El Salvador adopts Bitcoin as official currency, first country to do so
nbcnews.com
nbcnews.com
> In the early hours of Tuesday the wallet had not appeared on Apple Inc., Google and Huawei’s app download platforms, however, prompting a series of tweets from Bukele, including one with a red-faced “angry” emoticon.
The involvement of a government-issued wallet gives this story an even stranger dimension. First, it's not clear how the government will identify those eligible to receive the $30 bitcoin deposit. Second, why would the government be involved at all in developing a wallet? There are plenty to choose from now, so what features exactly were missing in those? Finally, what government in its right mind would hitch its fortunes to the vagaries of a walled-garden App Store based in the US, a country clearly hostile to the Salvadoran experiment?
And considering I use Bitcoin frequently, and I'm constantly, on a weekly basis sending on chain for 5 cents, 10 cents max. I'm in within a couple blocks, every single time. You are straight up spreading FUD.
By your own sources your original claims don't hold up. So much for "100% BULLSHIT". Please stop with the zealotry, it makes the entire space look foolish.
> The fees on Bitcoin, on chain, have been less than 75 cents the entire year of 2021.
The average transaction fee on April 21st was $62.779. You are wrong.
> The average tx on chain the past 9 months has been about 10-15 cents.
Clearly wrong. The data you cite is the median transaction fee, not the average transaction fee. For the lowest median transaction fee the chart shows 22.9 cents. Even that is above your claimed 10-15 cents.
Good for you that you spent less on your transaction, doesn't change the data though.
The fee was NEVER once $62 per tx in ALL of April, I sent numerous transactions all that month long for mere cents.
From the original bitcoin white paper:
> The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous.
Salvadorians can transfer their BTC to a tumbling service then to a an anonymous public key.
> independence from government
As soon as you transfer the BTC out of the wallet, you'll be independent from the government.
You are not required to use the government provided wallet if you don't need the $30 handout.
70% of El Salvadorians don't have a bank account [1].
[1] https://datacatalog.worldbank.org/dataset/el-salvador-global...
It was alleged this move would let percent "removing anonymity and ensur[e] the government can monitor their population effectively" [1]. Counterargument was that "normal banks already do that" [2].
That is true. But 70% of El Salvadorians don't use "normal banks." They use cash. Cash does not "ensur[e] the government can monitor its population." This Bitcoin rollout does.
So yes, an El Salvadorean using a bank to do business and switching to Bitcoin gives up no privacy. But one using cash does.
Here in Mexico the government has our biometrics, there's a national election ID, SSN and a unique "clave de población " .
IIRC, people using that wallet can opt into a government backed BTC to fiat conversion rate that allows all shopkeepers to cash out in fiat. It's to make people feel comfortable being forced to accept bitcoin. For obvious reasons, governments don't want to subsidize non-citizens or risk alternative wallet lending themselves to arbitrage.
[1] https://datareportal.com/reports/digital-2021-el-salvador
Bitcoin could be used by the whole world with mining only happening on a laptop. That would not change anything for Bitcoin users.
No, that is completely inaccurate.
First of all, with current parameters that would mean that you need a good few hundred years to process a few seconds of world-wide transactions.
And if the parameters were adjusted such that it would be that easy to mine blocks, bitcoin would become valueless, as everyone with a laptop could produce their own longest blockchain where they have half of all bitcoin.
Proof of work systems will always require absurd wastes of energy - that is, by definition, the only way they ensure the correctness of the blockchain.
Completely wrong. Go run a testnet yourself and you will see.
>And if the parameters were adjusted such that it would be that easy to mine blocks, bitcoin would become valueless, as everyone with a laptop could produce their own longest blockchain where they have half of all bitcoin.
The difficulty adjusts automatically. The energy usage comes only from the competition aspect - people are competing to earn blocks. You are lacking basic understanding of how PoW functions.
If you imagine that a laptop has enough hashrate to mine all the world's transactions in realtime, then how do you explain to yourself that the actual Bitcoin network is only able to add a few hundred transactions per second to the chain?
> The difficulty adjusts automatically. The energy usage comes only from the competition aspect - people are competing to earn blocks. You are lacking basic understanding of how PoW functions.
PoW works because miners have to invest significant resources in building and maintaining their mining rigs. As such, no one who wins the race to add a new block will want that block to contain false transactions, as that would bring down the value of the currency and leave them with extremely expensive mining equipment that is useless (once the deception would be noticed by others).
If the bitcoin network was run on 3 laptops, I could buy 100 laptops and start advertising my own blockchain which reverts the entire previous blockchain and replaces it with transactions I like. Since I can mine many more blocks with my 100 laptops, I can create a longer chain, so all clients will accept my chain and discard the old one, reverting all transactions that ever happened.
Instead, if I wanted to mount such an attack on the actual bitcoin network today, I would have to spend billions of dollars on equipment and electricity - ensuring that I wouldn't want to do so.
Originally the discussion is about people "using Bitcoin to pay for their McDonalds". Then the commenter erroneously stated, in response to that, that a "bitcoin transaction uses the energy equivalent the entire lifespan of a tree". El Salvador is using the lightning network. These transactions are done off-chain. So the transaction fees do not even go to miners. There can be thousands of McDonalds transactions that occur off-chain and are eventually settled on-chain in one transaction. Processing and validating transactions is very computationally easy. You can indeed do it on a laptop.
Mining blocks is a separate issue. If you ignore the competitive security race, then the network can indeed function on a laptop. Most the mining race that is currently occurring is because people are fighting to win the block reward - this would happen even if nobody were transacting, and someone doing a lightning network transaction has truly negligible effect on that energy usage.
