Like Libra, Wala also tried to “bank the unbanked” in Africa. It failed.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The collapse of a blockchain payments startup looking to serve the “unbanked” doesn’t bode well for other companies with similar plans, like, well, Facebook.&nbsp;” data-reactid=”19″>The collapse of a blockchain payments startup looking to serve the “unbanked” doesn’t bode well for other companies with similar plans, like, well, Facebook. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In late 2017, the South Africa-based Wala rolled out its cryptocurrency in developing countries across Africa, where it hoped to eventually substitute the local, volatile currencies for its own cryptocurrency, Dala.&nbsp;” data-reactid=”20″>In late 2017, the South Africa-based Wala rolled out its cryptocurrency in developing countries across Africa, where it hoped to eventually substitute the local, volatile currencies for its own cryptocurrency, Dala. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="But on June 24, after nearly two years, the company went belly up, laying off the majority of its 100 staff and announcing in a Medium post that it had failed to raise a second round of investment. The cause was clear: Wala was unable to disentangle itself from the banking system it hoped to exist apart from and, eventually, replace.” data-reactid=”21″>But on June 24, after nearly two years, the company went belly up, laying off the majority of its 100 staff and announcing in a Medium post that it had failed to raise a second round of investment. The cause was clear: Wala was unable to disentangle itself from the banking system it hoped to exist apart from and, eventually, replace.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="”We weren’t able to completely remove reliance or connection to the incumbent infrastructure,” founder Samer Saab said in an interview with Decrypt.” data-reactid=”22″>”We weren’t able to completely remove reliance or connection to the incumbent infrastructure,” founder Samer Saab said in an interview with Decrypt.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For Facebook, Wala might stand as a cautionary tale. Like Wala, Facebook’s putative digital currency, Libra, makes gestures at “banking the unbanked.” These are the some 1.7 billion people worldwide who, Facebook declares, “point to not having sufficient funds, high and unpredictable fees, banks being too far away, and lacking the necessary documentation” to have access to essential banking services.&nbsp;” data-reactid=”23″>For Facebook, Wala might stand as a cautionary tale. Like Wala, Facebook’s putative digital currency, Libra, makes gestures at “banking the unbanked.” These are the some 1.7 billion people worldwide who, Facebook declares, “point to not having sufficient funds, high and unpredictable fees, banks being too far away, and lacking the necessary documentation” to have access to essential banking services. 

But, also like Wala, Facebook plans to reach this demographic using a closed, centrally controlled system that will hew to regulations and, counterintuitively, require that its “unbanked” users…have bank accounts.

Going wala

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Originally a generic payments startup, Wala pivoted to blockchain in late 2017, seeing decentralization—via the then increasingly popular Ethereum network—as the first step in minimizing its reliance on the patchy, unreliable infrastructure across sub-Saharan Africa, where it operated.&nbsp;” data-reactid=”26″>Originally a generic payments startup, Wala pivoted to blockchain in late 2017, seeing decentralization—via the then increasingly popular Ethereum network—as the first step in minimizing its reliance on the patchy, unreliable infrastructure across sub-Saharan Africa, where it operated. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="At first, Wala’s rebranding efforts did well. It raised $1.2 million in a token sale and set up an independent foundation, the Dala Foundation, to oversee daily operations. Over the next year, the company reported a surge in revenue and users, the latter ballooning to 150,000. In June last year, Coindesk reported that the company was handling around 6,300 microtransactions—most for under $1, to top off mobile phone bills for airtime—among some 57,000 digital wallets, each day.&nbsp;” data-reactid=”27″>At first, Wala’s rebranding efforts did well. It raised $1.2 million in a token sale and set up an independent foundation, the Dala Foundation, to oversee daily operations. Over the next year, the company reported a surge in revenue and users, the latter ballooning to 150,000. In June last year, Coindesk reported that the company was handling around 6,300 microtransactions—most for under $1, to top off mobile phone bills for airtime—among some 57,000 digital wallets, each day. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Wala saw Africa as a rich, untapped vein of investment opportunity. But the limits of its blockchain solution—which involved offloading transactions on to “off-chain” processors—soon became clear. Unlike Ethereum proper, the network was permissioned, and leaned on pre-existing infrastructure. To credit funds to their Dala wallets, the so-called “unbanked” customers had to transfer their funds from regular bank accounts, often via face-to-face transactions with local tellers—“human ATMs,” as Saab put it.&nbsp;” data-reactid=”28″>Wala saw Africa as a rich, untapped vein of investment opportunity. But the limits of its blockchain solution—which involved offloading transactions on to “off-chain” processors—soon became clear. Unlike Ethereum proper, the network was permissioned, and leaned on pre-existing infrastructure. To credit funds to their Dala wallets, the so-called “unbanked” customers had to transfer their funds from regular bank accounts, often via face-to-face transactions with local tellers—“human ATMs,” as Saab put it. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="As such, Wala was heavily dependent on the centralized, vulnerable systems it sought to replace. Like Libra, it had vague “plans” to fully decentralize, as co-founder Tricia Martinex told Coindesk in June 2018, but these plans never materialized.&nbsp;” data-reactid=”29″>As such, Wala was heavily dependent on the centralized, vulnerable systems it sought to replace. Like Libra, it had vague “plans” to fully decentralize, as co-founder Tricia Martinex told Coindesk in June 2018, but these plans never materialized. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The pivotal moment came in July last year, when Ugandan lawmakers pushed through an unpopular tax on social media. Widely viewed as an attempt to censor unfavorable views, Ugandan internet users—who constituted Wala’s largest user base—fled offline in protest, cancelling their internet subscriptions and bleeding the service providers dry.&nbsp;” data-reactid=”30″>The pivotal moment came in July last year, when Ugandan lawmakers pushed through an unpopular tax on social media. Widely viewed as an attempt to censor unfavorable views, Ugandan internet users—who constituted Wala’s largest user base—fled offline in protest, cancelling their internet subscriptions and bleeding the service providers dry. 

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