81 ms·

El Salvador to adopt Bitcoin as legal tender

458 points by ncpa-cpl 5y ago

ncpa-cpl 5y ago
El Salvador is looking to introduce legislation that will make it the world’s first sovereign nation to adopt bitcoin as legal tender, alongside the U.S. dollar. In a video broadcast to Bitcoin 2021 President Nayib Bukele announced El Salvador’s partnership with digital wallet company, Strike, to build the country’s modern financial infrastructure using bitcoin technology.
- thinkmassive 5y ago
  This is good news, but note that Japan already declared Bitcoin as legal tender in 2017 https://www.coindesk.com/japan-bitcoin-law-effect-tomorrow https://www.coindesk.com/japan-bitcoin-law-effect-tomorrow
  - kragen 5y ago
    https://archive.fo/Gb8Wo https://archive.fo/Gb8Wo It looks like Japan did not, in fact, declare Bitcoin to be legal tender ("a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt"). Rather, it imposed a regulatory regime on Bitcoin exchanges.
  - notahacker 5y ago
    Legal tender, properly defined, means that someone you're in debt to must accept it as means of payment to discharge the debt. Afaik Japanese lenders can still insist on Yen, and almost invariably do I suspect this will be the same (in practice if not in theory). You can pay people in Bitcoin, or if they don't actually want Bitcoin the president's buddy is hyping an app that will let them get USD instead when you send your satoshis...
  - teachingassist 5y ago
    'Legal tender' means that you are [everyone is] obliged to accept bitcoin as a means of settling any debt. (That would be a nightmare - in my opinion, it would at least require some kind of official exchange rate between Bitcoin and yen.)
Geee 5y ago
Here's the emotional announcement by Jack Mallers (founder of Strike) who worked with the president of El Salvador to make this happen: https://www.youtube.com/watch?v=2V8y_IV7XU8&t=76s https://www.youtube.com/watch?v=2V8y_IV7XU8&t=76s It's worth a watch to understand the story.
- smoldesu 5y ago
  I only skimmed through, but it looks astronomically light on details with lots of Pathos tying it all together. If I was a journalist in that audience I'd be terrified.
  - philangist 5y ago
    I was in the audience and was rolling my eyes at the theatrics. Maybe his emotions were genuine but I felt I was seeing an attempt at clear emotional manipulation. That being said a country (even a very small one like El Salvador) choosing to accept BTC as legal tender is a huge step forward for its utility as a currency and made me optimistic again about a crypto future that’s not just focused on “number go up” and cult-like herd mentality.
    - deleted 5y ago
      [deleted]
    - peteretep 5y ago
      How is it a huge step forward? Note that no prices are denominated in Bitcoin in this arrangement.
- vincentmarle 5y ago
  Geez, I’ve never quite seen someone being so emotional about Bitcoin, it’s really a sight to be seen.
  - vecinu 5y ago
    Crocodile tears. I'm not being facetious when I say I would cry to influence my RSUs to increase in value if I could.
lowkey 5y ago
Though not mentioned in the article, the President of El Salvadore apparently also mentioned that the country plans to hold Bitcoin as a reserve asset.
- elevenoh 5y ago
  Happen to know whether ElSalv did covertly did most of their purchasing before announcing this? Or have they not purchased btc just yet?
  - lowkey 5y ago
    The law hasn’t taken effect yet. Apparently it will go to a vote in parliament next week. I’m honestly not sure but would suspect they haven’t bought yet but will soon have the legal ability too.
- Cantinflas 5y ago
  He didn't! It was mentioned later by other people on the conference, but the official announcement only mentioned legal tender
emc3 5y ago
Probably not unrelated: US report: Allies of El Salvador's president deemed corrupt (last month) https://apnews.com/article/latin-america-el-salvador-1d089ae377a6d8ef401fd898081a14ce https://apnews.com/article/latin-america-el-salvador-1d089ae...
- kragen 5y ago
  It wouldn't be surprising if the US government were to take actions against governments that were moving away from the dollar, whether as legal tender, as foreign reserves, or for other purposes like pricing oil, but it doesn't seem likely that the USG knew about this move a month in advance. Are you suggesting that the Salvadorean president is attempting to retaliate for the report by dedollarizing?
  - cperciva 5y ago
    Nothing to do with retaliation. They just want to protect their assets from being seized by the US government.
    - kragen 5y ago
      Hmm, are you suggesting that the US could overthrow their government, either by invasion as in Panama or by funding a terrorist campaign as in Nicaragua, and that Bitcoin would be more secure than suitcases of dollar bills against such actions? Surely not that the US would dramatically devalue its own currency in order to drain El Salvador's reserves? Or are you thinking that dollar-denominated reserves held in overseas banks would be easier for the US to seize, and Bitcoin avoids the need to hold the reserves overseas? It seems to me more likely that the figures in the article amply explain the move: > roughly 70% of people do not have bank accounts or credit cards. Remittances, or the money sent home by migrants, account for more than 20% of El Salvador's gross domestic product. Incumbent services can charge 10% or more in fees for those international transfers, which can sometimes take days to arrive and that sometimes require a physical pick-up. I mean, living in Latin America, I'm well aware that the US has a long history of invading and overthrowing Latin American governments, I'm just not sure how Bitcoin reserves would protect against that.
smoldesu 5y ago
> Bukele said the country is partnering with digital wallet company, Strike, to build modern financial infrastructure using bitcoin technology. Wow, this seems like an incredibly shitty situation for the people of El Salvador. It looks like some lobbyists got hired by a wallet company stacked with angel investors willing to pour money into the idea of being integrated into the government at such a low level. I wouldn't be surprised if they also announced that all transactions will be forced to go through a wrapper or other type of layer, maybe even justified with the classic "think of the coal" argument...
- Geee 5y ago
  Their work is open source and they are using standard Bitcoin protocols. Zap is their wallet https://zaphq.io https://zaphq.io Strike is a payment app that uses Bitcoin Lightning network internally to settle payments between financial institutions. It's useful for sending fiat currency denominated remittances instantly and without fees. https://strike.me https://strike.me When they released Strike in El Salvador, it was an instant success. The president himself contacted Jack.
  - rawtxapp 5y ago
    To add on to that, it's been used pretty nicely in the El Zonte beach town [1]. 1: https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-el-salvador-village-adopts-bitcoin-as-money/?sh=1c8a51bb2044 https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-...
    - CyberDildonics 5y ago
      When that article was written the transaction fees were around $1.50-$2.00 USD which is already a lot for meals and snacks. Now that the average transaction fees are anywhere from $7 - $60 I doubt people are buying much with bitcoin's dialup throughput. https://bitinfocharts.com/comparison/bitcoin-transactionfees.html#3m https://bitinfocharts.com/comparison/bitcoin-transactionfees...
      - 5y ago
jpxw 5y ago
I wonder why a country would choose Bitcoin as legal tender when better, faster, more environmentally friendly cryptos exist (ones which can feasibly be used to transact money in real-time, for instance).
- smoldesu 5y ago
  Mostly adoption purposes. Bitcoin, for better or worse, is now a globally recognized asset (if not official recognized). Sure they could adopt a coin like Ripple or Doge, but that would almost certainly permanently sabotage the market for both respective coins. While I agree that this is a bad idea, basing it on a larger currency does have some considerable economic benefits.
  - ncpa-cpl 5y ago
    Not sure why, but bitcoin has already been in use in a local surf town for a couple of years now, so maybe it's the only widely known crypto in El Salvador outside the crypto community [1] [1] https://www.bitcoinbeach.com/ https://www.bitcoinbeach.com/
- rawtxapp 5y ago
  When you consider a country-wide currency or global reserve currency status, things like security/trust are the most important properties. You can then use other layers for much faster and cheaper transactions while keeping the base layer as is (as lightning network on BTC and zk-rollups on ETH are doing, or even centralized layers like Paypal/Visa, etc).
