Stablecoin payments in Africa without an internet connection or a bank account - Kotani Pay integration

[GENERAL] Name and surname of main applicant

Brian Kimotho

[GENERAL] Email address of main applicant

brian@kotanipay.com

Additional applicants

Felix Manchira, CEO

Lemuel, CTO 

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

12

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language.

No

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

Yes

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.” .

Full successful integration (liquidity) may rely on collaboration with stablecoin issuers such as COTI (Djed), Indigo protocol (iUSD) and possibly Emurgo (USDA).

Depending on technical challenges, we may rely on development firms that work with Cardano protocols

For the pilot demo showcasing end-to-end usage, successful collaboration with DirectEd Development Foundation.

[GENERAL] Will your project’s output/s be fully open source?

No

[GENERAL] If NO, please describe which outputs are not going to be open source. If YES, please write “Project will be fully open source.”

In general, the API services are open-sourced. However, the remaining parts of the tech suite belong to Kotani Pay enterprise and would therefore be closed-sourced.

[METADATA] Category of proposal

Dev Tools, API or Library

[METADATA] SDG rating

1. SDG 1. No Poverty
2. SDG 10. Reduced Inequality

[IMPACT] Please describe your proposed solution.

Of the 770 million people in Africa with a phone, 440 million do not have an internet-enabled device. Current blockchain apps smartphones with large storage, access to the internet and knowledge. This poses a significant barrier to financial inclusion and hampers the adoption of blockchain technology. 

To address this challenge, our proposed solution is to integrate Cardano stablecoins into the stablecoin ecosystem supported by the Kotani Pay tech stack. This integration will enable offline mobile wallet payments, crypto on/off-ramping, and a stablecoin settlement solution for enterprises that need to convert large volumes of Cardano stablecoin to local fiat currencies in the countries we operate in (Kenya, Ghana and soon Zambia), revolutionizing financial services for underserved populations.

Kotani Pay has licences and a complete tech stack supporting crypto-to-mobile money solutions via Unstructured Supplementary Service Data (USSD) technology, which does not require internet connectivity. 

This breakthrough technology enables regular phone users across Africa to access and engage with financial services enabled by the Cardano blockchain, regardless of their access to the internet or ownership of traditional bank accounts.

The beneficiaries of this solution are the millions of Africans who are currently excluded from the financial system due to limited internet access. By enabling offline mobile wallet payments and providing a user-friendly interface, we empower individuals, including refugees, gig workers, and marginalized communities, to participate in the digital economy and access essential financial services. This solution is crucial for achieving financial inclusion and reducing inequalities, aligning with the United Nations' Sustainable Development Goals (SDGs) of ending poverty (SDG 1) and promoting inclusive and sustainable economic growth (SDG 8).

The integration of Cardano stablecoins into the Kotani Pay tech stack not only addresses the challenge of internet accessibility but also serves as a strategic partnership with Cardano. Cardano, as a leading blockchain platform focused on sustainability and scalability, recognizes the importance of extending financial services to underserved populations in Africa. By collaborating with Kotani Pay, Cardano can demonstrate its commitment to social impact and showcase its blockchain technology as a catalyst for positive change in emerging markets.

[IMPACT] How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?

This challenge seeks to enable builders of decentralised applications on Cardano to solve real-world challenges. 

Specifically, the challenge setting asks:

• What do developers want, and how do they get it from the Cardano dev ecosystem? 
• What are enterprise dev managers looking for in order to be able to build out enterprise projects? 

There are two ways in which we believe that we are achieving this.

1. Existing Cardano projects. Cardano has long had a strategic focus on Africa with Emurgo most recently launching a $100 million venture fund focused on Africa projects specifically. This long-standing commitment to Africa has attracted a lot of Africa-focused projects to build on Cardano. Some examples include World Mobile, Empowa, Thrift Finance, DirectEd Development Foundation, Landano and Commonlands. 
2. Traditional businesses. An enterprise looking to leverage a blockchain solution will thoroughly research its options. For any blockchain product to make sense on a continent with limited internet penetration, being able to reach users with no internet is a competitive advantage. 

What is the quantifiable impact this project will bring to the Cardano ecosystem?

