.

Indeed, taking everything into consideration, it is fair to state that M-Pesa is a huge improvement on what has been on offer. However, Bitcoin, through its decentralized blockchain platform, is a huge improvement on M-Pesa.


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