El Salvador gambled which is stupid. Whether they won or lost at the lottery is inconsequential to its stupidity.
Speculative spikes can happen for a lot of reasons, but that Bitcoin would replace all currencies (as early advocates would have had you believe) was not one of those reasons.
Bitcoin was not bought because people believed it will replace all currencies. They bought bitcoin to get rich fast and cash out BEFORE the expected crash.
Regardless of your opinion on this, you have to at least wait till the proposition plays out before passing judgement. You have to see if they can withstand the short term volatility and whether bitcoin succeeds or not.
Calling the experiment failure before the results is silly to say the least.
Salvadoran here.
It's hard to see the benefits if there is no transparency on the process.
If we could even have a dashboard and an official website were we could have access to audited reports about the results of this bet, and see how its value varies over time. Then I might agree.
Maybe just a graph like the one found Norway's Sovereign Fund website
In reality we just don't. Public information is limited or contradictory. The few public information available includes a tweet about the president buying bitcoin from his phone while not wearing clothes.
https://www.washingtonpost.com/world/2022/01/26/el-salvador-...
As far as I know, the trust that holds El Salvador bitcoin doesn't have a public website. And the state wallet's website doesn't publish an address or phone number.
The only time I've seen their address is a receipt from a veterinary hospital run by the same state company operating the wallet, in which every procedure costs only US $0.25 because they are subsidized by "bitcoin profits"
El Salvador is a strange country sometimes.
See: Survivorship bias.
Its utility as a decentralised banking system for those who have no access to banking in poorer regions of the world is a clear benefit and has achieved what it wanted for the country.
A lot of the risk can be hedged by custodians, so I don't agree.
The reason it should fail for transactions is because Bitcoin sucks for transactions. Few people will prefer slow, irreversible and expensive transactions.
El Salvador primarily uses lightning network, same network Strike uses for instant cross border payments.
> Investments are sound based on probability and risk beforehand.
Investing in bitcoin had a limited downside (lose 100%), but a very high upside (reaches it's initial goals). For me, the potential gains outweighed the low probability.
I consider myself very lucky that I made some money (wasn't crazy to put all my money in there). But for me, when it would have gone to 0, I still feel it was worth the risk.
But of course, with such a high risk high reward investment, only invest a small % of your total money.
Or I guess you could buy lottery tickets. Probably a slightly less insane way to "invest" your money.
I went from living very comfortably to living paycheck-to-paycheck in about 6 months. Holding my value in USD has become a significant risk.
Yeah, its up like 100% over Bitcoin and like +30% over Euro, Yen, and GBP? In fact, holding Cash/USD has been basically one of the best performing things in my entire portfolio this year (after oil/energy)
Have _you_ seen BTC's buying power recently?
Yeah, it's been going up relative to almost all other currencies and especially BTC.
If Bitcoin's momentum hadn't been dissolved, it wouldn't require people to be forced by State to accept it.
[1] https://bitinfocharts.com/comparison/size-btc-ema14.html#all...
You're the opposite of lucky.
Moreover, the entire philosophy of holding BTC as some store of value destroys the notion of BTC as a viable currency.
What it had was a currency it does not print (US dollar) and for which there is an ongoing international shortage.
What El Salvador got with Bitcoin was yet another currency it does not print and for which there is currently an international surplus.
The thing the article does not mention, and the only reason the policy made any sense, is that ~50% of Salvadorans live abroad. So there is a substantial remittance market in El Salvador relative to GDP. Allowing remittances to flow through bitcoin cuts out companies like Western Union who scoop from the top.
Even so, this scheme only makes a little sense. A better approach might have been for the government to have set up a USD-based remittance program of its own.
This is just not true. Crypto as foreign remittance has been proven and is working quite well in Argentina.
What you really don't want as a layperson in Latin America, is for really any third party -- but especially government third parties, to have control of your money in any capacity during remittance.
I agree with that. For example linking the U.S. banking system via ACH/Fedglobal with the El Salvador one as Panama and Mexico have done to bring down transactions costs.
https://www.frbservices.org/financial-services/ach/fedglobal
> This is just not true. Crypto as foreign remittance has been proven and is working quite well in Argentina.
But El Salvador is not Argentina though. El Salvador had never been affected by unstable currencies or unfavorable exchange rates set by their governments.
Bitcoin on the other hand, has been the first experience for Salvadorans, of having a currency that loses 50% of its value.