Our solution unlocks access to Cardano’s financial services to millions of users across our current three countries of operation: Kenya, Ghana and the Zambia. We are in the process of obtaining regulatory licences in more countries, including South Africa and Tanzania. 

Below is a list of current countries in which Kotani Pay is operating (Kenya, Ghana) and the countries that are included in the next expansion wave:

• Kenya. 23.35 million internet users (42.0 of population) in Kenya in January 2022, meaning that 32.25 million people (58.0 percent) in Kenya did not use the internet at the start of 2022. There are 67.9 million registered mobile money accounts.  (135% of population) https://datareportal.com/reports/digital-2022-kenya, https://www.statista.com/statistics/1188510/registered-mobile-money-accounts-in-kenya/ 
• Ghana. 44.9 million cellular mobile connections at the start of 2022 (140 percent of population) with around 17 million internet users. Implying that potential another 15 million with phone but no internet. https://www.statista.com/statistics/1175988/mobile-money-accounts-ghana/, https://www.statista.com/statistics/1171416/number-of-internet-users-ghana/ 
• Zambia. 16.36 million cellular mobile connections were active in Zambia in early 2023, with this figure equivalent to 80.6 percent of the population. Meanwhile they have only 4.30 million internet users (21.2 percent). https://datareportal.com/reports/digital-2023-zambia 
• Tanzania. 53.81 million mobile connections.(86.2 per cent of its population had access to mobile phones) and 15.6 million internet users (75% with no internet). https://furtherafrica.com/2022/07/19/african-countries-with-the-highest-number-of-mobile-phones/amp/ 
• South Africa. 108.6 million cellular mobile connections in South Africa at the start of 2022, equivalent to 179.8 per cent of its population (GSMA Intelligencs data). In 2021/22, the same source reported that 19.2 million people in the country remained offline, representing 31.8 per cent. https://furtherafrica.com/2022/07/19/african-countries-with-the-highest-number-of-mobile-phones/amp/ 

 

Taking all of the above together, this means that the potential addressable user base of Cardano dApps increases by around 93.8 million thanks to the Kotani Pay integration. 

These are the unbanked that Charles Hoskinson speaks of in his TEDtalk, and in his vision for Africa. 

[IMPACT] How do you intend to measure the success of your project?

Key Performance Metrics

Short-run (when building)

• Milestones attained
• Monthly reports (submission form)
• Monthly Progress updates:
• Telegram https://t.me/+ewVSyl0DJgBhYmI8 
• Medium https://kotanipay.medium.com/ 

Medium/long-term (post-launch)

• Number of Cardano TXs processed through Kotani Pay APIs
• Number of Cardano TXs through USSD mobile money 
• Businesses using Kotani Pay enterprise API solutions for Cardano payment processing
• Businesses using Stablecoin Settlement Solution for large volume transfers.

• 
  

[IMPACT] Please describe your plans to share the outputs and results of your project?

We will primarily be posting on two channels on a monthly basis.

1. Telegram Announcements https://t.me/+ewVSyl0DJgBhYmI8
2. Medium https://kotanipay.medium.com/

Milestone capabilities will also be announced there with demos when appropriate. As is outlined in the Milestones section, we will be demonstrating an end-to-end user journey in collaboration with DirectEd Development Foundation’s (DirectEd) Access Scholarship recipients (on-chain scholarships) in Q1 2024. https://linktr.ee/directeddevelopment 

This end-to-end video will be produced in junction with DirectEd and its outputs will be shared on each respective social media account with a preview video presented during one of the Catalyst After Town halls. 

API documentation will be found at https://docs.kotanipay.com/. 

[CAPABILITY/ FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability?

Kotani Pay has been recognised for its pioneering work across Africa across several major news outlets in traditional and crypto media, including Forbes, TechCrunch and WeForum. In 2022, we entered a partnership with Mercy Corps for a stablecoin payment system for microwork in Kenya (Medium post). We were also recently recognised as a global digital good after being part of the UNICEF Venture Fund, check out the Github here: Kotani Pay (unicef.github.io).

Our full suite of products is currently fully operational in Kenya and Ghana, with legal approval pending in Zambia. We are also in the process of obtaining licences across several other jurisdictions across Africa including Tanzania, South Africa, and Uganda. 