When you said "bitcoin would become valueless, as everyone with a laptop could produce their own longest blockchain where they have half of all bitcoin" this shows you don't understand the process, because the difficulty would rise until people can no longer produce blocks so rapidly. You're describing a situation where miners are not even on the same network so it doesnt make sense
Let's look at it like this: a block on the blockchain has a maximum size. A transaction has a minimum size. So, each block contains a maximum number of transactions. Miners must waste a certain amount of energy hashing a block to ensure the security of the network (through the incentive mechanisms described above).
So, we can compute a practical energy/block, which translates to an energy/typical transaction.
Now, the block size is a kind of free parameter - the blockchain guarantees wouldn't be significantly different with 1GB blocks instead of 1MB. And that, in turn, would reduce the energy cost per transaction dramatically, and allow the network to process more transactions/second.
Similarly, if there were fewer people putting fewer resources into mining bitcoin, the energy cost/block could go down. This would affect the security of the network though, as it also brings down the cost of a 51% attack.
But miners are opposed to such changes, which have been proposed before. So, in practice, the bitcoin network as it is today has a huge energy cost/mined transaction.
Again, if you don't believe this, you should ask yourself what stops the bitcoin blockchain from processing 1 billion transactions/second instead of the current pitiful ~2 hundred transactions.
Separately to the lightning network, the security (hashrate, energy usage) is still not directly linked to the number of on-chain transactions that are processed. You can compute "a practical energy/block" specifically for bitcoin but it does not translate to a meaningful energy/transaction value because the quantity of energy used is not directly caused by transactions. You can have a less-secure blockchain that does many more transactions than bitcoin with low energy usage (altcoins exist) - if these are low value transactions then people won't even be incentivised to attack it. The relationship is NOT just energy/transaction. Your estimated energy/transaction value will keep changing because that's not the relationship; the new coins in the block reward will eventually drop to zero, the value processed by the network will change, the ASIC development situation will change, etc. It's like finding a runner that eats icecream and computing icecream/kilometre.
>Again, if you don't believe this, you should ask yourself what stops the bitcoin blockchain from processing 1 billion transactions/second instead of the current pitiful ~2 hundred transactions.
Nothing is stopping it. Run your own lightning node and you can do more transactions than what you are erroneously claiming
The whole discussion is about the Bitcoin blockchain itself. Altcoins, lightning, payment apps etc are all entirely irrelevant to this point.
The bitcoin blockchain as it exists today has a pretty well fixed energy cost per transaction. All sorts of things could change this - changes in the protocol to allow bigger blocks, changes in the hashrate that most miners are willing to invest, changes in mining hardware efficiency etc.
But what you are claiming is like saying that it's meaningless to talk about the gas/mile of a diesel Ford Mustang, since you could always change the engine (block size), or change from gas to another fuel (better ASICs), or choose to ship the car by ferry somewhere(use Lightning instead)!
> You can compute "a practical energy/block" specifically for bitcoin but it does not translate to a meaningful energy/transaction value because the quantity of energy used is not directly caused by transactions.
Why does it matter that "it's not caused by " the number of transactions? As long as the block size is fixed, the number of transactions that can be processed by the existing bitcoin network is directly linked to the energy expenditure of the existing bitcoin network. Other hypothetical versions of the bitcoin network could achieve other energy/transaction thresholds. But the one we have today is extremely wasteful.
> Nothing is stopping it. Run your own lightning node and you can do more transactions than what you are erroneously claiming
"Why can't my car do 600km/h, it can only do 200km/h?" "Nothing is stopping it. Board a maglev train and you can do far more than 200 km/h."
But changing the blocksize is just a software change. It doesn't require outlay on a "bigger engine", or any new engineering. The "existing bitcoin network" could switch to it with a 1 line change in the code.
So it's not quite the same as some of your examples.
It's not "just" a software change. It's a huge political and organizational issue. It has been proposed and agreed and disagreed and fought over for many years, with no plausible change in site.
Turns out, changing fundamental limits of a truly distributed system is actually very hard. True, not entirely for engineering reasons, but that makes it even worse - engineering can in principle be solved, people problems can be forever.
https://en.wikipedia.org/wiki/Bitcoin_scalability_problem#Bl...
>"Why can't my car do 600km/h, it can only do 200km/h?" "Nothing is stopping it. Board a maglev train and you can do far more than 200 km/h."
Going by this analogy, you are commenting on an article about maglev trains. The article is about lightning network transactions. So you've gone completely off-topic? Why even talk about "transaction costs of the blockchain itself" if you think lightning transactions arent bitcoin transactions?
>What do off-chain transactions like Lightning have to do with the transaction costs of the blockchain itself?
Facilitating off-chain transactions lowers demand for on-chain transactions. Off-chain transactions arent possible without the underlying blockchain, yet they can fulfill the use-case of small bitcoin transactions. You can't separate the two.
>All sorts of things could change this - changes in the protocol to allow bigger blocks, changes in the hashrate that most miners are willing to invest, changes in mining hardware efficiency etc. But what you are claiming...
Back up the comment chain you were arguing that changing electricity prices etc would not affect the energy usage... I think you have changed what you are arguing about. Previously you disagreed with this:
"Bitcoin use and mining power are completely uncorrelated. By mining bitcoins, your earn as much as the computational fraction you are representing. So, indeed, there was a race to more and more mining power in the recent years but it can completely be reversed. For example if electricity prices rises."
> First of all, with current parameters that would mean that you need a good few hundred years to process a few seconds of world-wide transactions.
If you settle everything onchain, maybe (I haven't done the math on this, so I honestly don't know), but storing every transaction for a cup of coffee in a datastore that persists across tens of thousands of computers for the rest of time is absurd.
Long term Bitcoin layer 1 (onchain) is likely to be the settlement layer for large transactions, and other layers (lightning network, etc) will be used for every day activities like buying coffee, sending funds to a friend, etc.
You don't need consensus about the state of the entire network on layer 2 like you do on layer 1.
So it's not really a problem.