I'm just judging from their accents in Youtube videos, but part of the Salvadoran bitcoin wallet developers were from South American countries, so it seems to me that they were trying to solve a problem that existed in their countries, but not in El Salvador.
https://www.freethink.com/technology/crypto-argentina-black-...
Bitcoin enthusiasts can be so anti-government that they seem to think ever government will turn into a basket case like Argentina. Perhaps every government gets into trouble eventually. But you could wait a couple lifetimes for it in some countries.
Second best is a currency that no country can print.
Third best is a currency that another country prints (since that country can easily devalue your holdings).
About 1.50 USD bitcoin fee transfer[1][2], no fees for deposits or withdrawals on FTX for both BTC and USD (for > 0.01BTC, around 200 USD)[3]. And 0.07% taker, 0.02% maker fees for trades [4]
[1] https://ycharts.com/indicators/bitcoin_average_transaction_f...
[2] Could be avoided or greatly reduced if using other cheaper cryptos
[3] https://help.ftx.com/hc/en-us/articles/360034865571-Blockcha...
[4] https://help.ftx.com/hc/en-us/articles/360024479432-Fees
However, the presupposed lack of adoption of Bitcoin as a means of payment is not supported by the source bar chart. The numbers are actually pretty impressive compared to card: ~25% of businesses accept card and 20% accept Bitcoin as payment. That is impressive adoption after 1 year by any standard in a country that primarily uses cash.
From the article:
> But Bukele wanted more. Making bitcoins legal tender meant a payee had to accept them. As the 2021 legislation stated, “every economic agent must accept Bitcoin as payment when offered to him by whoever acquires a good or service”.
The numbers may be be higher in places that cater to bitcoin tourists, like beach hotels and restaurants, but for day to day locals the transactions is lower.
During peak bitcoin usage I asked a few cashiers how many transactions have been in bitcoin, and the answer was none in normal stores, and 1-3 in the largest supermarket in the fanciest part of San Salvador.
Even the largest bank in El Salvador, only processed 7500 bitcoin transactions on their payment gateway from october 2021 to december 2021. That would be like 80 por day.
"más de 7,500 transacciones [..] en el 2021 [...]n pago con bitcoin." [1]
[1] https://www.bancoagricola.com/salaprensa/notas-de-prensa/ban...
The best alternative payment system I have seen myself is M-Pesa in Kenya [0]
It's THE payment system in Kenya everything runs of it in terms of commence for the "ordinary man". It has a somewhat unique starting point, since Kenya (Africa) (I'm from there myself), was not "modern enough" for the everyday man to make use of traditional banking services. But even the "low tech man" had a cellphone.
I hope to see more examples like this in the future, and I'm sure many a BigCorp is doing just that, I do wish the next-gen version of these services will be more community-driven and less bigcorp. Oh gosh I almost described the original vision of bitcoin :)
Much like Africa, all of SE Asia went directly to cell service and skipped all landlines because they were so far behind. The same goes for banking in these parts of the world and India.
The people there will skip over the traditional banking system which is massively undeserving the population and adopt a digitally native banking system. The masses will go with the flow and accept the CBDC, but many already understand the implications and limitations.
Pyramid and MLM schemes exist and thrive today despite widespread knowledge of them and how they work.
So I think shitcoins will have their day again, they'll just have new branding.
Every 4 years it looks like that. And yet the next greed fueled ascension comes around like a clock. Each next one smaller than the last one.
Next one will come around 2025 but this time it's going to be just few hundred percent.
From all the fanfare around them, I was sure they had to invest more. But after looking up the numbers, this looks like a publicity stunt more than any serious investment. Also 20% adoption when it's mandatory to support it, is quite interesting too.
> The next bond payment (2023 note that they are trying to buy back now) There are two bonds which they are buying. The 2023 one at 91 cents per dollar, and the 2025 one at 51 cents per dollar.
> this looks like a publicity stunt more than any serious investment.
El Salvador has a very good PR team. So many announcements have their own publicitiy students. Teven produce different material targeting different foreign countries. It's always interesting to see what each to see what PR message each country gets.
For example: Targeting those who didn't agree on vaccine mandates in English Speaking Countries (Australia/Canada/UK):
https://twitter.com/CanAlbertaHuman/status/14784727600660725...
https://twitter.com/LowCard_Hunger/status/148358166523034010...
Targeting those who wanted vaccines in neighboring countries (Honduras):
https://twitter.com/radioamericahn/status/140378336359768474...