In Kenya, we are regulated by the Kenyan Central Bank. In Ghana, we are in the process of securing Digital Sandbox licence. We have also begun the same process for Uganda and the Zambia where similar legislative changes are being introduced to enable innovation. In South Africa, we are applying for Digital Assets provider licence. 

Kotani Pay has a history of successful integrations. At the time of writing, it has successfully integrated with Arbitrum Nova, Arbitrum One, Avalanche, Celo, Ethereum, Optimism, Polygon, Stellar, BTC Lightning Network. Most recently, we received a $100.000 grant for its integration with the Stellar network. 

We follow rigorous processes for our financial flows and management. If you require more details about our internal processes, please reach out to our CFO (see team section). 

Risk Analysis and Mitigation

1. Risk: ADA falls in value 
2. Mitigation Strategy: Continuously monitor market conditions and evaluate the impact of ADA's value on the project. Implement necessary adjustments of the roadmap to appropriately manage community expectations. 
3. Adequate Reserve: Maintain sufficient reserves to cover operational costs and project expenses in the event of significant value fluctuations.
4. Risk: Development is more difficult than expected 
5. Mitigation Strategy:
6. Comprehensive Project Planning with a well-established Cardano development firm: Conduct thorough project planning, including a detailed timeline, resource allocation, and milestone breakdown. This ensures a realistic assessment of development timelines and identifies potential bottlenecks in advance. 
7. Adequate Resources: Allocate adequate resources, including skilled developers, project managers, and technical experts, to ensure efficient progress. We’ve budgeted for external development assistance. 
8. Contingency Planning: Develop contingency plans and alternative solutions to address potential delays or roadblocks. This may involve adjusting priorities, reassigning resources, or seeking additional expertise or partnerships. 

[CAPABILITY/ FEASIBILITY] What are the main goals for the project and how will you validate if your approach is feasible?

The overarching goal of this project is to provide the infrastructure required for Cardano’s Africa-based projects to utilise Cardano’s financial infrastructure and offerings. The most important aspect of this is to enable users with not internet connectivity to interact with the Cardano blockchain. 

Specifically, we want to integrate three of our core products with Cardano. This means: 

• Non-custodial USSD wallet integration, enabling users to control their Cardano assets even with no internet connectivity.
• Enteprise-grade API for on-off ramping to local mobile money in Kenya, Ghana and soon Zambia. 
• Stablecoin Settlement Solution. This would enable Cardano projects with larger volumes of stablecoin to convert those to local currencies in the jurisdiction we are currently operating in. 

We believe these goals should be measured by functionality. 

• Can an end user with a feature phone receive a Cardano stablecoin, convert it to mobile money and purchase an item for their daily use? 
• Can a company easily integrate our APIs for on and off-ramping of ADA and at least one native Cardano stablecoin? 
• Can a company with Cardano stablecoin seamlessly settle this in local currency across several jurisdictions in Africa? 

Feasbility is not overall not an issue for the core product offering as illustrated by our past record of integrations with a number of protocols. Our first milestone will contain more thorough feasibility of some of the additional capabilities that we seek to offer.

[CAPABILITY/ FEASIBILITY] Please provide a detailed breakdown of your project’s milestones and each of the main tasks or activities to reach the milestone plus the expected timeline for the delivery.

Though we have established preliminary contact with some of the Cardano development firms, our current cost estimates rely on previous integrations undertaken. We are aware of the challenges involved with the eUTXO accounting model, and Plutus, a functional programming language. This might mean that the integration costs may be higher and there may be unforeseen challenges along the way. For each $5k milestone, we have therefore assumed 3 MD (man-days) of external dev assistance at $800 per MD. 

Due to the uncertainty of the integration costs, we have opted to include a list of core deliverables alongside “nice-to-have” deliverables. In the following section, we will outline both the “core” deliverables alongside “nice-to-have” deliverables. If the cost of delivering the core deliverables is lower than expected, then we will use the development time to build out “nice-to-have” features based on demand and feasibility. 

