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I never really understood what incentive a government had to recognize bitcoin as legal tender. There are no real benefits over something like UPI in terms of u

I never really understood what incentive a government had to recognize bitcoin as legal tender. There are no real benefits over something like UPI in terms of user UX. It takes things out of the government's hands, as it's harder to print money.

Spellman 4y ago
The Libertarians would argue that the government not being able to print money is the feature and can build trust in the currency
- dragontamer 4y ago
  But you could more easily "not print money" by making the Euro or US Dollar your currency.
  - jdminhbg 4y ago
    Sure, but the ECB or Federal Reserve can print money, and you don't control them. If your goal is a mathematically guaranteed money supply (this would not be my goal, fwiw), BTC is superior.
    - avrionov 4y ago
      The supply is mathematically guaranteed, but the price fluctuates more than the dollar.
  - Spellman 4y ago
    Because then you're beholden to another country, which may be hostile to your country, and their money printer. With Bitcoin, no one has control!
    - ceejayoz 4y ago
      > With Bitcoin, no one has control! Well, until a little over 50% of the miners decide they don't like you. Ethereum's fork proved "no one has control" is an illusion.
      - chrisco255 4y ago
        Bitcoin also famously forked into BTC and BCH. And Ethereum Classic is still ticking away printing blocks. Forks are a feature, not a bug.
        ForHackernews 4y ago
        Forks promise an infinite, ever-growing supply of deflationary digital scarcity.
        randomhodler84 4y ago
        No, not at all. Bcash isn’t Bitcoin. BSV isn’t Bitcoin. Eth classic is Ether. Existence of forks has zero impact on digital scarcity.
      - jkepler 4y ago
        Ethereum is not Bitcoin. Ethereum just showed the world Botcoin's unique value compared to Ethereum and the thousands of crypto projects so often conflated with Bitcoin. The 2017 Bitcoin scaling wars proved that one can't simply change Bitcoin's consensus rules by majority control of the miners. I think at one point 80% of the miners were in favor of large blocks, yet they didn't have buy-in from the rest of the network participants (developers, regular users, merchants, exchanges). Bitcoin has really robust decentralization.
      - deleted 4y ago
        [deleted]
      - aaaaaaaaata 4y ago
        Stop repeating this. The ETH fork happened before the people on HN were even following cryptocurrency happenings. That's how early in the project a fork was done — the project would never survive another at this stage of maturity. And everyone knows that. So stop repeating it?
  - schemescape 4y ago
    El Salvador already uses the US dollar, but it has no control over what the US does to its money supply.
    - altarius 4y ago
      Correct, but historically the price had been stable and predictable. Imo you're just trading "beholden to the usgovt" with "beholden to miners, whales and wall street" plus wild price swings. Former or latter may be preferable for certain reasons, but for fiscal stability or day-to-day use the choice seems obvious to me.
      - dragontamer 4y ago
        I'm pretty sure that if the US Government wanted to be a BTC whale to mess up El Salvador, we would be able to do so and barely break a sweat. The price of BTC, even today, seems very easy to manipulate.
  - eftychis 4y ago
    If you are using another country's currency you are tied to their monetary and indirectly fiscal policy which most likely does not align to yours. In fact trying to get a neutral or deflationary currency is a no brainer. Especially, if you have a small banking system/network. Of course there are gotchas.
    - toomuchtodo 4y ago
      You are always tied to the monetary and fiscal policy of the majority of a currency’s participants. Can you make your own currency? Of course. How will you back it? Who will trust it? Who governs those policies? These are people problems people want to solve without people (crypto folks), with expected results (speed running financial regulation). They came at the king (reserve currencies) and missed by a mile.
  - louloulou 4y ago
    The US dollar was el Salvador's currency. They are trying to diversify away from that total dependence.
  - makomk 4y ago