- geofft 5y ago
  Bitcoin's lobbyists are better paid because Bitcoin got people richer.
- Geee 5y ago
  Bitcoin is the strongest cryptocurrency in terms of security, decentralization and liquidity. Which also means that bitcoin will keep its value better than other cryptocurrencies. They are planning to use Bitcoin Lightning Network which is environmentally friendly and offers instant and almost feeless payments.
bratao 5y ago
What would happen to the markets if Satoshi appeared and starts trading his 1 Mi in BTC?
- bubersson 5y ago
  That would really depend on what Satoshi would do exactly with his/hers holding. It would probably cause volatility, but imo not larger volatility compared to what we are already used to.
- ldiracdelta 5y ago
  We already have these problems in the normal stock exchange -- they're called "whales". In order for whales to capture the best value to _them_, they trade carefully and slowly so as not to shock the market.
  - BreakfastB0b 5y ago
    The problem is all transaction on bitcoin are public. Satoshi even moving his coins to begin trading would cause a massive freakout. Coinbase even had to disclose this risk in their IPO filing.
    - ldiracdelta 5y ago
      You're right. That would be more akin to massive, instantaneous inflation which could shake peoples' confidence.
- LegitShady 5y ago
  he could just buy all of el salvadore.
temp10298385 5y ago
As someone who readily admits to not fully knowing what legal tender entails, I have a question for the optimists: As I understand it, legal tender status forces creditors to accept bitcoin as debt repayment. Given the volatility of bitcoin, wouldn't this impact risk assessment of loans? Being obligated to accept a high volatility asset as a repayment sounds like a nightmare for creditors. Wouldn't interest rates rise in order to cover this added uncertainty?
- jerf 5y ago
  Accepting it as legal tender doesn't mean it is what the loans are denominated in. Nobody sane would denominate loans in BitCoin. (There are loans denominated in BitCoin. The obvious syllogism applies.)
  - squiggleblaz 5y ago
    But if I have a loan for a value that corresponds to about 1 bitcoin and $53, then doesn't legal tender mean I have to accept 1 bitcoin and $53 in exchange for it? The fact that tomorrow the value will be 1 bitcoin and $196 seems irrelevant. And this is significant: debtors could repay their debts when bitcoins look like they will decrease in value with respect to the currency of denomination with an intent to harm the debt owner. In the 19th century, there were dual currency systems with fluctuating exchange rates. I don't know anything about why they failed, just that they failed...
    - jerf 5y ago
      A loan can be denominated in a currency other than what you directly pay for it with. That just means somebody is automatically converting it for you. Financially, it's exactly the same as using your Visa to buy something in a foreign currency; you're paying in Euros for a loan denominated in dollars, and you'll pay it off in dollars. The loan can't be denominated in multiple currencies at once, as you seem to be thinking of, because that would make the loan amount undefined unless the two currencies were directly pegged to each other. You can have a loan of 100 dollars. Or you can have a loan of .01 BitCoin. You can pay either off in dollars or BitCoin. How much a given pile of currency will pay off depends on exchange rates. But that doesn't affect the loan itself. I somewhat sarcastically said nobody would denominate a loan in BitCoin, but not sarcastically at all, nobody would ever denominate a loan in "either this much of one currency or this much of another" because that is seriously a no-win situation for the entity loaning money. Obviously the loanee would pay it off in whatever is cheaper.
fungiblecog 5y ago
This will not end well for El Salvador
rawtxapp 5y ago
Even though the market hasn't really reacted to this news (which I suspect is due to the fact that it's proposed/didn't happen yet), this is one of the most bullish news in a very long time in my opinion (even more bullish than companies buying into it). I suspect this will start the domino effect of countries slowly, but surely adopting BTC. It'll probably be the smaller countries first where they don't have great currencies to begin with, so they'll always have to use a foreign one, either USD or an alternative. With USD, they are at the mercy of USG and will get pushed around by them. With Bitcoin, the network itself is kept safe with all the energy and mathematical properties, but the price is very volatile at the moment, though volatility will decrease with increasing market caps. This will be a very interesting experiment to watch.
- pochamago 5y ago
  The smaller countries who don't want to be beholden to either the US or China's fiscal policy. We seem to be building up a second cold war, and I imagine for many countries being able to back your economy with a currency that isn't controlled by either of the two major players is tempting. China may well end up regretting discouraging its miners from holding the majority stake, given the Sino power that could project. This is all very heavily speculative, though, I'm just spitballing an interesting potential chain of events
  - rawtxapp 5y ago
    I think if Bitcoin price turns around and keeps increasing (big if), we are going to see a large scale game theory at play. The countries that have opted in will be in a much better place so that would create a race to get in. The next 5-10 years will be very interesting times to live through, especially after record USD printing.
    - karatinversion 5y ago
      Why would they benefit? Large scale deflation would be quite destabilising for a country.
ineedasername 5y ago
I'm sure the people of El Salvador won't mind having 20% of their wealth wiped out every time Elon Musk tweets something that changes his mind in some way. Certainly if I was selling something I'd denominate it in something relative stable and then change Bitcoin asking price to match the exchange rate to that stable currency. Since the currency there is the USD... Yeah, I'd still be pricing my goods and services in USD.
- rawtxapp 5y ago
  Historically, Bitcoin appreciated 300% YoY whereas the dollar is in a constantly depreciating cycle, I know which one I'd prefer.
  - TenJack 5y ago
    What evidence is there that the USD is depreciating?
    - bombcar 5y ago
      It’s down relative to Bitcoin. (People will say this with a straight face).
    - lowkey 5y ago
      1 year price inflation rate: #BITCOIN: 543% LUMBER: 372% CORN: 126% COPPER: 104% GASOLINE: 69% COFFEE: 56% HOME SALES: 16% US DOLLAR: 2% if you believe the official CPI
  - auxym 5y ago
    Deflation is not something desireable in macroeconomics. It incentivizes hoarding cash instead of spending it on productive things (hiring people, capital investments to improve productivity, etc). Slow and steady inflation is a stated goal for most governments and central banks.
    - Geee 5y ago
      Nah. When things are cheap, people will go shopping. When things are expensive, people will save. It's a naturally self-correcting mechanism. Every deviation from the expected deflation would be an opportunity for arbitrage. Also, the deflation isn't guaranteed, so it carries a risk, which disincentivizes hoarding.
gumby 5y ago
That will be exciting when someone sells some vegetables in the market and then 45 minutes later discovers the transaction was backed out.
- kadoban 5y ago
  That already happens every single day (credit card chargebacks), and is not very easy to do in BTC. I'd have to look into how it works in the lightning network.
  - ffggvv 5y ago
    people in ecuador don’t use credit cards. they use cash
    - kadoban 5y ago
      Interesting, but not sure it matters. There exist _many_ markets where chargebacks are possible, it's not that big of a deal. It's worked around or priced in and life goes on.
- RustyRussell 5y ago
  To be clear, Jack Mallers works on Strike, which uses the lightning network. Settlement is final on receipt, which is limited by network latency (and db commit time). The cost is that it's possible for your direct counterparty to attempt to cheat: you've been trading signed bitcoin transactions all this time, and they could try to use an old one. For this reason there's a lockout period for any unilateral onchain settlement (typically 1 - 14 days), and if they attempt to cheat you have that time to penalize them (they gave you a key to do this when you agreed the balance in the lightning network was updated). This penalty can be outsourced, too.
yosito 5y ago