Core Milestones 

Q4 2023

Milestone 1. Feasibility Study and Research. $2,000

• Activity 1. API integration requirements 
• Activity 2. Djed stablecoin integration
• Activity 3. iUSD stablecoin integration
• Activity 4. Wallet features research (staking, gasless transactions, native token UX, in-app swap, multi-chain swap, dApp integration)

Q1 2024

Milestone 2. API Integration with Cardano Mainnet. $10,000

• Activity 1. Testnet API for cashout
• Activity 2. Testnet to Mainnet migration
• Activity 3. Tests and debug to ensure end-to-end functionality

Milestone 3. USSD wallet off-ramp. $5,000

• Activity 1. In-wallet ADA transactions
• Activity 2. Cashout ADA to KES/GHS
• Activity 3. Cashout Djed/iUSD to KES/GHS

Milestone 4. USSD wallet on-ramp. $5,000

• Activity 1. Onramp KES to ADA/Djed/iUSD
• Activity 2. Onramp KES/GHS to ADA/Djed/iUSD

Q2 2024

Milestone 5. Stablecoin settlement support. $5,000

• Activity 1. Liquidity partner integration
• Activity 2. QA testing

Milestone 6. DirectEd Pilot and Case Study. $1,500

• Activity 1. Media recruitment and preparation
• Activity 2. Run a pilot with 25 students of DirectEd in Kenya
• Activity 3. Film production case study with 2-3 students.
• 
  
• Activity 4. Marketing and release of case-study video. 

Milestone 7. “Nice-to-have” 1 (subject to feasibility research and progress on the previous milestone). $5,000

Q3 2024 

Milestone 8. “Nice-to-have” 2 (subject to feasibility research and progress on the previous milestone). $5,000

Milestone 9. External Code audit. $30,000

Total: $68,500 

Nice-to-have integrations

The decision of which of these to build out depends on cost, demand and feasibility. This is determined during the feasibility study and is contingent on the success of earlier milestones. 

• dApp support. Ability to interact with Cardano dApps from within the USSD wallet.
• Gasless transactions. This refers to a situation in which a service provider pays for the gas fees of the end user and has been implemented for other chains we have in our tech stack. 
• Cross-chain swap. This hinges on bridges existing and/or the demand for escrow. 
• Staking support. Full optionality to stake with a variety of stake pools from within the wallet.

[CAPABILITY/ FEASIBILITY] Please describe the deliverables, outputs and intended outcomes of each milestone.

Milestone 1: Feasibility Study and Research. $2,000

- Deliverables: API integration requirements report, Djed stablecoin integration documentation, iUSD stablecoin integration report, wallet features research document.

- Outputs: Clear understanding of integration requirements, successful integration of Djed stablecoin, insights for iUSD integration, recommendations for wallet features.

- Intended Outcomes: Clear roadmap for API integration, expanded stablecoin options, enhanced wallet features.

- Measures of Progress: Completion of deliverables and documentation.

**Milestone 2: API Integration with Cardano Mainnet. $10,000**

- Deliverables: Testnet API for cashout documentation, Testnet to Mainnet migration plan, tests and debug report.

- Outputs: Testnet API for cashout, successful migration to Cardano Mainnet, fully functional integration with Cardano.

- Intended Outcomes: Seamless integration with Cardano, reliable cashout functionality, stable connection to the Cardano blockchain.

- Measures of Progress: Completion of deliverables and successful migration.

**Milestone 3: USSD Wallet Off-Ramp. $5,000**

- Deliverables: In-wallet ADA transactions documentation, cashout ADA to KES/GHS documentation, cashout Djed/iUSD to KES/GHS documentation.

- Outputs: Functional ADA transactions within USSD wallet, cashout capability to KES/GHS.

- Intended Outcomes: Seamless ADA transactions, easy conversion of ADA and stablecoins to local fiat currency.

- Measures of Progress: Completion of deliverables and successful execution of cashout.

**Milestone 4: USSD Wallet On-Ramp. $5,000**

- Deliverables: Onramp KES to ADA/Djed/iUSD documentation, onramp KES/GHS to ADA/Djed/iUSD documentation.

- Outputs: Capability to onboard KES and KES/GHS to ADA/Djed/iUSD.

- Intended Outcomes: Easy onboarding of local currencies to digital assets.

- Measures of Progress: Completion of deliverables and successful implementation of onramp functionality.

