Bitcoin becomes Legal Tender in El Salvador
coindesk.com
coindesk.com
BTC is not cash anymore, it won't work as such. There are other cryptos that could work, we'll have to see how broadly 'bitcoin' is interpreted.
The CGT exemption will be of interest to crypto whales and entrepreneurs and may attract some, but organized crime is a concern given the nature of the asset.
The SVC is no longer used day to day and is usually kept as a collectible item, it can still be exchanged at banks at 8.75 SVC per 1 USD.
[1] https://www.xe.com/currencyconverter/convert/?Amount=1&From=...
Also to stick it to the man.
Nevermind the unprecedented new level of randomware hacks.
What could possibly go wrong!
Gold is less volatile, and the value of the volume of a €2 coin in gold is 9 months of El Salvador nominal GDP per capita.
Or the gold could be stored elsewhere and accessed via an app, with exactly the sort of database every bank already uses.
Either way, BTC adds nothing. Apps might, depending on the banking infrastructure, but BTC itself? Nada.
I guess the answer to the exchange problem is to have a decentralised exchange.
I could use banks or Lightning like a checking account, while keeping the majority of my savings under my control.
Whatever you need to tell yourself to sleep at night, buddy.
Is the entire global system supposed to move to bitcoin just so 0.001% of people can keep their money under their mattress in a hard wallet?
What doesn’t work? I’ve only skimmed some LN search results, and it looks like there are a bunch of services using it, including strike [0] which was mentioned in a comment of the big thread here [1]. This would have the same problem (proprietary network) you mentioned, but it seems to be working still?
[0]: https://strike.me/
Again, I'd like to ask you, what doesn't work?
In terms of lightning being usable now, I've been using it for years with no real problems, both as a merchant and as a consumer.
To send to someone who's offline the recipient either has to run their own always-on node, or use a custodial service.
Routing small payments (one of the goals of Lightning) is unreliable with a high chance of failure. See http://essay.utwente.nl/82015/1/Satcs_BA_EEMCS.pdf
Alternatives like XLM, SOL, ATOM could also be an option.
For reference I'd like to refer to https://1ml.com/ There is currently > 1450 BTC network capacity on the lightning network, if it wouldn't work why would people provide network capacity exceeding 45 million USD.
edit Typo.
It's easier for San Salvador to disappear Bitcoin into cronies' pockets than U.S. dollars. For this purpose, Bitcoin's deeper liquidity makes it the best choice. Less cynically, Bitcoin has brand recognition. That makes it politically palatable in a unique way.
Bitcoin isn't a great currency. But it is a competitive store of value. El Salvador doesn't have a trusted domestic market of financial assets. This is an experiment in replacing a domestic market for assets with Bitcoin.
Who would want to spend Bitcoin in a stable country. 4,5€ transaction costs for daily purchases is not what it's intended for.
That hasn't been my experience. I agree it is a "complex" system and has its own limitations, but when I took some time to test it, it worked well.
I wonder, does HN hate the "Bitcoin Cash" fork as much as BTC? It's the closest to the technical specification that made me interested in BTC in the first place.
Meaning you can open a channel, but if you want to sell real-world goods in exchange for anything that happens in that channel, then you'd better trust the other parties in the channel to close it properly.
tldr; Lightning is indeed super fast, but it's not as secure.
The point is essentially to setup an off-chain chain maintained by a 3rd party. If you are selling non BTC into that channel, you are TRUSTING the other party to close the channel.
If they never close it, you cannot unilaterally close the channel, which means you might never get your BTC because they simple leave the channel open forever and get to keep whatever you sent them (ie other crypto or real-world or digital assets).
So I'm just some guy. Someone owes me money and says, nah I'll repay it with Bitcoin. Not only is that mega-volatile, most people have no idea how to use it. Also it's easy to fall for a scam if you don't know how it works.
And further, you can typically accept anything as debt repayment if you so like. Cash, art, pretty shells, or indeed, Bitcoin. Making it legal tender actually funnels people into having to accept Bitcoin.
Musk is right on this one: https://twitter.com/elonmusk/status/1401251430015582209?s=21
Unlike fiat money, BTC is not an accounting tool for value exchange.
Unlike actual land, it doesn’t have any intrinsic value.
I’m very curious to see an elite class whose core virtue is based on being an early adopter.
For land, you can say that even in the case that society collapses it is still valuable. Or is it?
What exactly is the assumption that deems BTC's intrinsic value zero and land's value more than zero?