    As people have pointed out this means that the US or wherever can print money and controls your monetary policy, but that's actually the least of the problems. Euros and US Dollars in large quantities, and digitally transferrable versions of them, can essentially only exist as numbers in databases controlled by the US and EU government respectively. So by adopting them as your country's currency, you're effectively giving them control over your money. They get to decide whether it continues to exist, whether you get to access it, whether it gets transferred to some well-connected megacorporations in those countries that bribed your former leader into a dodgy deal... In short, it gives a whole bunch of control to powerful entities who have tended to use their powers in ways that have not been good for developing countries at all.
- imtringued 4y ago
  I am not sure what libertarian really means but the idea that the rich of the past deserve to control the present and future strikes me as secretly authoritarian.
  - tokai 4y ago
    Might even call it crypto-fascism lol
  - chrisco255 4y ago
    What does that even mean? Is there any fiat currency system you can point to where elite insiders don't get special access to the money printer before us plebs do?
  - anonporridge 4y ago
    Except in bitcoin, having a large share from the past doesn't directly confer control in the present, since it's not a proof of stake system. If it's actually used as a currency, a person with a large stockpile will gradually lose their relative share over time as they consume, since you don't generate interest on it. It's also confusing to me that people can hold the cognitive dissonance of defending a post gold standard, infinitely inflatable currency with a negative view income inequality, which only started increasing drastically after we abandoned the gold standard. An inflationary currency benefits the wealthy asset owners more than the working class almost by design. Asset owners get to borrow against their assets and pay it back in a depreciating currency, while at the same time getting to use a psychological magic trick to make poorly educated employees think they're getting a pay raise, when in real terms they're getting a pay cut. If I was a greedy rich person who wanted to make sure I could never lose my wealth, I would build a financial system on a currency that inflates away by design.
    - daemoens 4y ago
      A small amount of inflation (1-2% per year) is required or else you'd get deflation. Deflation is an almost guarenteed death spiral for an economy as everything grindes to a halt because not spending makes you richer.
- deleted 4y ago
  [deleted]
- andrewmutz 4y ago
  History has repeatedly shown that being able to print money is a critical tool during financial crises. No one likes their money being debased, but they like economic depressions even less. There is a reason that nations have abandoned the gold standard.
  - jkepler 4y ago
    Gold's physical characteristics tended towards centralization. Centralizing gave the institutions controlling the gold strong incentives to allow debasement of gold-backed money, as it gave those institutions handsome profits and strong political control.
  - randomhodler84 4y ago
    History has repeated shown us that printing money in a crisis just makes it worse, eventually. Taking that away is hard, but honesty is the best policy, even if it hurts at first. The reason we ditched the gold standard was for deviance. It’s very hard to fight wars if you can’t print the money. Ww1 ww2 Vietnam, Afghanistan, Iraq … try that on gold. Bitcoin = End of all war.
    - daemoens 4y ago
      I mean most wars happened before I the World Wars. Like the overwhelming majority of wars happened on a gold standard. Bitcoin would probably make us too poor for war though.
      - aaaaaaaaata 4y ago
        > Bitcoin would probably make us too poor for war though. ...?
  - aaaaaaaaata 4y ago
    Let a recession happen when we deserve one, so the depressions don't happen. Holding back the floodgates until the problem is ready to kill everyone equally is stupid, and the opposite of a meritocracy.
- Geee 4y ago
  In addition, bitcoin limits government power. Most autocracies fund their operations with inflation. Even in liberal democracies, deficit spending funded with inflation is not really what people have voted for. People are fine with taxes to the extent they have voted for them, but that should be enough. Inflation is a way to covertly siphon wealth from citizens on top of tax revenues.
  - JumpCrisscross 4y ago