A lightning channel does require an onchain bitcoin transaction both to be opened and closed, but while open it supports unlimited transactions within the channel while it is open without increasing the onchain storage burden on the network validation nodes further beyond the two transactions to open and close the channel.
Or can there be more than 2 owners of a channel?
In this case, the correct point is that the waste of energy is to ensure the security of the blockchain (as you correctly pointed out), and not to process transactions. The marginal cost of processing another transaction is completely negligible compared to the cost of securing the blockchain, and so naive comparisons saying that a single transaction uses as much energy as XXX where XXX is the total energy cost divided by the number of transactions is misguided. You could send a million more transactions and the energy cost wouldn't budge.
Of course, the overreach is in the part where they said a single laptop could run all of Bitcoin. Marginal transactions are cheap, but not that cheap, and a single laptop couldn't secure shit. (Again, all as you correctly pointed out. I just wanted to clarify where everyone was coming from for readers who aren't familiar with how Bitcoin works.)
Obviously it's limited now by the blocksize (let's not go there). But the point is the "per transaction" figure is based on the currently imposed limits.
Bitcoin is secure only under the assumption that a 51% attack is computationally difficult, i.e., that it is not cheaper to acquire more mining capacity than the non-malicious miners collectively have (whether by creating a conspiracy of existing miners, or by becoming new miners) than to actually pay whatever transaction you're trying to get away with not paying.
This means two things (which are, in a sense, the same thing in two different directions).
First, Bitcoin needs to have a nontrivial fraction of the world's computational power in order to be secure. If mining happens on a laptop, well, I personally own at least two laptops, so I can easily double-spend coins, making the currency worthless. It doesn't have to be 51% of the world's total computational power, but it has to be enough that nobody can easily and cheaply put together enough additional power to mine false chains at a rate that keeps up with the non-malicious miners.
Second, if it were ever the case that secure mining was happening on a single laptop, that would mean that this one laptop represents a huge portion of humanity's computing power, meaning that, first of all, the fair market value of being able to use this laptop would be incredibly high (both because it needs to be high enough that a double-spend attack isn't profitable, and because of simple supply and demand), and second, there would be a separate moral question of why we're using this laptop to mine Bitcoin instead of, say, powering any of the scientific research (like vaccine development) that now has to happen on TI-83s.
It is technically true that Bitcoin could "work" with mining only happening on a laptop (and probably did "work" in this sense when Satoshi was developing it on his personal laptop), but that's like saying that, say, MD5 is a "secure" hash provided the attacker only has pen and paper. True, but that's not what anyone means by "secure."
I don't see how you could significantly reduce the energy usage without sacrificing security (unless you make structural changes such as moving to POS)
That's not gonna happen at this stage however.
Which is of course to be expected, as the bitcoin network is entirely unable to process the transactions of a small rural town.
Basically, people in El Salvador will use a centralized payment app that happens to denominate prices in Bitcoin. It will be interesting to see how much this actually works with the extreme volatility of Bitcoin, but for a country that is apparently desperate to get foreign value into the country it may be the worse option, except for all the others.
With ligthning, you're not using the bitcoin network to process transactions. If we opened a lightning channel for our 2 personal bitcoin wallets, and I paid you 1000SAT over the channel, and then someone checked my bitcoin wallet, they would see that I still have all those SATs (of course, I can't double spend them).
Did Jo and Alice participate in a USD transaction?
If Bitcoin's original thesis of truly decentralized P2P cash still holds, then it should be viewed as an M0 money supply. Financial services and products build on top of and separately from the main chain make sense as analogues to reserve banks and payment processors that do not handle the majority of transfers in physical cash.
Calling it a promise makes it sound like there's counterparty risk and you're relying on them not changing the code. Changing the lightning code would have no effect on your funds locked into lightning using the old code.
Similarly, if I send you 1000SAT through the lightning network, I am trading in bitcoin, but not using the bitcoin blockchain to do so.
Sure, Lightning relies on guarantees offered by the bitcoin blockchain to promise payment security. But it's not the same thing, and the Lightning network could become compromised even if the bitcoin blockchain remain secure For example, if Lightning accidentally started adding an extra 0 to transactions, if I send you 100 SAT over the LN you could see that you are receiving 1000 SAT and send me some products. Later, when the channel is closed, the bitcoin blockchain would refuse the final transfer, but it may be too late.
[0]: https://twitter.com/OpenNodeCo/status/1435264127241527306
Nobody is required to use Chivo, but people are required to accept legal tender. There's no reason to expect that Chivo-Chivo transfers will go to the trouble of opening individual lightning channels for each user, which costs non trivial amounts of money for each opened and closed channel.
It would make sense that users of the app can settle with each other and it doesn't so much as escape the four walls of a database at Chivo-HQ. But McDonalds is a multi-national enterprise and won't be trusting Chivo (or any El-Salvador official banking infra, I'd assume) to manage their wallets.
It is really cool to see a (hopefully) successful application of Lightning on Bitcoin in the wild, from a person who has been nay-saying about Lightning. I will be really glad to see it succeed. But I'm dubious about the success of this app.
One should hope the two successes are not tied to each other – it's encouraging that there are other companies. I have no way to judge Chivo and I've never used their software, but I have little trust of governments to implement complex systems well, and if there ever was a case study of a burgeoningly complex system, I think Lightning and Bitcoin is the big one.
I don't know enough about lightning to dispute it, but it would seem these reports about Opennode and McDonalds are in conflict with those reports. Do you have any local color or stories to add? I'm interested in what they actually are technically doing, I didn't know that Lightning could be "partitioned" but my Technical Spanish is rusty.
Are there any controls that would prevent folks from using Chivo to spend their $30 literally anywhere they wanted, in as much as there is a Bitcoin receiving address for them? (If I opened it up to "all lightning-capable nodes" would that change the story? I understand little in spite of knowing lots about Bitcoin and friends, something something, needs to be a route/path from one node to another?)