Capitalist, Communist or Anarchist - the land doesn’t care, it grows the tomatoes the same way.
The core of the human life is based on people processing materials to sustain biological processes and the rest of the humanity is built on top of it.
Intrinsic value comes from the ability to support that structure. At the top of the structure there are the higher ideals, like art and happiness and people who produce these are often rewarded with the goods from the bottom of the pyramid.
The problem with the BTC's "early adopters get rewarded extremely well and are entitled to all the goods for a liftime and generations to come" nature makes an extremely top heavy structure.
If that becomes a reality I suspect that a rubber hose cryptography breakthrough event will occur. After all, whoever has the private key, has the coins and the private key is transferable by force.
Sure, in this hype cycle Bitcoin has once again had a huge inflow of capital. But if you look at Bitcoin dominance charts, you can see that it is at an all-time low, and IMO will continue to be if its community stays so conservative.
I'm annoyed that the intrinsic value argument is constantly being brought up even by economists against crypto currencies. I have a similar understanding of the concept as you have, in that the value derives from the material eventually - land being most valuable.
However, what many that say BTC has no intrinsic value neglect is the opportunistic value of the traditional banking sector. German Wirecard e.g. went broke and now its stock is worth nothing anymore. Seems there was no intrinsic value either except for a few office chairs I guess.
Nobody warned investors of that. But for Bitcoin, where corruption is less likely given its transparent structure, people keep talking about intrinsic value and how it apparently has none.
Societies with no concept of private land ownership wage war. Nomadic tribes with no private or even communal land ownership structures wage war at the scales they can. Tying warmongering to private ownership or money is oversimplifying.
Gold has a very little intrinsic value. Decorative and tool making value due to its physical properties are there but they are minor comparatively.
BTC has none. That doesn’t mean it doesn’t have a value, of course but it’s simply a value within a certain ecosystem.
Not really true, the only reason it is not used much more widely in electronic components, despite being superior to copper, is the high price it has, because of its function as value storage.
That being said, it's still a very valuable material for electronics.
It's not true that gold is naturally superior, in fact Gold is often mixed with other metals to create alloys to overcome certain issues. Pure gold is too soft for most of the practical uses like jewellery for example, so they add copper to it.
Most people also don't agree on huge salaries and bonuses for CEO's, in practice the people with money are willing to pay those perks. When people vote with their wallets, does it really matter what the people not voting are going to say?
Bitcoin adds anonymous violence, increased CO2 emissions, and subtracts brilliant minds that could be working on more important problems.
The "you have nothing to lose but your chains"-argument just doesn't work on people who have more than enough junk to fill their stomachs (and brains) with.
For me the easiest way to determine if something has intrinsic value is ask yourself what would happen if you owned all of it (and couldn't be forced to give it up).
If you owned all the Bitcoin in the world, we wouldn't accept its use, and would just create another currency with identical properties.
If you owned all the land in the world, people would come to you to buy or rent it. You can't build a house or a factory unless someone is willing to sell or lease you the land. That's what makes it valuable.
In many ways, this is why we have the word "priceless". Things become priceless when, in certain contexts (for certain people at certain times), they will not be sold for any price. Land can be priceless because I can have a sentimental attachment to a particular place. Its value isn't derived from how many $'s people will pay for it.
Don’t all modern currencies work like this?
- If I save 100% of my money now, I can retire now (because clearly I don't need money to live).
- If I save 0% of my money now, I will never be able to retire (because I'll have none when I forfeit my income).
Retirement is not solely coupled to the amount of money you have. I personally have aspirations and enough money to not having to work for a few years. And still I work lots of hours to achieve certain goals that have nothing to do with increasing my money.
FI is solely determined by the amount of valuable assets you have
> I’m very curious to see an elite class whose core virtue is based on being an early adopter.
How do you think the elite class became elite? How do queens and kings get their power? By having some ancestor in the right place at the right time take advantage of an opportunity before other people tried.
They fought and murdered the competition. Their offsprings continue doing that until they no longer had the intelligence or power and got exterminated and their wealth redistributed.
This is very, very different than stumbling upon something.
a) Accumulating capital & power (e.g bitcoin, land, property, influence) has always had a 'stumble upon' component.
There's no inherent 'fight and murder' evil to it...
b) Early Bitcoin acquisition required some level of computer/security/independent thinking competence.
Early land acquisition required some level of legal/defence/homesteading competence.
Aside: Writing 'very, very' made me take a closer look at this comment. Comments stating something like like 'very, very' pretty reliably tend to be flawed & indeed not 'very, very'.