**Milestone 5: Stablecoin Settlement Support. $5,000**

- Deliverables: Liquidity partner integration documentation, QA testing report.

- Outputs: Integrated liquidity partners, quality assurance-tested settlement support.

- Intended Outcomes: Efficient and secure cross-border stablecoin settlements.

- Measures of Progress: Completion of deliverables and successful QA testing.

**Milestone 6: DirectEd Pilot and Case Study. $1,500**

- Deliverables: Media recruitment and preparation, pilot with 25 students of DirectEd, case study with 2-3 students, marketing and release of case study video.

- Outputs: Successful pilot program, filmed case study, published case study video.

- Intended Outcomes: Demonstrated impact on students' lives, awareness of Kotani Pay's solution.

- Measures of Progress: Completion of deliverables and positive feedback from pilot participants.

**Milestone 7: "Nice-to-have" 1 (subject to feasibility research and progress on the previous milestone). $5,000**

- Deliverables: Dependent on feasibility research and progress.

**Milestone 8: "Nice-to-have" 2 (subject to feasibility research and progress on the previous milestone). $5,000**

- Deliverables: Dependent on feasibility research and progress.

**Milestone 9: External Code Audit. $30,000**

- Deliverables: Successful external code audit of the Kotani Pay platform.

- Outputs: Comprehensive code audit report.

- Intended Outcomes: Ensured security and reliability of the platform.

- Measures of Progress: Completion of code audit and positive assessment of the platform's code.

[RESOURCES & VALUE FOR MONEY] Please provide a detailed budget breakdown of the proposed work and resources.

See details of activites above section

Total cost budgeted for milestones and code audit: $68,500 

Management and admin: $4000

Reporting and marketing: $3000

Infrastructure (API service): $1000 

Contingency: $5000

Total = $81,500

Total ADA = 326,000 ADA* 

*assuming 1 ADA = 0.25 USD

[RESOURCES & VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

Cost

In USD-equivalent, we are asking for a sum of $81,500 which is on par with what we have received from other protocols for similar integration work (e.g. Stellar grant). 

As of now, we are not in a position to fully estimate our costs for a full Cardano integration and we don’t know if we’ll have the in-house capabilities to successfully implement this. We have therefore set the costs for each milestone assuming a combination of internal and external development (1 man day, external dev. = $800, each $5k milestone requiring 3 MDs). However, there are many unknowns and therefore the milestones and the associated budgets should be seen as preliminary.

If the development costs of earlier milestones were underestimated, then that will only open up our budget for other value-adding capabilities of our USSD wallet and tech stack. One of the most interesting of which would be integration with some of the existing dApps on Cardano. We envision a future in which a small-hold farmer in rural Kenya is able to receive small stablecoin donations, go onto their USSD wallet and immediately add it to a savings account through a Cardano DeFi protocol such as Liqwid, Indigo, Lenfi and many more! 

Value

Cardano was built for the many, not the few. This aligns with what Kotani Pay was set out to do. Though we are supporting several protocols at the moment, our key mission is to enable builders in the Web3 space to solve real world problems for people across Africa. 

As the most vibrant ecosystem with several market-leading Web3 projects building in Africa, such as World Mobile, Empowa, DirectEd, Landano and many more, we have been looking to integrate with Cardano.

Our value can be summarised in these two points:

1. **Enhancing Financial Inclusion**. By integrating Cardano stablecoins into the Kotani Pay tech stack, Cardano’s addressable user base will expand by nearly 100 million users as outlined in an earlier section. Even rural small-hold farmers with only a feature phone could all of a sudden interact the global financial system. This aligns with Cardano's mission of creating a more inclusive and accessible financial ecosystem. 
2. **Expanding Adoption of Cardano**. The project's focus on API integration with Cardano Mainnet and the integration of ADA transactions within the USSD wallet increases the likelihood that enterprises looking for blockchain protocols to build out their solutions choose Cardano. In this competitive environment, Cardano needs to not only be the most secure and decentralized protocol, it must also be the most accessible. 

[IMPORTANT NOTE] The Applicant agreed to Fund10 rules and also that data in the Submission Form and other data provided by the project team during the course of the project will be publicly available.

I Accept