Coinapult was the first to offer a method to send bitcoins to a mobile number (where those bitcoins can be stored by the recipient or sent using nothing more than SMS text messaging).  Their SMS service is available in the U.S. and Canada only, though they assert that they are working on offering that to a wider global footprint.  Presumably, since Coinapult offers the ability to send bitcoins for free (they only charge when bitcoins are sent through their API), offering this globally would incur costs for sending the text messages.
 - http://coinapult.com/sms-wallet

Blockchain.info just added the ability to send bitcoins to any mobile, however the text message sent to the recipient contains simply an URL that is used to claim the funds using the web (thus a data plan on the mobile, or Internet access on a separate device is required.)  They too offer this service for free, apparently.
 - https://blockchain.info/wallet/send-via
 - http://bitcointalk.org/index.php?topic=40264.msg1000405#msg1000405


An SMS wallet service like Coinapult's which requires only SMS text messaging for use combined with the ability to be used globally like Blockchain.info's means bitcoin instantly becomes truly usable by oh, about four BILLION people.  When realizing this I feel like running to the rooftop and shouting Hey world, the BE-YOUR-OWN-BANK is now open!.

Of course, we're not there yet, and I'm stuck not believing we'll actually get there.  At least, not with SMS text messaging.

Here's why.

SMS text messaging is not secure.  The URL in the SMS text message from blockchain info looks like this:

Congratulations! You have been sent 0.1 bitcoins. Claim at: https://blockchain.info/wallet/claim#SwiDoPVEDoZFz6Vsid3

So if a person has access to a mobile carrier's sms gateway or network (which many of the mobile provider's staff and government / law enforcement do) then there's only one line needed to filter the text message stream to get access to free money.  (filter to include any "blockchain.info/wallet/claim#").

That URL is a bearer instrument.  Anyone who has access to that URL can spend those funds.

Coinapult requires a text message response from the mobile number the funds were sent to so at least with that there's no bearer code being transmitted across the SMS network.

On the surface, it would seem an SMS wallet offered globally would have the potential to be a global version of a bitcoin-denominated M-PESA.  With four billion users in the potential market, this seems like a solution so obvious that it will happen.

But it probably won't.  At least not where it is needed the most.  M-PESA is offered by a telecom company.  M-PESA shares their (relatively exhorbitant) fees with the government of Kenya (the country where M-PESA is offered.)  How many days after realizing that SMS wallets are starting to catch on before texts to and from the SMS wallet provider's number are blocked?  (and thus the user's funds left stranded, at least temporarily).   Unlike bitcoin's peer-to-peer architecture, telecom infrastructure operates as the givernment instructs them to.

Over the longer term, smartphones with data services and encrypted communications make it irrelevant what can or cannot be done using the SMS network.

But to carry bitcoin through this period of time where SMS wallets would be the only option for hundreds of million or billions of potential users, I'm wondering what path, if any, will work?

I suppose though, the benefits gained by using bitcoins could outweigh the potential financial loss should blocking or thieving of funds start to occur and as a result pursuing this approach, flaws and all, really is the correct action.

Any thoughts?