Chivo has just usual Lightning node as any other, you can follow it publicly here: https://amboss.space/node/02f72978d40efeffca537139ad6ac9f099... and you can see that they have direct channels with IBEX and others, so payment to many businesses from Chivo can literally be done with 0 sats fee. IBEX then has channel with OpenNode, so when paying to McDonalds there's a chance that IBEX will take some fee.
But in practice, it's absurd to imagine that the population of a whole country will learn about lightning or bitcoin directly and create their own Lightning channels or bitcoin wallets (though doubtless some will). Instead, most will use an app that hides all the complexity from them, and since the government is advertising one particular app, that will likely see overwhelming use.
And then, the official app or any other app will likely avoid wasting money on lightning or bitcoin to settle app-app transfers, and instead settle most transactions in their own centralized backend.
You're just moving the goal posts. Here was your original statement:
> Actually, they are not even using lighning wallets
Here is your updated statement:
> it's absurd to imagine that the population of a whole country will learn about lightning or bitcoin directly and create their own Lightning channels or bitcoin wallets (though doubtless some will)
You started with what sounded like fact, then revealed that the justification is just the invocation of a thought experiment. There's nothing but speculation here. You're right this may happen, but a hyperbolic angry comment isn't the way to add to the discussion. This is why HN cryptocurrency threads are garbage dumps.
>They are using lightning wallets.
If your real intent is to improve discussion, maybe you should address that instead of erroneously invoking the "move the goalposts" fallacy. Moreover, I think both comments had substance to them, especially when compared to, again, the original comment about the lightning network.
The non-hyperbolic statement would have been "they will (99.99% certainly) not be using even lightning wallets".
Still, while this is a forward-looking statement, it is more than idle speculation - the government is encouraging the population to install one specific app, even offering money to anyone that does. In contrast, running your own lightning channels is known to be very difficult to do, so it is a priori extremely unlikely for a large proportion of the population to run their own.
pull the plug of your computer
leave the metaverse
> Are you figuring in the Lightning Network?
No.
The lightning network is a separate system for transactions denominated in bitcoin. It does nothing to modify the capacity of the bitcoin network, it creates a way to do transactions WITHOUT using the bitcoin network (except occasionally).
I imagine these transactions are being done over the lightning network or something like that(I could be wrong on this though), in which case that calculation wouldn’t give the right answer.
In addition, I think I would evaluate the CO2 costs per transaction based on the contributions to the mining reward (because this is the part of transaction which has an influence on how much power people use to mine), which I think for bitcoin is still relatively small compared to the block reward part? Well, there’s also the influence on the price that making transactions has.
I think the assumption that there will be no innovation in this space, optimizations will never decrease the amount of computing resources required for a bitcoin transaction, and nothing can be done, is probably incorrect.
Some prospects:
https://en.wikipedia.org/wiki/Bitcoin_scalability_problem#Ef...
The impact of the lightning network on energy consumption is even neglible...
The fees are high because the costs are high.
Existing remittance channels are shackled by anti-money-laundering, anti-organized-crime, anti-terrorism, know-your-customer compliance costs (typically enforced by the governments of multiple jurisdictions leaning on the money transfer operator's banking partners, who tend to be skittish about these things as a result). The world average of a ~$14 fee on a $200 remittance is easily in line with these costs; any crypto-remittance system which offers lower fees is only able to do so because it bypasses these controls.
If you wanted to reform this in the existing world banking system, you'd need the US and El Salvador government to work with each other to some treaty which streamlines these channels; this would lower costs either directly or when competition arose.
https://www.moneyandbanking.com/commentary/2018/2/18/the-stu...
I'm not sure if there's a direct tie to Iran-Contra, but in Nicaragua Regan directly contravened a congressional funding ban and used Iranian and CIA drug money to fund the death squads there. Similar funding sources were probably at play in El Salvador.
Major banks in El Salvador accept cheques from US banks, sometimes of them without any fees or very low fees. Main disadvantage is that it is slow.
I haven't seen this used as a mainstream remmitance channel though. But an Salvadoran American relative could give their family a checkbook and they could deposit it here.
This is for cheques though. Different from Panama and Mexico whose ACH systems are connected with the US Fed ACH system in a way El Salvador isn't.
Average remittance costs for El Salvador are between 1.67% and 4.33%, with the average being 2.85% [1]. Meanwhile, the two Bitcoin ATMs in the country charged a 5% fee.
[1] https://sites.krieger.jhu.edu/iae/files/2021/06/Bukeles-Bitc...
So, for instance, if your plumber did some work for you and sends you an invoice afterwards then that debt is discharged if you offer to settle it using a 'legal tender'.
However, shopping in a store is usually not the same because payments do not settle an existing debt.
Again, I'm not sure exactly what El Salvador's new law entails.
EDIT: To be clear, I mean tourists each individually buying a normal amount of things using BTC, which adds up to the store exchanging it's inventory for a number in the app.
[1] https://u.today/el-salvador-government-to-punish-businesses-...
> every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service
https://theconversation.com/bitcoin-will-soon-be-legal-tende...
https://twitter.com/nayibbukele/status/1402446890466217985
Art. 7 states "Every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service".
So it goes beyond merely saying it's "legal tender".
I suspect more likely some rich people will find it more convenient to pay their tax bill.
I'm actually curious how this will be implemented specifically. I guess (although I'm not well-informed on the ecosystem) that most of the places that let you do small cryptocoin transaction either use some smaller coin, or they must have some way of doing fractions of a bitcoin, right? In which case, the fraction system would have to be proprietary, I guess? I can't imagine the law required shopkeepers to use any particular proprietary exchange...
Its fundamental unit it the "Satoshi", of which there are 100 million in a "Bitcoin".
Murder good for Bitcoin?
Is it how I do it? Probably not exactly. But it's disingenuous to say that economic and financial changes are not a piece of fixing social problems like persistent crime.