If creditors were obligated to accept Bitcoin, does that mean that to be a creditor, you must maintain a Bitcoin address/wallet? Or could you still just say, "Sorry, you still have to pay in USD because we don't have a Bitcoin wallet"?
- bombcar 5y ago
  If you make it clean beforehand what the repayment terms are you should be fine - at least in a US-style law way (this is why you can say “no $100s” or “you can’t pay in pennies”. One you’ve a debt and you didn’t specify you may be required to accept payment (though if the debt is denominated in dollars the BTC is perhaps not as clear - does it have to be enough at the time of payment, settlement, etc?).
- viraptor 5y ago
  If this is actually implemented, there will be a lot of payment gateways which will take the BTC and give you today's USD equivalent immediately (minus processing fees). Pretty much the same situation as paying by foreign card.
- PragmaticPulp 5y ago
  It's concerning that the government has partnered with one particular startup company with a specific Bitcoin app for this. Depending on how the laws are written, essentially forcing people to use a specific startup's app to transact in the country could be the most egregious example of regulatory capture we've seen in recent history.
  - RustyRussell 5y ago
    Lightning developer here. Note that Strike is only one implementation of lightning (it's also open source, and an open standard). It's not even the most popular.
  - elsalviador 5y ago
    You did not do your homework. Read the proposed law before concern trolling. Nothing mentioned using only Company X or Y.
eloff 5y ago
My prediction. This won't be used hardly at all. Why use bitcoin when the USD is also legal tender and superior as a currency in nearly every way? About the only thing you can do more easily with bitcoin is buy other cryptos and send it across borders - sometimes. I would also predict that the failure here would finally get people to stop thinking it's a currency. But I doubt it.
- bubersson 5y ago
  It's pain in the ass and quite extra bit of fees to send money from US to El Salvador. Even when the currency is the same. So using Bitcoin is presumably much better in this situation. 23% of El Salvador's GDP is from remittances, so this is a large use case.
  - eloff 5y ago
    Bitcoin is not cheap either to send, but it has an advantage here I think in fees. The volatility on the other hand could be problematic.
- JohnJamesRambo 5y ago
  USD has this little problem and it hasn’t even begun to manifest yet. https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL
  - SantalBlush 5y ago
    This chart only looks like a problem for those who don't understand what the Fed does.
  - eloff 5y ago
    Maybe, maybe not. Time will tell. This has been happening since 2008 with no serious repercussions.
    - rawtxapp 5y ago
      My car's "check engine" light has been on for a while now, but it still runs with no serious repercussions, guess I can ignore it. You see how that logic would be flawed?
davidgerard 5y ago
The first thing that will happen is that everyone phones up El Salvador and asks if they really want to be cut off from the entire rest of the world's financial system. Marshall Islands found this out too. I wrote it up yesterday: https://davidgerard.co.uk/blockchain/2021/06/04/the-marshall-islands-sov-cryptocurrency-the-saga-winds-down/ https://davidgerard.co.uk/blockchain/2021/06/04/the-marshall...
- jtbayly 5y ago
  But them issuing their own cryptocurrency is very different from adopting Bitcoin, is it not?
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young_unixer 5y ago
Many other cryptocurrencies are so much better than Bitcoin. Off the top of my head: Monero, Litecoin and maybe Ada (Cardano) sound like better alternatives. A good heuristic is "if someone extols the virtues of Bitcoin (instead of crypto in general), then they don't understand much about the virtues of Bitcoin or any other cryptocurrency."
- 6foot4_82iq 5y ago
  https://en.wikipedia.org/wiki/Network_effect https://en.wikipedia.org/wiki/Network_effect
- staktrace 5y ago
  Network size is a virtue too. Specially for things that benefit from network effects!
- spyder 5y ago
  Because the guy who is behind this thinks that other cryptos are just an experiment that couldn't work, but bitcoin is the holy grail and just appears to be slow/expensive. Video interview with him: https://www.youtube.com/watch?v=q1pSf_akaig https://www.youtube.com/watch?v=q1pSf_akaig
- ulzeraj 5y ago
  Bitcoin has problems. Its a known fact. But apparently everything in this weird crypto world is about trade offs. Every time you hear someone saying Nano is better than bitcoin because transactions are free the same person never mentions the problem with spam in their network. Everyone who advocates for Ethereum for being a more complex and Turing complete network never mentions that the same complexities invite bugs and vulnerabilities and the chain was actually hacked once. Or that the developer can decide to literally rewind the chain again. Or that the PoS model is a centralizing force that is trying to replicate the current financial system. Just check the number of people mentioning bitcoin fees without ever touching on the subject of current ETH gas cost. Everyone advocating for Monero for its better privacy never mentions the challenges of auditing the monetary policies of their chain. Everything is a trade off but for some reason people are very good at pointing the good parts of their solutions without never disclosing what was lost to achieve that feature and at the same time they are very good to point flaws in the Bitcoin protocol and network.
RocketSyntax 5y ago
My fear is that this is somehow a way to legitimize black market transactions, and to attract more of that activity to that struggling country.
KirillPanov 5y ago
> President Nayib Bukele announced El Salvador's partnership with digital wallet company, Strike, to build the country's modern financial infrastructure using bitcoin technology. Moments later, president Bukele was deposed in a violent military coup. The CIA denied involvement.
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throwaway129856 5y ago
If bitcoin does become legal tender in El Salvador, does that mean when a US person spending/exchanging it there (or any where in the world) would not be subject to capital gains tax on the spend/exchange? Currently the IRS states that because bitcoin does not have legal tender status in any jurisdiction, it is not a foreign currency. It is only considered a virtual currency and subject to capital gains reporting and tax. But what would happen if bitcoin becomes in both categories at the same time: a virtual currency and a legal tender foreign currency?
- lostmsu 5y ago
  I thought in US you pay the same capital gains tax on currency exchange sans some relatively small allowance for tourism.
  - _delirium 5y ago
    Yes, if you realize a profit on forex trading, you do have to report it as a capital gain.
throwaway129856 5y ago
If bitcoin does become legal tender in El Salvador, does that mean when a US person spending/exchanging it there (or any where in the world) would not be subject to capital gains tax on the spend/exchange? Currently the IRS has the position that because bitcoin does not have legal tender status in any jurisdiction, it is not a foreign currency. It is only considered a virtual currency and subject to capital gains reporting and tax. But what would happen if bitcoin becomes in both categories at the same time: a virtual currency and a legal tender foreign currency?
kerng 5y ago
Strike also open sources their code - calling it "Bitcoin for countries"
superkuh 5y ago
Unlike the USA which taxes it as if it were an asset but regulates it like a legal tender in an attempt to kill it.
- AnonMO 5y ago
  KYC and AML for the purpose of money laundering exists throughout the world. Which regulation is specifically attempting to kill bitcoin if you don't mind me asking?
  - superkuh 5y ago
    The US government has clearly stated bitcoin is not a currency. But they are still passing regulations saying all transfers of cryptocurrency value over $10k USD equiv have to be reported (as if it was a currency). This kind of obvious double-think has only one purpose.
    - strogonoff 5y ago
      US gov stance on cryptocurrency, when described this way, is clear to me. “We will only accept X. We will monitor the use of Y as a means of value exchange among the citizenry, since we still want everyone to participate in X market and pay taxes in it[0].” Less double-think, more orthogonality. [0] a.k.a. “maintain a country”
    - NaturalPhallacy 5y ago