There are many deep subtle questions about Economics, even with stablecoins but the choice of Bitcoin was way off base, the only possible reason to use it was because it was the only one most people had heard of.
Bitcoin is totally nonsensical for low-value high volume transactions and by the time the money gets paid to the seller for already bought goods, they could be making a loss. At least inflation in normal currency is only (usually) a few percent per year.
That question has an obvious answer: because it's the oldest and biggest cryptocurrency. Not letting perfect be the enemy of adequate (let alone good) is a perfectly reasonable choice.
Remove grifters, acquire actual progress.
I also am largely okay with people using it for personal quantities of controlled substances, even though I do not use it for that personally. Sometimes these are for legitimate medicinal purposes as well (for example, schedule 2 TRT and HRT drugs)
Crypto can keep them, it's nice to not have to deal with the noise
I reserve judgement as to whether or not this will be a net benefit for society. I suspect not, but our present ignorance is far too great to make such a prediction - I just think it's gonna happen whether we want it to or not, so get used to the idea of crypto-everything.
Think of all the poor slobs in Russia who've been steam-rolled by these sanctions, and can no longer sell their software or get paid for their little Apps. Whatever you might think about Russia -- "group punishment" is not cool; these are people like you and me who cannot now feed their families. To them, Bitcoin (and other even more capable cryptocurrencies now in development) is the difference between life and death.
So, it might be worthwhile to ... reflect, if we find ourself agreeing with the obese head banker at BIS or weird Klaus Schwab, when they say they want to control all aspects of personal commerce. They can pound sand -- I'm going to continue to work to move cryptocurrency technology forward.
Remove grifters, acquire actual progress.
I wonder if there were people in the 80s that said that.
There are (and always will be) people who see no good in the Internet. I played a small part in its growth in the early 90s and even I have pangs of regret over what it has become. AND there was a lot of grift and lawlessness in the early Internet -- that is what paid the bills at first.
However, at the time I was able to articulate all the ways moving X, Y and Z to the Internet would make things better -- for hours on end -- and I would 'win' those arguments. OTOH, all my crypto crazed associates have trouble doing that same thing today. For years, the argument ended up being "I got in early and now my 'investment' is worth X amount." It has been an end justifies the means proposition.
In the end, the Internet was judged by its exponential growth and adoption. There was a mad rush of, arguably, useful activity going on... for years. Everything I wished for and pushed for back in the day has come true -- monkey paw curse and all. Bitcoin's use has actually gone down afaict, the market value of it is the only metric people care about.
Humanistically, I gotta say, perceptions matter. I left crypto because it just started "tasting gross", regardless of the technological interest I had. Clearly, I wasn't in a minority with that.
I'd like to see an analysis of the situation, assuming that the value goes neither up or down, but simply holds a constant value in an inflation indexed manner. Would it still be a bad idea in that situation?
Why? BTC has zero history of doing this.
Gold and currencies backed by gold come very close to this, with historical evidence to back it up. The purchasing power of gold -- that is, its convertibility to goods and services you might wish to consume -- have remained remarkably stable over time.
Countries stopped issuing currencies backed by gold for a few different reasons, but its ability to hold constant value over time wasn't one of them.
I think we'll see another even worse cycle unfortunately within the next 10 years.
I'm sure I would pay $500 per month for internet or drinking water for instance, but in general this type of rent-seeking behavior is not good for the economy.
Through that lens, it would be interesting to see if there was any anomaly in GDP, luxury goods sold, real estate sales, or tourism in the country.
If there was some crypto without any incentives of hodling long term, I'm sure the adoption would be higher. People don't spend Bitcoin the same way they don't spend gold in daily life: to own it as a long-term value reserve.
Bitcoin miners and devs took the project in a specific direction a few years later, optimizing it for use as digital gold, while making it much harder and more expensive to use as a currency.
El S. is in a pretty strange place because they don't have their own currency. They have no control over their economy in that regard, so adopting a separate currency which frees them from singular dollar dependence is quite useful.
Nullifies what claims exactly?
We the hodlers believe that Bitcoin can be hacked only by hacking cryptografic hash-functions, which will lead to collapse all the banks, all passwords on all websites, maybe some data structures like hash-maps.
> or I get scammed in some way, where is my legal recourse?
How will you get scammed if you have a backup which you promise to yourself to not even introduce to computer with online? Also nobody recommends you to hold all your wealth in crypto. Some metals work not bad also, my favorite example is copper.