[0] https://foreignpolicy.com/2021/03/03/el-salvador-homicide-hi...
So yes, if you allow the state to become an arm of the cartels then I suppose you can call it a job well done that they're not murdering as many people.
Maybe the Sicilians should run for office in Italy?
The use of “else” implies that this surrender constitutes the “government” controlling the cartels rather than vice versa. In fact, the cartels are the government, they’ve just outsourced the boring and less-profitable aspects of governing to the entity that calls itself the “government”, as long as it stays in line.
(Which, to be fair, hardly makes El Salvador unique.)
On the one hand, I’m no IMF fan and appreciate how that abstractly could be part of the beginning of a better fix than typically comes of working with the IMF.
On the other hand, in practice it seems usually to be part of a flag-waving, nationalist, foreigners-are-the-problem distraction for regime leaders implementing either looting the country or tightening an authoritarian fist around it under the guise of economic/financial reforms not beholden to foreigners (but any of whose bad effects will be blamed on foreign interference.)
It used to be like that. Now the homicide rate is the lowest in modern history of El Salvador.
The IMF is of course the entity who had to bail out the entire country of Albania when they all got into a massive ponzi scheme, jailed their finance minister and had a civil war over it.
That's a funny way to define criminals.
Especially since Western Union actually hands you cash which you have to get out of one of the Bitcoin ATMs that eats 20% of your withdrawal lol.
Remember Strike is a centralized custodial wallet offering so not actually Bitcoin. They only use their own private LN to transfer Bitcoin between their own two custodial accounts (which they could elide entirely by using a spreadsheet lol).
If they really cared about remittances Bukele would make a deal with TransferWise. That's not what this is about, at all.
If I'm an el salvadoran with no documentation in the US I can send my $15k wages for like $40 to any individual in El Salvador (who can now use it as currency once on the appropriate local network) without getting rammed by Uncle Sam's large dong while trying to transfer. It's incomparable to Western Union.
I think the only thing cheaper may be to find some company that allows international wire for very cheap, and that normally requires holding a lot of fiat in the bank.
Since USD is an official currency of El Salvador, you can just send a USD wire without currency conversion fees, that can be up to $50 -- but Fidelity charges $0. [3]
You could also set up a Wise multi-currency account, which is supported in El Salvador. You'll get banking details in the US (and many other jurisdictions) to which you can ACH money free of charge, or receive a Fedwire for $7. [1]
[edit] If you need to send small amounts of money, Wise is hard to beat. If you need to send big money, InteractiveBrokers Forex trading is the definition of market rate, and their commission is 0.002% (2/10th of a basis point), minimum $2. So, $20 per million.
This has been a solved problem for a very long time.
[1] https://wise.com/multi-currency-account/
[2] https://www.nasdaq.com/articles/the-best-way-to-understand-b...
[3] https://www.nerdwallet.com/article/banking/wire-transfers-wh...
Transferring crypto, without KYC (which is a real concern for persons from central america who may not have documentation for a bank account or legal status in the US), for $~3 in transfer fees plus whatever rate they can get face-to-face (which could be near 0% exchange fee) is damn good. I doubt most of these marginalized workers in the US (not all El Salvadorans, I'm sure there are plenty of rich ones with Fidelity accounts who haven't been the utilitarian use case for crypto transfer) could do better without packing up a bundle of cash and travelling to El Salvador on a plane.
Anyone can sign up with a Fidelity account just as easily as they can sign up with an exchange, to send free USD denominated wires. As for whether counter-parties in ES charge for wire receipts, I don't know! Receiving is generally far less expensive than sending.
You appear to have completely skipped over Wise, which I pointed out to you is better in ... every way, and completely free of charge?
> Transferring crypto, without KYC...
Transferring crypto, without KYC, is a real concern to every developed country on earth. And I believe the Salvadoran sanctioned wallet KYCs ya too.
> ...which is a real concern for persons from central america who may not have documentation for a bank account or legal status in the US
I'm sorry, why are we building a system to make being an illegal immigrant easier again? I'm pro-immigration, and an immigrant myself. However, this is a country of laws is it not? Generally speaking I think we should open up immigration much more broadly. However, I also don't think it's a stretch to say if you're here illegally that's a bad thing and we shouldn't make it easier to do that?
> I'm sure there are plenty of rich ones with Fidelity accounts who haven't been the utilitarian use case for crypto transfer) could do better without packing up a bundle of cash and traveling to El Salvador on a plane.
Crypto is always available for money launders and criminals, yes.
I know it isn't fruitful here to discuss whether illegal immigrants should exist (maybe we should block all their access to money supply so they and their family can starve). But they do exist, and they will seek out the lowest cost non-KYC options, and crypto looks to be a decent bet. There are other people as well without documents, such as homeless who have long lost them and people born in weird situation where their parents never sought legal documents for their existence.
>Crypto is always available for money launders and criminals, yes.
As are banks and fiat.
Well, no, remember that asylum is legal immigration and asylees and claimants are free to use the banking system. A properly and fairly executed asylum system actually threads the needle here nicely.
Of course they shouldn't exist, we both agree.
Given the system is imperfect what should we do, is the question you're asking I think.
My answer is not "build circumvention tools" but instead "advocate for reform." In the same way I think drugs should be legal, but instead of building a darknet marketplace - which solves zero existing problems and creates 10 more new ones - I instead advocate for drug decriminalization and prison reform. And safe injection sites. This makes the world a better place.
> As are banks and fiat.
Of course, but that system tries to stop them with the things you rail against, like AML and KYC rules - whereas crypto welcomes them with open arms.
That's a fundamental difference. Whatever is built upon it is fruit of the poison tree, rife with adverse selection.
I maintain that building tools to circumvent constitutional laws you happen not to like is a bad thing. I think that energy is better expended advocating for better legislation. It's hard, but it's infinitely better.