      They hate it because they can't control it. Remember, the payment processors and paypal all decided to cut off wikileaks and ban people who try to paypal money to them as punishment for exposing US war crimes. Control of the currency is control of the populace. It's why crypto, is so wonderful, and everyone needs to accept it.
    - AnonMO 5y ago
      But this only applies to businesses, and if you had a business relating to crypto you would at least i was reporting much less in dollar value other’s in my circle as-well. This regulation does nothing in slowing let alone killing bitcoin nor crypto.
crossroadsguy 5y ago
I wonder how many of world’s economy screw-ups would have gone if USA wasn’t able to shove their currency down everybody’s throat. And which ones would have stayed? What’s the relevance of such central currency today? Especially a currency that’s the fiat currency of just one nation and that’s not even like Euro!
knodi 5y ago
This is quite dumb of them.
Proven 5y ago
In Salvador silver would be easier and better.
rebuilder 5y ago
So I guess this is a litmus test for cryptoanarchists: condemn the use of state coercion to mandate the use of Bitcoin or cheer the financial gains Bitcoin holders stand to make?
- alentist 5y ago
  Those are not mutually exclusive.
  - strogonoff 5y ago
    The end justifies the means, eh?
    - alentist 5y ago
      That's clearly not what I said.
simonebrunozzi 5y ago
Well, it this is really true and going to happen, I am glad. In 2014 I was writing a book on Bitcoin, which I never finished. In the various interviews I did with influential people at the time (Yanis Varoufakis, Rick Falkvinge, Chris Dixon, etc), when offering my view, I used to say that the tipping point would have been a country adopting Bitcoin as currency, and guessing it was going to happen by 2020. I was wrong, but not by much. And believing so in 2014 wasn't that common.
- throwaaskjdfh 5y ago
  It'll be interesting to see how it plays out. I expect a catastrophe, but anything could happen. I suspect Bukele will have more influence on the outcome than Mallers or the users.
- vivab0rg 5y ago
  Boy I'd really like to read your Yanis Varoufakis interview. He really had an interesting opinion about Bitcoin.
aseerdbnarng 5y ago
But why?
- lottin 5y ago
  Regulatory capture.
mikewarot 5y ago
The last time someone had ideas to replace the US Dollar, things didn't end so well for them. https://millenium-state.com/blog/2019/05/03/the-dinar-gold-the-real-reason-for-gaddafis-murder/ https://millenium-state.com/blog/2019/05/03/the-dinar-gold-t...
NaturalPhallacy 5y ago
This is what bitcoin - and the world - through non-authoritarian controlled currency, needs. BTC is a currency. People who treat as such - by simply accepting it or spending it - drive it's growth, and more importantly its acceptance. People who treat it as purely an investment stagnate its growth. Feel free to read (or not) my more detailed comment on this concept here: https://news.ycombinator.com/item?id=27338320 https://news.ycombinator.com/item?id=27338320
- lottin 5y ago
  But bitcoin is more authoritarian-controlled than the US dollar. The US is democracy, whereas the Bitcoin development team is not.
  - gverrilla 5y ago
    Bitcoin devs do not have control of the network. Anyone can fork bitcoin.
    - lottin 5y ago
      What do you mean they don't have control of the network? The bitcoin network is by definition the network that runs the bitcoin software developed by the bitcoin dev team.
      - bigger_inside 5y ago
        no, the devs can't unilaterally make decisions on how the network works. There are decentralized nodes (very low-barrier to entry) that run the code; the nodes must actually run that code, and devs have no control over it. Then there are miners, not quite as decentralized because the barriers to entry are much higher here; they have to mine on that chain, which is also a way of "running" it. So the devs have to interact with two decentralized, in effect anarchist (in the political sense) networks that have to all consent to their changes. This is why changes are very rare (no push updates every other day like any other forsaken software!), and when they happen, they come with huge debates in the networks (check the blocksize wars).
runeks 5y ago
Why is no one pointing out that, in order to receive bitcoins on the Lightning Network (LN), you need to lock bitcoins in a payment channel? So, if a consumer wants to send bitcoins to a merchant, either the consumer needs to lock up bitcoins in a payment channel which can only send bitcoins to that given merchant, or the consumer needs to lock up bitcoins in a payment channel to an intermediate gateway, and the merchant needs to lock up the amount of bitcoins it wants to receive in a payment channel between it and the gateway. So if 1000 consumers want to send 0.001 BTC to merchant A, via a gateway, then 1 BTC needs to be locked in a payment channel between the gateway and merchant before this can happen. This means that LN needs 2 BTC to send 1 BTC when using a single gateway. So, first of all, the gateway needs to know how many bitcoins the merchant will receive in the future, and secondly the gateway needs to borrow this amount of bitcoins in the market and lock it up in a payment channel between it and the merchant. In the end I think the capital cost of this will be too high. I think it makes more sense to use a decentralized, credit-based system such as GNU Taler (think “decentralized BTC debit card”). Merchants are then free to choose which gateways (“exchanges” in GNU Taler speak) to trust, and a payment app can work with any Taler gateway, making the system decentralized in the same way as email.
- dylkil 5y ago
  lightning network is a broken mess. It baffles me that so many people still pump resources into after all these years.
  - itsdsmurrell 5y ago
    Correct, that's why many left and support Bitcoin Cash now.
    - vivab0rg 5y ago
      WTF? Source?
- pastech 5y ago
  Is it really "locking" when putting bitcoins on LN actually make them easily spendable with very little fees? Imo, all of those are outdated claims. For consumers, it's easy to open outbound channels (e.g. to well connected nodes). For merchants, it's becoming easier as well. Remember that it's a network, merchants can have outbound channels and "pay themselves" to get back inbound liquidity (can also be automated). You're not limited to one "gateway" either. If liquidity is a problem on LN right now, you're already dealing with bigger amounts that can happen on-chain. I'm not saying it's perfect, but I find LN to be elegant as a payment system for Bitcoin.
stOneskull 5y ago
if another country announces the same, it will get very interesting.. popcorn and hodl
gonzo41 5y ago
I have a prediction. This will not be good for the people of El Salvador.
jeroenhd 5y ago
As if wasting energy on speculation and get-rich-quick schemes wasn't enough, now an entire country is made dependent on crypto? That's a terrible precedent. I understand that countries want to get away from foreign influences on their monetary system, but decentralised currency isn't going to solve that problem. One tweet by Elon Musk can send the price of their "currency" flying high or plummet to the ground. If crypto currency has any real value that isn't based on schemes and speculation, at least pick something less wasteful for the environment as a currency. A proof of stake currency would work just as well in a system where the government decides on the coin. I'm sure the guys that convinced the government to use their system made a boatload of crypto cash by buying in early and riding the price as this system is unleashed upon the country.
mr_m30w 5y ago
Americans can skip reporting or paying taxes on small transactions under $200 in foreign currencies. Appears Strike (Zap wallet) recognized user base consists largely of U.S. based drug dealers, so by lobbying El Salvador into doing this they'll shield U.S. drug dealers from prosecution for tax fraud. It'd theoretically benefit other Americans doing small transactions in BTC, but really only drug dealers do such small transactions in BTC, everyone else uses it as a reserve for speculation.
krishnadevi 5y ago
Hello , Bitcoin is great The payment system mentioned in the Fine Article is built on top of Bitcoin, using Lightning Network. There's nothing stopping them from putting various consumer protections and rewards programs on top of that, and plenty of motive to do so. It's definitely a wait-and-see sort of thing, but I don't see as to how betting against it is the obvious move.
jasonlaramburu 5y ago
A single BTC transaction (on-chain) costs $5.56 in fees today. Minimum wage in El Salvador is around $300/month. How will anyone in-country afford this? Even the lightning network requires periodic on-chain transactions.
deleted 5y ago
[deleted]