    > autocracies fund their operations with inflation There is limited evidence for connecting countries' foreign debt levels to their degree of democratization [1]. More pointedly, there is ample evidence--millenia of it!--for empires on commodity money waging war and whatnot and having a fine time of it. > deficit spending funded with inflation is not really what people have voted for Deficit spending / bond issuance is voted on at multiple levels of government practically every cycle. People have voted for this. Because the alternative is austerity, and fanatical governments that pursue that for its own sake tend to get replaced. [1] https://d1wqtxts1xzle7.cloudfront.net/68966375/bf0022468120210831-2783-1x0220y-libre.pdf?1630428316=&response-content-disposition=inline%3B+filename%3DOn_democracy_and_debt.pdf&Expires=1657148365&Signature=Z9nP6UyBaPk1bW4htWD30OLywgMNXv4PD4KOShJB2sTLACQ~OIiNd-wbHoVcGibLcmyHin1k1p2g~oinVzkoF5trXX8af9lsouYREXxkw6OjBqAVdobyfiEWCF5N3cwKAFbgm7gkyVVRalsByZ-GsyDzro~9YiwJAztfaO09CaZJHP8GNcBmo~n4ZZAYa~RiRevcpW2LqBDXcpUplp7j7Ik1rccxU6Sq9EQjoorBRShnlBaLLA3WbFkVX-KWxCJw~GorJpoobdtZtUT~CDJ5RZU~ZPI5sMQElRaGeKVp67-TMc2dmvTqsIWnA-702F2agpR2RM9ab09-HuMlOm~Slg__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA https://d1wqtxts1xzle7.cloudfront.net/68966375/bf00224681202...
    - Geee 4y ago
      Well, you are right in that people usually do vote for more government spending. The problem exists in all kinds of governments. Anyway, my point was that bitcoin can limit government spending and protect individuals against inflation due to government spending. It doesn't mean that a rich nation couldn't wage war.
      - randomhodler84 4y ago
thesausageking 4y ago
El Salvador is a USD-based economy and does not have their own currency. This means they're at the whims of the US Federal Reserve, which they have representation with. And any USD reserves that are abroad can be seized by the US, as Afghanistan ($7B seized) and Russia ($300B seized) learned recently. Bukele is promoting BTC as a way to attract talent and capital, and also to modernize El Salvador's economy. Similar to how Africa skipped landlines and jumped right to mobile phones. It remains to be seen how effective that part is. But, either way, it gives El Salvador some more independence from the US and sovereignty in a world where alliances are shifting fast.
- 0xB31B1B 4y ago
  Bukele is promoting BTC as a sort of crony capitalism/kleptocrat play. This is not a high minded “advancing society” play.
- walrus01 4y ago
  > as Afghanistan ($7B seized) This is because the Taliban is a terrorist organization that captured the capitol, not a government. You don't give $7bn to al qaeda, ISIS or lashkar-e-taiba either. You can thank Trump and Pompeo and their plan to withdraw 100% of US forces by a fixed deadline for that (removing all support for the afghan government's armed forces), and Biden for going along with the foolish plan.
  - deleted 4y ago
    [deleted]
  - daemoens 4y ago
    While all this is true, his point still stands. The US still has the ability to seize your country's money at will.
    - ForHackernews 4y ago
      ...if you keep it in US banks (because you can't trust your own corrupt local financial system).
overtonwhy 4y ago
Presumably people in the government got bribed. Did they also make their banking system crypto friendly?
- el-salvador 4y ago
  > Did they also make their banking system crypto friendly? El Salvador banks don't exchange or accept bitcoin as deposit. Some of them accept bitcoin for loan payments, via an external payment processor.
JumpCrisscross 4y ago
> never really understood what incentive a government had to recognize bitcoin as legal tender El Salvador is very corrupt, in the neighborhood of Sierra Leone and Algeria [1]. It is unclear to what degree the state has a monopoly on violence [2]. Bitcoin is a precedented dark money channel. [1] https://www.transparency.org/en/cpi/2021/index/slv https://www.transparency.org/en/cpi/2021/index/slv [2] https://www.cfr.org/in-brief/why-has-gang-violence-spiked-el-salvador-bukele https://www.cfr.org/in-brief/why-has-gang-violence-spiked-el...
jcranmer 4y ago
The wrong (but popular) answer is to say that this is a move to break El Salvador's reliance on the USD--the USD still remains legal tender in El Salvador, and from what I can tell, there is absolutely no movement whatsoever towards things like pricing in Bitcoin in lieu of USD or other steps that would insulate El Salvador from US monetary policy. The charitable answer I would give is that Bukele hoped to attract cryptocurrency investors with the move, perhaps to supplement existing institutional investors who haven't been happy with some of Bukele's policies. The uncharitable answer I would give is that Bukele is trying to innovate and translate core cryptocurrency strategies of extracting money from people's pockets into extracting money from El Salvador's citizens' pockets.