> Whatever is built upon it is fruit of the poison tree
To you; to me it's built on the tree of liberty.
>building a darknet marketplace - which solves zero existing problems
The existing problem was that people would show up in cash in person, and often without either parties being vetted. The darkmarket did not totally solve this problem but it did help it, by creating a rating system and allowing people to buy items without needing to put themselves in the vicinity of a potentially dangerous drug den.
Sometimes direct action is more empowering to the common man than legislation. As Cody Wilson said when he made the 3d gun popular, it was a political act that the world just has to deal with. Bringing crypto into this world "legislated" into reality a way to move funds in a way the legislature failed to by blocking the path of those who are conventionally blocked by KYC and AML. I don't know that every El Salvadoran can just wait indefinitely for legislation to pass for their money to come in from their family members working in the US. Every dollar taken away from them from the likes of Western Union et al is money straight out of the mouth of possibly impoverished family members, and we shouldn't begrudge these people the tools to fund their unbanked families at a fair rate.
Woah. Hold up. There's no KYC for holding anything. There's always been KYC for obtaining fiat. For withdrawing fiat. For depositing fiat. For getting paid in fiat. For paying other people in fiat. It's not the holding at issue, it's the transacting.
> ...and transactions above 10k are on the honor system for cash purchases.
No, they certainly are not. Any withdrawals or deposits of over 10K USD at a bank will require an ID and get you a CTR or SAR filed. If you tried to get 100K in fiat you will almost certainly get a CTR or SAR filed on you. You'll probably get a call from a bank manager, a compliance officer and/or someone from FinCEN. Ditto on the deposit.
In fact, transactions under 10K also often get CTRs filed. [1]
If you aren't withdrawing it the person who did will get the filings.
> There's also minimal checking of those that leave our borders; someone could easily cross into Mexico with 100k in a breifcase of Swiss Francs and no one would be the wiser.
Potentially, but unlikely. You cannot get 100K of cash lawfully without presenting ID. If you did, you committed a crime to get it, it was probably laundered, and you probably paid 2-10X that amount to launder it. You're probably a criminal.
To wind up with an undocumented, untraceable 100K in a briefcase, either you or someone else committed a crime.
This is part of the reason people do not cross borders with 100K in cash. It's a crime to do so without reporting it, so if found it'll be seized. It's trivial to find $100K in cash strapped to someone or on an Xray.
They tend to instead obtain gift cards and move portfolios of that.
> To you; to me it's built on the tree of liberty.
No, crime is not liberty. It's crime. Crime is the violation of my liberties and the code of civil society because you think rights you don't have are more important than rights I do have.
Again you completely ignore Wise as a much better, less volatile solution to the problem.
The problem you're describing, and the world you're describing, feels a bit like finance fanfic.
> The existing problem was that people would show up in cash in person, and often without either parties being vetted. The darkmarket did not totally solve this problem but it did help it, by creating a rating system and allowing people to buy items without needing to put themselves in the vicinity of a potentially dangerous drug den.
No the issue with drug legislation is it impinges on the freedoms of average citizens and directly harms them via prison. A darknet market does nothing to alleviate the issue at hand.
From a bank, or a money transmitter, or a traditional employer -- sure. But I could spange on the side of the road or get picked up at a home depot and do some work and get cash without KYC no problem, same for selling some personal goods or goods I buy and then sell at a markup or any number of common cash transactions.
>No, they certainly are not. Any withdrawals or deposits of over 10K USD at a bank will require an ID and get you a CTR or SAR filed. If you tried to get 100K in fiat you will almost certainly get a CTR or SAR filed on you. You'll probably get a call from a bank manager, a compliance officer and/or someone from FinCEN. Ditto on the deposit.
At a bank sure. If you sell a car for $15k you're supposed to report the transaction on the honor system but in reality people could take that cash, buy $15k worth of gold from a variety of sources and there would be no reporting anywhere despite the fact you sold $15k of assets and then bought $15k more of assets.
>Potentially, but unlikely. You cannot get 100K of cash lawfully without presenting ID. If you did, you committed a crime to get it, it was probably laundered, and you probably paid 2-10X that amount to launder it. You're probably a criminal.
Sure you can. I could pressure wash houses for $200 a house and do one everyday for 500 days. Or I could ask for spare change by the side of the road; doing that daily for a few years could probably get you 100k in a rich area and you wouldn't even need to speak English or have an ID or any relationship with a bank whatsoever, just the ability to bury your earnings in a hole somewhere.
>This is part of the reason people do not cross borders with 100K in cash. It's a crime to do so without reporting it, so if found it'll be seized. It's trivial to find $100K in cash strapped to someone or on an Xray.
Yes it is a crime, yet it happens all the time. The US/Mexico border is one of the most porous in the world, and I can tell you as someone has has crossed it multiple times that I have never been X-rayed entering mexico (they do have an X-ray but the guy manning it is asleep/gone/not interested much of the time). And this lack of X-ray is despite the fact the US border patrol has a SERIOUS SERIOUS hair up their ass for me that results in my long detainment everytime I enter the US (I've never broken a law but there's some weird file in my record that I'm a nefarious agent due to some actions in some 3rd world nations.)
>No, crime is not liberty. It's crime
Transferring and owning crypto is not always a crime. And crime is not necessarily bad. For instance, it is a crime to carry a hand gun in public for defense in Hawaii without a virtually unobtainable license, yet the constitution pretty clearly says the right to bear arms shall not be infringed. The government says servers have to pay taxes on all their tips, yet sometimes ones struggling to get by opt to not pay to fund imprisoning drug users or blowing up brown people abroad. Sometimes "crime" is liberty. In the US crime does not have to have a victim (like moving 100k in cash across the border) so it is not synonymous with a "violation of your liberties" or rights.
>Again you completely ignore Wise as a much better, less volatile solution to the problem.