458 points by ncpa-cpl 5y ago

El Salvador is looking to introduce legislation that will make it the world’s first sovereign nation to adopt bitcoin as legal tender, alongside the U.S. dollar. In a video broadcast to Bitcoin 2021 President Nayib Bukele announced El Salvador’s partnership with digital wallet company, Strike, to build the country’s modern financial infrastructure using bitcoin technology.

thinkmassive 5y ago
This is good news, but note that Japan already declared Bitcoin as legal tender in 2017 https://www.coindesk.com/japan-bitcoin-law-effect-tomorrow https://www.coindesk.com/japan-bitcoin-law-effect-tomorrow
- kragen 5y ago
  https://archive.fo/Gb8Wo https://archive.fo/Gb8Wo It looks like Japan did not, in fact, declare Bitcoin to be legal tender ("a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt"). Rather, it imposed a regulatory regime on Bitcoin exchanges.
- notahacker 5y ago
  Legal tender, properly defined, means that someone you're in debt to must accept it as means of payment to discharge the debt. Afaik Japanese lenders can still insist on Yen, and almost invariably do I suspect this will be the same (in practice if not in theory). You can pay people in Bitcoin, or if they don't actually want Bitcoin the president's buddy is hyping an app that will let them get USD instead when you send your satoshis...
- teachingassist 5y ago
  'Legal tender' means that you are [everyone is] obliged to accept bitcoin as a means of settling any debt. (That would be a nightmare - in my opinion, it would at least require some kind of official exchange rate between Bitcoin and yen.)

Geee 5y ago

Here's the emotional announcement by Jack Mallers (founder of Strike) who worked with the president of El Salvador to make this happen: https://www.youtube.com/watch?v=2V8y_IV7XU8&t=76s https://www.youtube.com/watch?v=2V8y_IV7XU8&t=76s It's worth a watch to understand the story.

smoldesu 5y ago
I only skimmed through, but it looks astronomically light on details with lots of Pathos tying it all together. If I was a journalist in that audience I'd be terrified.
- philangist 5y ago
  I was in the audience and was rolling my eyes at the theatrics. Maybe his emotions were genuine but I felt I was seeing an attempt at clear emotional manipulation. That being said a country (even a very small one like El Salvador) choosing to accept BTC as legal tender is a huge step forward for its utility as a currency and made me optimistic again about a crypto future that’s not just focused on “number go up” and cult-like herd mentality.
  - deleted 5y ago
    [deleted]
  - peteretep 5y ago
    How is it a huge step forward? Note that no prices are denominated in Bitcoin in this arrangement.
vincentmarle 5y ago
Geez, I’ve never quite seen someone being so emotional about Bitcoin, it’s really a sight to be seen.
- vecinu 5y ago
  Crocodile tears. I'm not being facetious when I say I would cry to influence my RSUs to increase in value if I could.

lowkey 5y ago

Though not mentioned in the article, the President of El Salvadore apparently also mentioned that the country plans to hold Bitcoin as a reserve asset.

elevenoh 5y ago
Happen to know whether ElSalv did covertly did most of their purchasing before announcing this? Or have they not purchased btc just yet?
- lowkey 5y ago
  The law hasn’t taken effect yet. Apparently it will go to a vote in parliament next week. I’m honestly not sure but would suspect they haven’t bought yet but will soon have the legal ability too.
Cantinflas 5y ago
He didn't! It was mentioned later by other people on the conference, but the official announcement only mentioned legal tender

emc3 5y ago

Probably not unrelated: US report: Allies of El Salvador's president deemed corrupt (last month) https://apnews.com/article/latin-america-el-salvador-1d089ae377a6d8ef401fd898081a14ce https://apnews.com/article/latin-america-el-salvador-1d089ae...

kragen 5y ago
It wouldn't be surprising if the US government were to take actions against governments that were moving away from the dollar, whether as legal tender, as foreign reserves, or for other purposes like pricing oil, but it doesn't seem likely that the USG knew about this move a month in advance. Are you suggesting that the Salvadorean president is attempting to retaliate for the report by dedollarizing?
- cperciva 5y ago
  Nothing to do with retaliation. They just want to protect their assets from being seized by the US government.
  - kragen 5y ago
    Hmm, are you suggesting that the US could overthrow their government, either by invasion as in Panama or by funding a terrorist campaign as in Nicaragua, and that Bitcoin would be more secure than suitcases of dollar bills against such actions? Surely not that the US would dramatically devalue its own currency in order to drain El Salvador's reserves? Or are you thinking that dollar-denominated reserves held in overseas banks would be easier for the US to seize, and Bitcoin avoids the need to hold the reserves overseas? It seems to me more likely that the figures in the article amply explain the move: > roughly 70% of people do not have bank accounts or credit cards. Remittances, or the money sent home by migrants, account for more than 20% of El Salvador's gross domestic product. Incumbent services can charge 10% or more in fees for those international transfers, which can sometimes take days to arrive and that sometimes require a physical pick-up. I mean, living in Latin America, I'm well aware that the US has a long history of invading and overthrowing Latin American governments, I'm just not sure how Bitcoin reserves would protect against that.

smoldesu 5y ago

> Bukele said the country is partnering with digital wallet company, Strike, to build modern financial infrastructure using bitcoin technology. Wow, this seems like an incredibly shitty situation for the people of El Salvador. It looks like some lobbyists got hired by a wallet company stacked with angel investors willing to pour money into the idea of being integrated into the government at such a low level. I wouldn't be surprised if they also announced that all transactions will be forced to go through a wrapper or other type of layer, maybe even justified with the classic "think of the coal" argument...

Geee 5y ago
Their work is open source and they are using standard Bitcoin protocols. Zap is their wallet https://zaphq.io https://zaphq.io Strike is a payment app that uses Bitcoin Lightning network internally to settle payments between financial institutions. It's useful for sending fiat currency denominated remittances instantly and without fees. https://strike.me https://strike.me When they released Strike in El Salvador, it was an instant success. The president himself contacted Jack.
- rawtxapp 5y ago
  To add on to that, it's been used pretty nicely in the El Zonte beach town [1]. 1: https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-el-salvador-village-adopts-bitcoin-as-money/?sh=1c8a51bb2044 https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-...
  - CyberDildonics 5y ago
    When that article was written the transaction fees were around $1.50-$2.00 USD which is already a lot for meals and snacks. Now that the average transaction fees are anywhere from $7 - $60 I doubt people are buying much with bitcoin's dialup throughput. https://bitinfocharts.com/comparison/bitcoin-transactionfees.html#3m https://bitinfocharts.com/comparison/bitcoin-transactionfees...
    - 5y ago

jpxw 5y ago

I wonder why a country would choose Bitcoin as legal tender when better, faster, more environmentally friendly cryptos exist (ones which can feasibly be used to transact money in real-time, for instance).