Spellman 4y ago

The Libertarians would argue that the government not being able to print money is the feature and can build trust in the currency

dragontamer 4y ago
But you could more easily "not print money" by making the Euro or US Dollar your currency.
- jdminhbg 4y ago
  Sure, but the ECB or Federal Reserve can print money, and you don't control them. If your goal is a mathematically guaranteed money supply (this would not be my goal, fwiw), BTC is superior.
  - avrionov 4y ago
    The supply is mathematically guaranteed, but the price fluctuates more than the dollar.
- Spellman 4y ago
  Because then you're beholden to another country, which may be hostile to your country, and their money printer. With Bitcoin, no one has control!
  - ceejayoz 4y ago
    > With Bitcoin, no one has control! Well, until a little over 50% of the miners decide they don't like you. Ethereum's fork proved "no one has control" is an illusion.
    - chrisco255 4y ago
      Bitcoin also famously forked into BTC and BCH. And Ethereum Classic is still ticking away printing blocks. Forks are a feature, not a bug.
      - ForHackernews 4y ago
        Forks promise an infinite, ever-growing supply of deflationary digital scarcity.
        randomhodler84 4y ago
        No, not at all. Bcash isn’t Bitcoin. BSV isn’t Bitcoin. Eth classic is Ether. Existence of forks has zero impact on digital scarcity.
    - jkepler 4y ago
      Ethereum is not Bitcoin. Ethereum just showed the world Botcoin's unique value compared to Ethereum and the thousands of crypto projects so often conflated with Bitcoin. The 2017 Bitcoin scaling wars proved that one can't simply change Bitcoin's consensus rules by majority control of the miners. I think at one point 80% of the miners were in favor of large blocks, yet they didn't have buy-in from the rest of the network participants (developers, regular users, merchants, exchanges). Bitcoin has really robust decentralization.
    - deleted 4y ago
      [deleted]
    - aaaaaaaaata 4y ago
      Stop repeating this. The ETH fork happened before the people on HN were even following cryptocurrency happenings. That's how early in the project a fork was done — the project would never survive another at this stage of maturity. And everyone knows that. So stop repeating it?
- schemescape 4y ago
  El Salvador already uses the US dollar, but it has no control over what the US does to its money supply.
  - altarius 4y ago
    Correct, but historically the price had been stable and predictable. Imo you're just trading "beholden to the usgovt" with "beholden to miners, whales and wall street" plus wild price swings. Former or latter may be preferable for certain reasons, but for fiscal stability or day-to-day use the choice seems obvious to me.
    - dragontamer 4y ago
      I'm pretty sure that if the US Government wanted to be a BTC whale to mess up El Salvador, we would be able to do so and barely break a sweat. The price of BTC, even today, seems very easy to manipulate.
- eftychis 4y ago
  If you are using another country's currency you are tied to their monetary and indirectly fiscal policy which most likely does not align to yours. In fact trying to get a neutral or deflationary currency is a no brainer. Especially, if you have a small banking system/network. Of course there are gotchas.
  - toomuchtodo 4y ago
    You are always tied to the monetary and fiscal policy of the majority of a currency’s participants. Can you make your own currency? Of course. How will you back it? Who will trust it? Who governs those policies? These are people problems people want to solve without people (crypto folks), with expected results (speed running financial regulation). They came at the king (reserve currencies) and missed by a mile.
- louloulou 4y ago
  The US dollar was el Salvador's currency. They are trying to diversify away from that total dependence.
- makomk 4y ago
  As people have pointed out this means that the US or wherever can print money and controls your monetary policy, but that's actually the least of the problems. Euros and US Dollars in large quantities, and digitally transferrable versions of them, can essentially only exist as numbers in databases controlled by the US and EU government respectively. So by adopting them as your country's currency, you're effectively giving them control over your money. They get to decide whether it continues to exist, whether you get to access it, whether it gets transferred to some well-connected megacorporations in those countries that bribed your former leader into a dodgy deal... In short, it gives a whole bunch of control to powerful entities who have tended to use their powers in ways that have not been good for developing countries at all.
imtringued 4y ago
I am not sure what libertarian really means but the idea that the rich of the past deserve to control the present and future strikes me as secretly authoritarian.
- tokai 4y ago
  Might even call it crypto-fascism lol
- chrisco255 4y ago