I'm sure that inventing the Internet had a component of drinking coffee.
Anyways, the BTC is a power transfer by virtue of being early and demanding all the goods and services to be provided in exchange of transferring some amount of it.
If that is deemed unfair by the stakeholders it is very likely that there will be fight and murder phase. Can you imagine if it turns out that Satoshi is a mathematician from El Salvador and secretly holds half of the reserves once BTC is established as a world currency?
Do you think that El Salvador will instantly become world's richest country and everyone will provide them with food, wine, weapons, iPhones, software in exchange of some of the coins?
The problem is that BTC gained it's intangible value differently from a normal fiat currency and it can loose it again. See https://bitcoin.isnot.money
People play along when they benefit too. When they no longer benefit, they take action to take it down.
Those clones have almost no one mining with it, thus limited hashing power, thus no ability to secure transactions on the network. The amount of hashing power + number of nodes makes the protocol decentralized and secure, and thus far only Bitcoin has that and none of the clones.
There's a bunch of people that have little to no knowledge about the space coming in and buying new coins believing it will make them rich, but they're usually clueless about the underlying technology.
https://twitter.com/nayibbukele
Just have a look at it. The profile pic with laser eyes. I wonder how much of this is motivated by personal profit motives.
Edit: The biggest thing of this is that every commercial actor MUST accept Bitcoin if a customer wants to pay in Bitcoin. See Art. 7
How's the Internet infrastructure in El Salvador?
* Wireless data can be spotty in rural areas due to many hills and mountains. We would need an MVNO for rural areas coverage, as it wouldn't be cost effective for the four mobile networks to place a tower in every rural corner.
* Wireless coverage in cities was limited/overloaded for about 5 years due to lack of new frequencies. This was a regulatory issue fixed about 2 years ago and wireless service is finally improving
* Some companies stopped providing wired service in rural areas about 15 years ago due to copper theft. Not sure if this has improved
Payment in food stalls and small businnesses is mostly cash.
* This is an analysis of what was actually passed. It's a big deal as far as "legal tender" goes: https://twitter.com/robustus/status/1402456274340442113 For an discussion on what "legal tender" can mean, see: https://www.coindesk.com/el-salvador-bitcoin-legal-tender-ko...
* For those that don't know, the US Dollar was El Salvador's previous only legal tender. For a list of some other countries that use USD or are pegged to USD: https://en.wikipedia.org/wiki/List_of_countries_by_exchange_... - note of those, the Marshall Islands has previously announced plans for a CBDC (working w/ Algorand) and politicians in Ecuador has also brought up the possibility of introducing Bitcoin as legal tender. Many LatAm politicians (many that have been pegged to USD) have announced support for cryptocurrencies. Perhaps domino theory is back in play? https://twitter.com/balajis/status/1402279912623464458
* The plan for the merchant/end-user use case is apparently to use Strike https://strike.me/ , which is a custodial service built on the Lightning Network - see also https://www.businesswire.com/news/home/20210605005045/en/Str... (Technically it's opt-in and you can use any wallet, but I'll just leave this recent thread here as an example of why this isn't really an option: https://threadreaderapp.com/thread/1376286470256873475.html )
* Anyway, that last detail is I believe is getting sidetracked from the main point, which is that as a (to my mind) clear direct consequence/reaction to current US monetary policy, and a shot across the bow of USD's reserve currency status. One doesn't have to look further than the numbers for foreign holding of US Treasury Bills to see how the wind has been blowing: https://ycharts.com/indicators/increase_in_foreign_holdings_... but of course, you can also listen to much smart people than me opine about this: https://youtu.be/ScAeHsXIUqI?t=528
(It appears that El Salvador plans hold $150mm USD in a fund that will slowly convert into BTC, assuming price volatility risk for merchants that want USD)
I think the trade-deficit between El Salvador and the rest of the world[0] will mean this is just a gimmick in the end.
[0] https://tradingeconomics.com/el-salvador/balance-of-trade
... should I stay or should I go?
Also the volatility piece will be hard to manage in anything other than instant transactions. If it's legal currency will people have to denominate larger assets (e.g. cars, houses) in BTC and commit to a price where there could be considerable shift before settlement? I know they mention that stability fund in the article but I could see this getting more complex than that.
What the policy will be where BTC appreciates before settlement will be interesting too, so in a bull run will a buyer have to hand over the number of coins they committed to, and will the gov. get the excess, or the merchant?
If we were on the gold standard, gold would be legal tender, even though it isn’t fiat.