On the outskirts of Mombasa, Kenya’s second largest city, sits a slum called Bangladesh. It was supposedly named after an Asian proprietor who once lived there, though he has since left, along with most of the infrastructure. Now, waste-filled ditches snake between stout huts of corrugated iron.

It’s not, at first glance, an obvious place to flaunt Silicon Valley’s latest and greatest.

Yet the slum has become the unlikely proving ground for a grand experiment in modern money. For a week now, Bangladesh’s residents have traded goats, tomatoes, and charcoal with one another—all using a highly localized, blockchain-based digital currency. With a bit of luck, proponents say this digital micro-economy will lift the community, and others nearby, out of poverty.

Unredeemable Bankers

The digital tokens, dubbed “Bangla-Pesa,” were phased in on August 7 by Grassroots Economics, a Kenya-based non-profit using the Ethereum-based Bancor Protocol. The platform matches buyers and sellers of cryptocurrencies via the Bancor Smart Token, which helps residents access cash quickly. (Good explainer here.)

“In the morning you’d find a new dead body in the water. But now you can go out at night. It feels safe in the community. It’s a God-given thing to have.”Emma Onyango, Bangladesh resident and board member of the Bangladesh Business Network

The Bangla-Pesa supplements a suite of paper tokens already in use since 2013, intended to relieve the community’s strained credit system. Will Ruddick, Bancor’s Director of Community Currencies and the founder of Grassroots Economics, says Bangladesh’s local markets used to collapse weekly, and its residents could scarcely put food on the table. 

The problem, Ruddick explains, is that the circulation of the Kenyan shilling failed to reflect supply and demand. It didn’t represent local need, which was actually met by supply. Instead, it was subject to the flux of the wider economy. In other words,  there were plenty of goods to go around in Bangladesh, yet no cash to buy them with.

Before the token sale, “there was no money to save at all,” says Emma Onyango, a Bangladesh resident who teaches the community how to use Bangla-Pesa.

So Grassroots Economics approached the community and minted 200 tokens for each resident. Since the tokens can’t accrue interest, they must be persistently spent on local goods to maintain their value. This creates a micro-economy attuned to the ebb and flow of the marketplace. Thus, internal trade continues at a steady, stable rate. It eases the pressure on the strained Kenyan shilling, which residents can now spend elsewhere, even on frivolities. “People now go on the merry-go-round,” Onyango says.

Flush with a stable means of exchange, Bangladesh feels safer. Says Onyango: “There were boys with sin. In the morning you’d find a new dead body in the water. But now you can go out at night—it feels safe in the community. It’s a God-given thing to have.”

Now, the token system has been digitized. The Bancor Protocol accommodates the algorithms needed to maintain their supply and value. It then stamps each transaction securely on the Ethereum blockchain.

The Bancor Protocol allows Bangla-Pesa holders to switch their tokens for other currencies, facilitating trade in neighboring communities and allowing the holder to gain access to the more exotic goods. The protocol is a kind of float, automatically adjusting the Bangla-Pesa’s value in line with supply and demand.

Villagers are adapting to its demands with whatever technology they have at hand. “We have maasai warriors with solar panels strapped to their hair selling their cattle.” Will Ruddick, Bancor’s Director of Community Currencies and the founder of Grassroots Economics

Nate Hindman, Bancor’s director of communications, says this complex system of interchange is difficult to calculate without the protocol. Digitizing this process enables Grassroots Economics to jumpstart a healthy, regional economy, which could spread.

Redeemable Bancors

According to Ruddick, the trial phase is going well. A group of shopkeepers, fish saleswomen, and school teachers has so far received 500 digital tokens each; the tokens are redeemable at 250 local businesses that already use the paper voucher system.

Ruddick says the near-term goal is to increase the number of people holding tokens to more than 1,000 smartphone owners. (Smartphones are surprisingly common among poor Kenyans, who use the wildly popular mobile-banking app m-Pesa, he says.)

Paying in tokens is simple, and done face-to-face. Villagers ask vendors for a particular good or service, then transfer the appropriate number of tokens using the Bancor app. The transaction is then imprinted on a cost-free sidechain of the Ethereum network. So far, villagers have swapped the electronic tokens for tomatoes, chapati, school fees, haircuts, charcoal, construction work, and trash collection.

In the near future, Bancor plans to roll out a text-messaging service so users with non-smartphones can make transactions, says Ruddick.

But even without that, the system seems to be working. Villagers are adapting to its demands with whatever technology they have at hand. “We have maasai warriors with solar panels strapped to their hair selling their cattle,” says Ruddick.

There has been some drama along the way. Ruddick was jailed in 2013, along with a cohort of community leaders, on the grounds that distributing the paper vouchers amounted to a secessionist insurrection. After an acrimonious six-month court battle, however, Ruddick and co. were finally acquitted. “No law was being broken,” says Ruddick.

Grassroots Economics keeps chugging enthusiastically along. With community-driven currencies cropping up farther afield in the Congo, Nigeria, and South Africa, soon we may all be chowing down on blockchain tomatoes.