  What does that even mean? Is there any fiat currency system you can point to where elite insiders don't get special access to the money printer before us plebs do?
- anonporridge 4y ago
  Except in bitcoin, having a large share from the past doesn't directly confer control in the present, since it's not a proof of stake system. If it's actually used as a currency, a person with a large stockpile will gradually lose their relative share over time as they consume, since you don't generate interest on it. It's also confusing to me that people can hold the cognitive dissonance of defending a post gold standard, infinitely inflatable currency with a negative view income inequality, which only started increasing drastically after we abandoned the gold standard. An inflationary currency benefits the wealthy asset owners more than the working class almost by design. Asset owners get to borrow against their assets and pay it back in a depreciating currency, while at the same time getting to use a psychological magic trick to make poorly educated employees think they're getting a pay raise, when in real terms they're getting a pay cut. If I was a greedy rich person who wanted to make sure I could never lose my wealth, I would build a financial system on a currency that inflates away by design.
  - daemoens 4y ago
    A small amount of inflation (1-2% per year) is required or else you'd get deflation. Deflation is an almost guarenteed death spiral for an economy as everything grindes to a halt because not spending makes you richer.
deleted 4y ago
[deleted]
andrewmutz 4y ago
History has repeatedly shown that being able to print money is a critical tool during financial crises. No one likes their money being debased, but they like economic depressions even less. There is a reason that nations have abandoned the gold standard.
- jkepler 4y ago
  Gold's physical characteristics tended towards centralization. Centralizing gave the institutions controlling the gold strong incentives to allow debasement of gold-backed money, as it gave those institutions handsome profits and strong political control.
- randomhodler84 4y ago
  History has repeated shown us that printing money in a crisis just makes it worse, eventually. Taking that away is hard, but honesty is the best policy, even if it hurts at first. The reason we ditched the gold standard was for deviance. It’s very hard to fight wars if you can’t print the money. Ww1 ww2 Vietnam, Afghanistan, Iraq … try that on gold. Bitcoin = End of all war.
  - daemoens 4y ago
    I mean most wars happened before I the World Wars. Like the overwhelming majority of wars happened on a gold standard. Bitcoin would probably make us too poor for war though.
    - aaaaaaaaata 4y ago
      > Bitcoin would probably make us too poor for war though. ...?
- aaaaaaaaata 4y ago
  Let a recession happen when we deserve one, so the depressions don't happen. Holding back the floodgates until the problem is ready to kill everyone equally is stupid, and the opposite of a meritocracy.
Geee 4y ago
In addition, bitcoin limits government power. Most autocracies fund their operations with inflation. Even in liberal democracies, deficit spending funded with inflation is not really what people have voted for. People are fine with taxes to the extent they have voted for them, but that should be enough. Inflation is a way to covertly siphon wealth from citizens on top of tax revenues.
- JumpCrisscross 4y ago
  > autocracies fund their operations with inflation There is limited evidence for connecting countries' foreign debt levels to their degree of democratization [1]. More pointedly, there is ample evidence--millenia of it!--for empires on commodity money waging war and whatnot and having a fine time of it. > deficit spending funded with inflation is not really what people have voted for Deficit spending / bond issuance is voted on at multiple levels of government practically every cycle. People have voted for this. Because the alternative is austerity, and fanatical governments that pursue that for its own sake tend to get replaced. [1] https://d1wqtxts1xzle7.cloudfront.net/68966375/bf0022468120210831-2783-1x0220y-libre.pdf?1630428316=&response-content-disposition=inline%3B+filename%3DOn_democracy_and_debt.pdf&Expires=1657148365&Signature=Z9nP6UyBaPk1bW4htWD30OLywgMNXv4PD4KOShJB2sTLACQ~OIiNd-wbHoVcGibLcmyHin1k1p2g~oinVzkoF5trXX8af9lsouYREXxkw6OjBqAVdobyfiEWCF5N3cwKAFbgm7gkyVVRalsByZ-GsyDzro~9YiwJAztfaO09CaZJHP8GNcBmo~n4ZZAYa~RiRevcpW2LqBDXcpUplp7j7Ik1rccxU6Sq9EQjoorBRShnlBaLLA3WbFkVX-KWxCJw~GorJpoobdtZtUT~CDJ5RZU~ZPI5sMQElRaGeKVp67-TMc2dmvTqsIWnA-702F2agpR2RM9ab09-HuMlOm~Slg__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA https://d1wqtxts1xzle7.cloudfront.net/68966375/bf00224681202...
  - Geee 4y ago
    Well, you are right in that people usually do vote for more government spending. The problem exists in all kinds of governments. Anyway, my point was that bitcoin can limit government spending and protect individuals against inflation due to government spending. It doesn't mean that a rich nation couldn't wage war.
    - randomhodler84 4y ago