> But state regulation nullifies a lot of what bitcoin advocates claim is the advantage of cryptocurrency.
Let me guess, you have not read / have to reread the bitcoin.org/bitcoin.pdf whitepaper?
Adoption for what purpose though?
If you're not keeping a substantial "float" in the currency, you have to buy more every time you want to use it. So you've just inserted an extra, riskier step into your ecommerce or international wire transfer.
Within El Salvador, the policy behaves like dollarisation with all its advantages and disadvantages, with an extra disadvantage that the currency has fallen by a third against the dollar.
Interestingly, that is also the analysis that most central banks make. Their monetary policy sets a positive target inflation rate for this exact goal.
However, that monetary policy is often a large part of why people use Bitcoin.
The opposite.
Cryptos that are anchored to USD have no appeal. They're less useful than USD, and, there's no 'get rich quick' aspect. So what's the point.
The Ponzi Mania is what drives people into BTC and to talk about it incessantly on the Internet etc.. Without the mania, it's not going to spread.
An institutionalized crypto, like one by the government, and which had some kind of stability (i.e. central banked) would probably get critical mass and therefore have some utility.
El Salvador leader is basically criminally derelict, he should be jailed.
There was an early alt-coin, http://freico.in/, which had a demurrage fee for holding, which was intended to incentivize spending over saving. A terrible idea if you ask me.
Long-term saving is the biggest selling-point for Bitcoin. If the value of savings went down by design, it would have never got to where it is.
The appeal however is not from people wanting to use them to buy their coffe. The appeal is DeFi.
There's Tether and USDC, plus a handful of others.
The critical thing at the moment is to be "sophisticated" enough to make the right choice.
In US law, an investor has to prove they have means (money to spare) to do risky things. They are "sophisticated" investors and can afford losses. (This word is used in the law)
The rest don't get to play. So the rest don't know the rules and don't understand contract law.
If you read a contract it defines the rules. Most people don't want to or don't know to do this and, right now, the government isn't stopping them from making these decisions about investment in crypto.
Many people talk about crypto without acknowledging the fundamental nature of investments, because the don't invest (i.e. not "sophisticated"). They want something like their bank. Somebody to make sure they don't mess up and take care of them if things go sour.
If that person is you, leave your opinions aside and keep your money in bonds and mutual funds
There are some that strongly discourage speculation by having a purely linear emission, which after n years still has a yearly supply inflation of 1/n and takes a whole century to get down to 1%. Offering the same rewards to later generations helps avoid concentration of wealth that most cryptocurrencies, especially premined ones, suffer from.
The inverse is also true: you can have little impact but attain big wealth/success.
Moreover, due to competitive pressures this lack of correlation happens is quite common. If impact requires a mix of skill+luck+timing and success requires skill+luck+timing, then impact+success is (mathematically speaking) exponentially harder.
It's way too early to declare El Salvador's Bitcoin experiment a failure (or, for that matter, a success). Adopting a new currency (let alone an entire alternative financial system) doesn't happen overnight.
You want a currency that encourages usage in the economy, not one being buried in vaults.
Being pretty young, everyone I know is involved in crypto in one way or another. I'm personally waiting on the sidelines, but there should be some beneficial middle ground between going all-in and completely discarding the tech.
Another one that I find fascinating is immutability, things like https://opentimestamps.org/ (uses bitcoin's blockchain), it allows you to proof that X piece of information existed prior to time Y.
I know of 2 different paths of assumptions you need to verify that proof:
1. Somewhat trusting bitcoin block's timestamps and the immutability that proof of work provides to the chain of blocks
2. Having a higher bound estimate of your attacker's ability to generate proof of work, and then sum all the available proof of work (it is sequentially chained in the blockchain from the block's proof, till the latest block produced), and compute how much time the attacker needed to spend to fake that proof of work, and that's your proof of the minimum time that must have passed since X was conceived
https://e-estonia.com/wp-content/uploads/2020mar-nochanges-f...
I would prefer a neutral crypto currency to be the new world reserve instead of a competing currency like the YUAN. Government should not have the power to print money out of thin air.
The technology of blockchains is improving, for the example lightning network should make it very well possible. Just like with the invention of 'real' money there is a lot of failure in the crypto space.
The subject of money and currencies is a much more complex issue. A government giving its "printing power" or in the case of Elsalvador, no longer wanting to be the victim of the printing power of the USA, is a very good thing.