smoldesu 5y ago
Mostly adoption purposes. Bitcoin, for better or worse, is now a globally recognized asset (if not official recognized). Sure they could adopt a coin like Ripple or Doge, but that would almost certainly permanently sabotage the market for both respective coins. While I agree that this is a bad idea, basing it on a larger currency does have some considerable economic benefits.
- ncpa-cpl 5y ago
  Not sure why, but bitcoin has already been in use in a local surf town for a couple of years now, so maybe it's the only widely known crypto in El Salvador outside the crypto community [1] [1] https://www.bitcoinbeach.com/ https://www.bitcoinbeach.com/
rawtxapp 5y ago
When you consider a country-wide currency or global reserve currency status, things like security/trust are the most important properties. You can then use other layers for much faster and cheaper transactions while keeping the base layer as is (as lightning network on BTC and zk-rollups on ETH are doing, or even centralized layers like Paypal/Visa, etc).
geofft 5y ago
Bitcoin's lobbyists are better paid because Bitcoin got people richer.
Geee 5y ago
Bitcoin is the strongest cryptocurrency in terms of security, decentralization and liquidity. Which also means that bitcoin will keep its value better than other cryptocurrencies. They are planning to use Bitcoin Lightning Network which is environmentally friendly and offers instant and almost feeless payments.

bratao 5y ago

What would happen to the markets if Satoshi appeared and starts trading his 1 Mi in BTC?

bubersson 5y ago
That would really depend on what Satoshi would do exactly with his/hers holding. It would probably cause volatility, but imo not larger volatility compared to what we are already used to.
ldiracdelta 5y ago
We already have these problems in the normal stock exchange -- they're called "whales". In order for whales to capture the best value to _them_, they trade carefully and slowly so as not to shock the market.
- BreakfastB0b 5y ago
  The problem is all transaction on bitcoin are public. Satoshi even moving his coins to begin trading would cause a massive freakout. Coinbase even had to disclose this risk in their IPO filing.
  - ldiracdelta 5y ago
    You're right. That would be more akin to massive, instantaneous inflation which could shake peoples' confidence.
LegitShady 5y ago
he could just buy all of el salvadore.

temp10298385 5y ago

As someone who readily admits to not fully knowing what legal tender entails, I have a question for the optimists: As I understand it, legal tender status forces creditors to accept bitcoin as debt repayment. Given the volatility of bitcoin, wouldn't this impact risk assessment of loans? Being obligated to accept a high volatility asset as a repayment sounds like a nightmare for creditors. Wouldn't interest rates rise in order to cover this added uncertainty?

jerf 5y ago
Accepting it as legal tender doesn't mean it is what the loans are denominated in. Nobody sane would denominate loans in BitCoin. (There are loans denominated in BitCoin. The obvious syllogism applies.)
- squiggleblaz 5y ago
  But if I have a loan for a value that corresponds to about 1 bitcoin and $53, then doesn't legal tender mean I have to accept 1 bitcoin and $53 in exchange for it? The fact that tomorrow the value will be 1 bitcoin and $196 seems irrelevant. And this is significant: debtors could repay their debts when bitcoins look like they will decrease in value with respect to the currency of denomination with an intent to harm the debt owner. In the 19th century, there were dual currency systems with fluctuating exchange rates. I don't know anything about why they failed, just that they failed...
  - jerf 5y ago
    A loan can be denominated in a currency other than what you directly pay for it with. That just means somebody is automatically converting it for you. Financially, it's exactly the same as using your Visa to buy something in a foreign currency; you're paying in Euros for a loan denominated in dollars, and you'll pay it off in dollars. The loan can't be denominated in multiple currencies at once, as you seem to be thinking of, because that would make the loan amount undefined unless the two currencies were directly pegged to each other. You can have a loan of 100 dollars. Or you can have a loan of .01 BitCoin. You can pay either off in dollars or BitCoin. How much a given pile of currency will pay off depends on exchange rates. But that doesn't affect the loan itself. I somewhat sarcastically said nobody would denominate a loan in BitCoin, but not sarcastically at all, nobody would ever denominate a loan in "either this much of one currency or this much of another" because that is seriously a no-win situation for the entity loaning money. Obviously the loanee would pay it off in whatever is cheaper.

fungiblecog 5y ago

This will not end well for El Salvador

rawtxapp 5y ago

Even though the market hasn't really reacted to this news (which I suspect is due to the fact that it's proposed/didn't happen yet), this is one of the most bullish news in a very long time in my opinion (even more bullish than companies buying into it). I suspect this will start the domino effect of countries slowly, but surely adopting BTC. It'll probably be the smaller countries first where they don't have great currencies to begin with, so they'll always have to use a foreign one, either USD or an alternative. With USD, they are at the mercy of USG and will get pushed around by them. With Bitcoin, the network itself is kept safe with all the energy and mathematical properties, but the price is very volatile at the moment, though volatility will decrease with increasing market caps. This will be a very interesting experiment to watch.

pochamago 5y ago
The smaller countries who don't want to be beholden to either the US or China's fiscal policy. We seem to be building up a second cold war, and I imagine for many countries being able to back your economy with a currency that isn't controlled by either of the two major players is tempting. China may well end up regretting discouraging its miners from holding the majority stake, given the Sino power that could project. This is all very heavily speculative, though, I'm just spitballing an interesting potential chain of events
- rawtxapp 5y ago
  I think if Bitcoin price turns around and keeps increasing (big if), we are going to see a large scale game theory at play. The countries that have opted in will be in a much better place so that would create a race to get in. The next 5-10 years will be very interesting times to live through, especially after record USD printing.
  - karatinversion 5y ago
    Why would they benefit? Large scale deflation would be quite destabilising for a country.

ineedasername 5y ago

I'm sure the people of El Salvador won't mind having 20% of their wealth wiped out every time Elon Musk tweets something that changes his mind in some way. Certainly if I was selling something I'd denominate it in something relative stable and then change Bitcoin asking price to match the exchange rate to that stable currency. Since the currency there is the USD... Yeah, I'd still be pricing my goods and services in USD.

rawtxapp 5y ago
Historically, Bitcoin appreciated 300% YoY whereas the dollar is in a constantly depreciating cycle, I know which one I'd prefer.
- TenJack 5y ago
  What evidence is there that the USD is depreciating?
  - bombcar 5y ago
    It’s down relative to Bitcoin. (People will say this with a straight face).
  - lowkey 5y ago
    1 year price inflation rate: #BITCOIN: 543% LUMBER: 372% CORN: 126% COPPER: 104% GASOLINE: 69% COFFEE: 56% HOME SALES: 16% US DOLLAR: 2% if you believe the official CPI
- auxym 5y ago
  Deflation is not something desireable in macroeconomics. It incentivizes hoarding cash instead of spending it on productive things (hiring people, capital investments to improve productivity, etc). Slow and steady inflation is a stated goal for most governments and central banks.
  - Geee 5y ago
    Nah. When things are cheap, people will go shopping. When things are expensive, people will save. It's a naturally self-correcting mechanism. Every deviation from the expected deflation would be an opportunity for arbitrage. Also, the deflation isn't guaranteed, so it carries a risk, which disincentivizes hoarding.

gumby 5y ago

That will be exciting when someone sells some vegetables in the market and then 45 minutes later discovers the transaction was backed out.

kadoban 5y ago
That already happens every single day (credit card chargebacks), and is not very easy to do in BTC. I'd have to look into how it works in the lightning network.
- ffggvv 5y ago
  people in ecuador don’t use credit cards. they use cash
  - kadoban 5y ago
    Interesting, but not sure it matters. There exist _many_ markets where chargebacks are possible, it's not that big of a deal. It's worked around or priced in and life goes on.
RustyRussell 5y ago
To be clear, Jack Mallers works on Strike, which uses the lightning network. Settlement is final on receipt, which is limited by network latency (and db commit time). The cost is that it's possible for your direct counterparty to attempt to cheat: you've been trading signed bitcoin transactions all this time, and they could try to use an old one. For this reason there's a lockout period for any unilateral onchain settlement (typically 1 - 14 days), and if they attempt to cheat you have that time to penalize them (they gave you a key to do this when you agreed the balance in the lightning network was updated). This penalty can be outsourced, too.