thesausageking 4y ago

El Salvador is a USD-based economy and does not have their own currency. This means they're at the whims of the US Federal Reserve, which they have representation with. And any USD reserves that are abroad can be seized by the US, as Afghanistan ($7B seized) and Russia ($300B seized) learned recently. Bukele is promoting BTC as a way to attract talent and capital, and also to modernize El Salvador's economy. Similar to how Africa skipped landlines and jumped right to mobile phones. It remains to be seen how effective that part is. But, either way, it gives El Salvador some more independence from the US and sovereignty in a world where alliances are shifting fast.

0xB31B1B 4y ago
Bukele is promoting BTC as a sort of crony capitalism/kleptocrat play. This is not a high minded “advancing society” play.
walrus01 4y ago
> as Afghanistan ($7B seized) This is because the Taliban is a terrorist organization that captured the capitol, not a government. You don't give $7bn to al qaeda, ISIS or lashkar-e-taiba either. You can thank Trump and Pompeo and their plan to withdraw 100% of US forces by a fixed deadline for that (removing all support for the afghan government's armed forces), and Biden for going along with the foolish plan.
- deleted 4y ago
  [deleted]
- daemoens 4y ago
  While all this is true, his point still stands. The US still has the ability to seize your country's money at will.
  - ForHackernews 4y ago
    ...if you keep it in US banks (because you can't trust your own corrupt local financial system).

overtonwhy 4y ago

Presumably people in the government got bribed. Did they also make their banking system crypto friendly?

el-salvador 4y ago
> Did they also make their banking system crypto friendly? El Salvador banks don't exchange or accept bitcoin as deposit. Some of them accept bitcoin for loan payments, via an external payment processor.

JumpCrisscross 4y ago

> never really understood what incentive a government had to recognize bitcoin as legal tender El Salvador is very corrupt, in the neighborhood of Sierra Leone and Algeria [1]. It is unclear to what degree the state has a monopoly on violence [2]. Bitcoin is a precedented dark money channel. [1] https://www.transparency.org/en/cpi/2021/index/slv https://www.transparency.org/en/cpi/2021/index/slv [2] https://www.cfr.org/in-brief/why-has-gang-violence-spiked-el-salvador-bukele https://www.cfr.org/in-brief/why-has-gang-violence-spiked-el...

jcranmer 4y ago

The wrong (but popular) answer is to say that this is a move to break El Salvador's reliance on the USD--the USD still remains legal tender in El Salvador, and from what I can tell, there is absolutely no movement whatsoever towards things like pricing in Bitcoin in lieu of USD or other steps that would insulate El Salvador from US monetary policy. The charitable answer I would give is that Bukele hoped to attract cryptocurrency investors with the move, perhaps to supplement existing institutional investors who haven't been happy with some of Bukele's policies. The uncharitable answer I would give is that Bukele is trying to innovate and translate core cryptocurrency strategies of extracting money from people's pockets into extracting money from El Salvador's citizens' pockets.