No I specifically mentioned that to use Wise without fees it's an issue for the unbanked, which is a major problem in El Salvador. I'm glad the plight of the unbanked is "fanfic" to you. We all know the rich legal citizens who are banked have the financial upper hand including in international transactions.
>No the issue with drug legislation is it impinges on the freedoms of average citizens and directly harms them via prison.
We're in agreement here on the root cause, but unfortunately even marijuana is illegal federally despite many surveys showing the majority of the US does not want it criminalized. Even if drugs were legal, I'm not sure a casual crack user would benefit from going to a crack dealer full of broke people that feel they need it to survive ( I don't even feel all that safe going to some gas stations that people constantly ask for gas money at). But yeah I think crack and heroin should be sold off amazon and drug laws do impinge on the freedoms of average citizens, and I don't mean that in a sarcastic way. I don't know why you would rather people buy crack from some street dealer than buy it off an at least superficially vetted dealer on the darknet for whom there are at least reviews stating it's not laced with fentanyl.
> No I specifically mentioned that to use Wise without fees it's an issue for the unbanked, which is a major problem in El Salvador. I'm glad the plight of the unbanked is "fanfic" to you. We all know the rich legal citizens who are banked have the financial upper hand including in international transactions.
You uh, got some numbers to back up your assertions? Unbanked people are un-banked because they don't have money. Do you know of a lot of wealthy folks without bank accounts?
I'm gonna need to see some stats on all of this. Everything you've said is theoretical, hypothetical, and I'm going to need an understanding of exactly how often these scenarios play out. If it's just that, then it doesn't matter.
> For instance, it is a crime to carry a hand gun in public for defense in Hawaii without a virtually unobtainable license, yet the constitution pretty clearly says the right to bear arms shall not be infringed.
It actually doesn't, because if it did, you'd be right, and that law would be unconstitutional.
The point at issue is the "well regulated militia" bit and I defer to the Supreme Court's interpretation. Plus the whole context thing. America isn't a civil law society, its a common law society which means law is subject to interpretation and precedent. The text alone isn't the source of truth. In Quebec, it would be, because their legal system is based on the Napoleonic code. Americas is not. [1]
Anyways, this has been fun - you think crime is good when you personally disagree with the law, I think the law should be respected until changed, and that advocacy is the path. Nobody agrees with all of the law, but it works because we all respect it anyways. I don't think it should be a crime to hold a dead lobster less than 6" long. However, respecting the law is fundamental to a society. If you don't agree, we won't come to terms.
[1] https://www.lexisnexis.com/en-us/lawschool/pre-law/intro-to-...
Likely unbanked people working without any work authorization working for cash can be seen at the hardware store daily where I live. I invite you to come to any major city near a border and see it with your own two eyes. Or maybe they just looked and acted really mexican but didn't want to get a very easily gotten regular job and preferred shit wages by the side of the road? I don't need to "cite" something I have seen with my own two eyes. And do you seriously think illegal movement of hard cash across borders is fanfic? I understand if maybe you live in rich or ethnically homogeneous enclave or are otherwise not exposed to the poors and the illegal immigrants that I see every day; from that perspective maybe it does seem like a distant fiction. Do you really think people working for cash to remit abroad is not a thing? If you do, I admit defeat without so much as a citation.
>I'm gonna need to see some stats on all of this. Everything you've said is theoretical, hypothetical, and I'm going to need an understanding of exactly how often these scenarios play out. If it's just that, then it doesn't matter.
Here ya go![1] Most Salvadorans are unbanked. If your theory that the unbanked are just the people without money (which I dispute below), then it stands that the unbanked are probably most in need of remittance, and get the largest marginal utility from unbanked low transfer cost methods such as crypto (particularly such as LTC and BCH with have only pennies transaction fee).
>Unbanked people are un-banked because they don't have money
Or because they lack documents (even if they are legal citizens). Or because they are an American in a foreign country and no bank there wants to comply with FATCA reporting requirements. Or because they have money, but not _enough_. Or because they have some enemy in government, or lack a permanent address or proof of address. Recently I was rejected for a bank account because I was moving and had no address, despite having good income and assets and a valid passport recognized by the bank and our government as the authoritative identity document. Your view of the unbanked is naive and simplistic.
>Do you know wealthy people without bank accounts?
Not off hand, but there are plenty of Americans with large amounts of unbanked money. Such as this man who had 87k seized by the road side despite doing nothing wrong [3] (he did have a bank account but preferred not to store cash there). You won't have to dig long to find examples of truckers and other folk who keep large stores of cash outside the banking system, that we only know about because their money was seized by some overzealous thief in Blue by the side of the road.
>It actually doesn't, because if it did, you'd be right, and that law would be unconstitutional.
Actually it says the right of the people, not the right of the militia. I live in a state where I can conceal carry without a license. I do it everyday, and guess what -- no one has ever noticed because it makes zero difference to anyone else unless someone tries to fatally hurt me or my family. If I did it in Hawaii the only difference would be if I ever successfully defended myself or my family I would go to jail for exercising my constitutional rights.
>, I think the law should be respected until changed
And if you were in the US at the time of the American Revolution, you'd be left screaming about how it's against the law to fight the British and how we should all just solicit the King for a change. The law definitely doesn't "work" for the many victims of the drug war, the people in jail for having both a joint and a gun, or the many immigrants not quite as lucky as you that have been deported from the country after performing even military service [2].
I think crime is good when there is no victim and it expands liberty. I think crime is good when the law is unjust. I don't think all criminals are bad, and no I don't agree to your terms. There have been a number of successful, well respected, and honorable men who thought the same.
[1] https://www.statista.com/statistics/1011424/el- salvador-bank-account-ownership-rate-type/
[2] https://theconversation.com/deported-veterans-stranded-far-f...