yosito 5y ago

If creditors were obligated to accept Bitcoin, does that mean that to be a creditor, you must maintain a Bitcoin address/wallet? Or could you still just say, "Sorry, you still have to pay in USD because we don't have a Bitcoin wallet"?

bombcar 5y ago
If you make it clean beforehand what the repayment terms are you should be fine - at least in a US-style law way (this is why you can say “no $100s” or “you can’t pay in pennies”. One you’ve a debt and you didn’t specify you may be required to accept payment (though if the debt is denominated in dollars the BTC is perhaps not as clear - does it have to be enough at the time of payment, settlement, etc?).
viraptor 5y ago
If this is actually implemented, there will be a lot of payment gateways which will take the BTC and give you today's USD equivalent immediately (minus processing fees). Pretty much the same situation as paying by foreign card.
PragmaticPulp 5y ago
It's concerning that the government has partnered with one particular startup company with a specific Bitcoin app for this. Depending on how the laws are written, essentially forcing people to use a specific startup's app to transact in the country could be the most egregious example of regulatory capture we've seen in recent history.
- RustyRussell 5y ago
  Lightning developer here. Note that Strike is only one implementation of lightning (it's also open source, and an open standard). It's not even the most popular.
- elsalviador 5y ago
  You did not do your homework. Read the proposed law before concern trolling. Nothing mentioned using only Company X or Y.

eloff 5y ago

My prediction. This won't be used hardly at all. Why use bitcoin when the USD is also legal tender and superior as a currency in nearly every way? About the only thing you can do more easily with bitcoin is buy other cryptos and send it across borders - sometimes. I would also predict that the failure here would finally get people to stop thinking it's a currency. But I doubt it.

bubersson 5y ago
It's pain in the ass and quite extra bit of fees to send money from US to El Salvador. Even when the currency is the same. So using Bitcoin is presumably much better in this situation. 23% of El Salvador's GDP is from remittances, so this is a large use case.
- eloff 5y ago
  Bitcoin is not cheap either to send, but it has an advantage here I think in fees. The volatility on the other hand could be problematic.
JohnJamesRambo 5y ago
USD has this little problem and it hasn’t even begun to manifest yet. https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL
- SantalBlush 5y ago
  This chart only looks like a problem for those who don't understand what the Fed does.
- eloff 5y ago
  Maybe, maybe not. Time will tell. This has been happening since 2008 with no serious repercussions.
  - rawtxapp 5y ago
    My car's "check engine" light has been on for a while now, but it still runs with no serious repercussions, guess I can ignore it. You see how that logic would be flawed?

davidgerard 5y ago

The first thing that will happen is that everyone phones up El Salvador and asks if they really want to be cut off from the entire rest of the world's financial system. Marshall Islands found this out too. I wrote it up yesterday: https://davidgerard.co.uk/blockchain/2021/06/04/the-marshall-islands-sov-cryptocurrency-the-saga-winds-down/ https://davidgerard.co.uk/blockchain/2021/06/04/the-marshall...

jtbayly 5y ago
But them issuing their own cryptocurrency is very different from adopting Bitcoin, is it not?

deleted 5y ago

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young_unixer 5y ago

Many other cryptocurrencies are so much better than Bitcoin. Off the top of my head: Monero, Litecoin and maybe Ada (Cardano) sound like better alternatives. A good heuristic is "if someone extols the virtues of Bitcoin (instead of crypto in general), then they don't understand much about the virtues of Bitcoin or any other cryptocurrency."

6foot4_82iq 5y ago
https://en.wikipedia.org/wiki/Network_effect https://en.wikipedia.org/wiki/Network_effect
staktrace 5y ago
Network size is a virtue too. Specially for things that benefit from network effects!
spyder 5y ago
Because the guy who is behind this thinks that other cryptos are just an experiment that couldn't work, but bitcoin is the holy grail and just appears to be slow/expensive. Video interview with him: https://www.youtube.com/watch?v=q1pSf_akaig https://www.youtube.com/watch?v=q1pSf_akaig
ulzeraj 5y ago
Bitcoin has problems. Its a known fact. But apparently everything in this weird crypto world is about trade offs. Every time you hear someone saying Nano is better than bitcoin because transactions are free the same person never mentions the problem with spam in their network. Everyone who advocates for Ethereum for being a more complex and Turing complete network never mentions that the same complexities invite bugs and vulnerabilities and the chain was actually hacked once. Or that the developer can decide to literally rewind the chain again. Or that the PoS model is a centralizing force that is trying to replicate the current financial system. Just check the number of people mentioning bitcoin fees without ever touching on the subject of current ETH gas cost. Everyone advocating for Monero for its better privacy never mentions the challenges of auditing the monetary policies of their chain. Everything is a trade off but for some reason people are very good at pointing the good parts of their solutions without never disclosing what was lost to achieve that feature and at the same time they are very good to point flaws in the Bitcoin protocol and network.

RocketSyntax 5y ago

My fear is that this is somehow a way to legitimize black market transactions, and to attract more of that activity to that struggling country.

KirillPanov 5y ago

> President Nayib Bukele announced El Salvador's partnership with digital wallet company, Strike, to build the country's modern financial infrastructure using bitcoin technology. Moments later, president Bukele was deposed in a violent military coup. The CIA denied involvement.

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throwaway129856 5y ago

If bitcoin does become legal tender in El Salvador, does that mean when a US person spending/exchanging it there (or any where in the world) would not be subject to capital gains tax on the spend/exchange? Currently the IRS states that because bitcoin does not have legal tender status in any jurisdiction, it is not a foreign currency. It is only considered a virtual currency and subject to capital gains reporting and tax. But what would happen if bitcoin becomes in both categories at the same time: a virtual currency and a legal tender foreign currency?

lostmsu 5y ago
I thought in US you pay the same capital gains tax on currency exchange sans some relatively small allowance for tourism.
- _delirium 5y ago
  Yes, if you realize a profit on forex trading, you do have to report it as a capital gain.

throwaway129856 5y ago

If bitcoin does become legal tender in El Salvador, does that mean when a US person spending/exchanging it there (or any where in the world) would not be subject to capital gains tax on the spend/exchange? Currently the IRS has the position that because bitcoin does not have legal tender status in any jurisdiction, it is not a foreign currency. It is only considered a virtual currency and subject to capital gains reporting and tax. But what would happen if bitcoin becomes in both categories at the same time: a virtual currency and a legal tender foreign currency?

kerng 5y ago

Strike also open sources their code - calling it "Bitcoin for countries"

superkuh 5y ago

Unlike the USA which taxes it as if it were an asset but regulates it like a legal tender in an attempt to kill it.

AnonMO 5y ago
KYC and AML for the purpose of money laundering exists throughout the world. Which regulation is specifically attempting to kill bitcoin if you don't mind me asking?
- superkuh 5y ago
  The US government has clearly stated bitcoin is not a currency. But they are still passing regulations saying all transfers of cryptocurrency value over $10k USD equiv have to be reported (as if it was a currency). This kind of obvious double-think has only one purpose.
  - strogonoff 5y ago
    US gov stance on cryptocurrency, when described this way, is clear to me. “We will only accept X. We will monitor the use of Y as a means of value exchange among the citizenry, since we still want everyone to participate in X market and pay taxes in it[0].” Less double-think, more orthogonality. [0] a.k.a. “maintain a country”
  - NaturalPhallacy 5y ago
    They hate it because they can't control it. Remember, the payment processors and paypal all decided to cut off wikileaks and ban people who try to paypal money to them as punishment for exposing US war crimes. Control of the currency is control of the populace. It's why crypto, is so wonderful, and everyone needs to accept it.
  - AnonMO 5y ago
    But this only applies to businesses, and if you had a business relating to crypto you would at least i was reporting much less in dollar value other’s in my circle as-well. This regulation does nothing in slowing let alone killing bitcoin nor crypto.

crossroadsguy 5y ago

I wonder how many of world’s economy screw-ups would have gone if USA wasn’t able to shove their currency down everybody’s throat. And which ones would have stayed? What’s the relevance of such central currency today? Especially a currency that’s the fiat currency of just one nation and that’s not even like Euro!

knodi 5y ago

This is quite dumb of them.

Proven 5y ago

In Salvador silver would be easier and better.

rebuilder 5y ago

So I guess this is a litmus test for cryptoanarchists: condemn the use of state coercion to mandate the use of Bitcoin or cheer the financial gains Bitcoin holders stand to make?

alentist 5y ago
Those are not mutually exclusive.
- strogonoff 5y ago
  The end justifies the means, eh?
  - alentist 5y ago
    That's clearly not what I said.

simonebrunozzi 5y ago

Well, it this is really true and going to happen, I am glad. In 2014 I was writing a book on Bitcoin, which I never finished. In the various interviews I did with influential people at the time (Yanis Varoufakis, Rick Falkvinge, Chris Dixon, etc), when offering my view, I used to say that the tipping point would have been a country adopting Bitcoin as currency, and guessing it was going to happen by 2020. I was wrong, but not by much. And believing so in 2014 wasn't that common.

throwaaskjdfh 5y ago
It'll be interesting to see how it plays out. I expect a catastrophe, but anything could happen. I suspect Bukele will have more influence on the outcome than Mallers or the users.
vivab0rg 5y ago
Boy I'd really like to read your Yanis Varoufakis interview. He really had an interesting opinion about Bitcoin.

aseerdbnarng 5y ago

But why?

lottin 5y ago
Regulatory capture.

mikewarot 5y ago

The last time someone had ideas to replace the US Dollar, things didn't end so well for them. https://millenium-state.com/blog/2019/05/03/the-dinar-gold-the-real-reason-for-gaddafis-murder/ https://millenium-state.com/blog/2019/05/03/the-dinar-gold-t...

NaturalPhallacy 5y ago

This is what bitcoin - and the world - through non-authoritarian controlled currency, needs. BTC is a currency. People who treat as such - by simply accepting it or spending it - drive it's growth, and more importantly its acceptance. People who treat it as purely an investment stagnate its growth. Feel free to read (or not) my more detailed comment on this concept here: https://news.ycombinator.com/item?id=27338320 https://news.ycombinator.com/item?id=27338320

lottin 5y ago
But bitcoin is more authoritarian-controlled than the US dollar. The US is democracy, whereas the Bitcoin development team is not.
- gverrilla 5y ago
  Bitcoin devs do not have control of the network. Anyone can fork bitcoin.
  - lottin 5y ago
    What do you mean they don't have control of the network? The bitcoin network is by definition the network that runs the bitcoin software developed by the bitcoin dev team.
    - bigger_inside 5y ago
      no, the devs can't unilaterally make decisions on how the network works. There are decentralized nodes (very low-barrier to entry) that run the code; the nodes must actually run that code, and devs have no control over it. Then there are miners, not quite as decentralized because the barriers to entry are much higher here; they have to mine on that chain, which is also a way of "running" it. So the devs have to interact with two decentralized, in effect anarchist (in the political sense) networks that have to all consent to their changes. This is why changes are very rare (no push updates every other day like any other forsaken software!), and when they happen, they come with huge debates in the networks (check the blocksize wars).

runeks 5y ago

Why is no one pointing out that, in order to receive bitcoins on the Lightning Network (LN), you need to lock bitcoins in a payment channel? So, if a consumer wants to send bitcoins to a merchant, either the consumer needs to lock up bitcoins in a payment channel which can only send bitcoins to that given merchant, or the consumer needs to lock up bitcoins in a payment channel to an intermediate gateway, and the merchant needs to lock up the amount of bitcoins it wants to receive in a payment channel between it and the gateway. So if 1000 consumers want to send 0.001 BTC to merchant A, via a gateway, then 1 BTC needs to be locked in a payment channel between the gateway and merchant before this can happen. This means that LN needs 2 BTC to send 1 BTC when using a single gateway. So, first of all, the gateway needs to know how many bitcoins the merchant will receive in the future, and secondly the gateway needs to borrow this amount of bitcoins in the market and lock it up in a payment channel between it and the merchant. In the end I think the capital cost of this will be too high. I think it makes more sense to use a decentralized, credit-based system such as GNU Taler (think “decentralized BTC debit card”). Merchants are then free to choose which gateways (“exchanges” in GNU Taler speak) to trust, and a payment app can work with any Taler gateway, making the system decentralized in the same way as email.

dylkil 5y ago
lightning network is a broken mess. It baffles me that so many people still pump resources into after all these years.
- itsdsmurrell 5y ago
  Correct, that's why many left and support Bitcoin Cash now.
  - vivab0rg 5y ago
    WTF? Source?
pastech 5y ago
Is it really "locking" when putting bitcoins on LN actually make them easily spendable with very little fees? Imo, all of those are outdated claims. For consumers, it's easy to open outbound channels (e.g. to well connected nodes). For merchants, it's becoming easier as well. Remember that it's a network, merchants can have outbound channels and "pay themselves" to get back inbound liquidity (can also be automated). You're not limited to one "gateway" either. If liquidity is a problem on LN right now, you're already dealing with bigger amounts that can happen on-chain. I'm not saying it's perfect, but I find LN to be elegant as a payment system for Bitcoin.

stOneskull 5y ago

if another country announces the same, it will get very interesting.. popcorn and hodl

gonzo41 5y ago

I have a prediction. This will not be good for the people of El Salvador.

jeroenhd 5y ago

As if wasting energy on speculation and get-rich-quick schemes wasn't enough, now an entire country is made dependent on crypto? That's a terrible precedent. I understand that countries want to get away from foreign influences on their monetary system, but decentralised currency isn't going to solve that problem. One tweet by Elon Musk can send the price of their "currency" flying high or plummet to the ground. If crypto currency has any real value that isn't based on schemes and speculation, at least pick something less wasteful for the environment as a currency. A proof of stake currency would work just as well in a system where the government decides on the coin. I'm sure the guys that convinced the government to use their system made a boatload of crypto cash by buying in early and riding the price as this system is unleashed upon the country.

mr_m30w 5y ago

Americans can skip reporting or paying taxes on small transactions under $200 in foreign currencies. Appears Strike (Zap wallet) recognized user base consists largely of U.S. based drug dealers, so by lobbying El Salvador into doing this they'll shield U.S. drug dealers from prosecution for tax fraud. It'd theoretically benefit other Americans doing small transactions in BTC, but really only drug dealers do such small transactions in BTC, everyone else uses it as a reserve for speculation.

krishnadevi 5y ago

Hello , Bitcoin is great The payment system mentioned in the Fine Article is built on top of Bitcoin, using Lightning Network. There's nothing stopping them from putting various consumer protections and rewards programs on top of that, and plenty of motive to do so. It's definitely a wait-and-see sort of thing, but I don't see as to how betting against it is the obvious move.

jasonlaramburu 5y ago

A single BTC transaction (on-chain) costs $5.56 in fees today. Minimum wage in El Salvador is around $300/month. How will anyone in-country afford this? Even the lightning network requires periodic on-chain transactions.

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