[3] https://www.reviewjournal.com/crime/courts/nevada-troopers-t...
https://en.wikipedia.org/wiki/Informal_value_transfer_system
Average remittance costs for El Salvador are between 1.67% and 4.33%, with the average being 2.85% [1]. Meanwhile, the two Bitcoin ATMs in the country charged a 5% fee.
[1] https://sites.krieger.jhu.edu/iae/files/2021/06/Bukeles-Bitc...
Bitcoin has a max throughput of 7 transactions per second. It's utter lunacy to suggest that it could function as a currency for a country.
This will only end in tears.
That El Salvador is adopting it refutes your second claim.
Then there's the lightning network which increases the transaction throughput.
Everything is going to be okay.
Do you think they are wrong? By how much?
https://www.theguardian.com/sustainable-business/2017/jul/10...
I struggle to find hand wringing about bitcoin's energy consumption as anything but naive or sour grapes.
Society is never going to voluntarily reverse total energy consumption. Either price bitcoin mining out of the market, or focus on voting with your wallet and regulating carbon emissions at the energy production level. Arguing about how people should spend their money on energy is a waste of political energy.
Millions of people believe that bitcoin is worth the energy costs. "Too much" energy usage is entirely subjective.
The question is not if there is a factor that is positive, but whether the positives outweigh the negatives. Every source I have seen is confident they do not.
The claim that consumption of renewable energy is equivalent to consumption of fossil fuels, because that renewable energy would have otherwise offset fossil fuel consumption I don't agree with though.
This would be true only if electrical capacity were completely inelastic. It is not. Electrical capacity is relatively slow to respond to changes in demand, sure, but it does respond.
Consider the scale of the increase in electrical capacity that will be needed to fully move the US alone to EVs. That change will not have a hard cost cap, either - people are willing to pay quite a bit to operate their automobiles, and the current cost to operate an EV is substantially less than the cost of operating a similar ICE vehicle. Bitcoin mining does have a hard cost cap: ([Bitcoin price] * 6.25 + [Bitcoin price] * [~10 minutes of transaction fees]). In about 2024, that 6.25 will drop to 3.125.
Ultimately Bitcoin mining is driven by economic forces, and those same forces are the same that control the scale of power generation worldwide.
You can see Bitcoin’s energy use as being used only to secure the network; I see it as securing the network and driving incentives for the development and expansion of electrical infrastructure.
I’ll go a step further - Bitcoin’s energy use is centralized around the cheapest sources due to economic forces. If renewables are cheaper at scale than fossil fuels, Bitcoin’s energy use could in fact become a net positive for the world.
To put it another way, the profitability of mining is directly proportional to the cost of electricity compared to the global average. This should drive the development of less expensive forms of energy over time. Even if fossil fuels are cheapest today (and I’m not certain that’s true), there is an ongoing cost floor due to it relying upon extraction, processing, transportation, and burning. Solar, for example, has a higher capital cost but presumably a lower ongoing $/kWh.
Finally, ~5% (2.2-13.3%) of electricity generated in the US is lost due to transmission from the point of generation to the point of consumption. India loses 20-30%. [0] Bitcoin mining, given its high power consumption, should specifically drive decentralized power generation. This in turn could help make such technology available for other uses, resulting in a less centralized, more robust power grid.
0: http://insideenergy.org/2015/11/06/lost-in-transmission-how-...
I divested from all PoW coins except ETH in expectation that PoS will be completed soon.
It is if it spurs development of the underlying tech.
Pornography isn’t necessary, but because it was consumed in volume we ended up with ubiquitous household VCRs in the 80s and 90s.
How does that work? For example, if leave a lightbulb on all day long, does that spur adoption or development of renewable energy sources?
Breaking a window isn’t going to be a net positive. If everyone breaks a window and replaces it, every week, at some point it’s highly likely that a more efficient process for window replacement will be developed.
Again, though - we’re not talking about increasing the overall economic output. We’re talking about spending resources to incentivize technological progress.
I’m also not saying it’s a good idea to start doing it because it’ll surely work. I’m only saying that it may well end up having positive effects outside of the primary use case.
Bitcoin miners can respond to energy price in minutes, where most industry is hours, sometimes days (for capacity that already exists - months to years for capacity that does not). Stop/start costs are very low, so its easy to run only in profitable energy conditions.
https://en.wikipedia.org/wiki/Lightning_Network#2021_adoptio...
https://twitter.com/nayibbukele/status/1435197879795212291?r...
https://en.m.wikipedia.org/wiki/Lightning_Network
edit: typos
https://twitter.com/nayibbukele/status/1435197879795212291?r...
Also. Lightning network can give unreliable transaction costs ( eg. When sending to an unknown wallet)
It's weird that everyone is supporting an off chain solution. It kinda defeats the purpose of Bitcoin in general.
While Blockchain can be valuable, Bitcoin is not.
Note : i did hold btc until late 2017.
I am not surprised to see hyperbole like this, but i'm disappointed that they are so routinely upvoted. I've personally used bitcoin for sending money across borders (for legitimate purposes) and never for drugs or money laundering.
Apologies for my reactivity, but i think highly of the HN community and get deeply frustrated that this sort of ignorant hyperbole is peddled and supported.
And let's ignore the actual criminals who legally counterfeit US dollars to finance war all around the world.
The rest still stands.
I've not heard of a legal counterfeiter. How's that work?
https://twitter.com/Rchr2M/status/1435236141112905732 https://twitter.com/david_a_garcia/status/143525911196544614...
Protests:
What security holes? The first tweet seems to be some sort of some sort of app saying it's a virus, and the second seems to say that it collects IMEI information. Neither constitute good evidence of "security holes".
It's leaking and collecting private information.
It would be very interesting to observe, whether they will eventually move to Bitcoin only (if the bull market keeps going) based on Economics history (because domestic market will hoard Bitcoin, causing outflow of USD). And if that happens, would be interesting to observe the other factors (wage and services) deflate as the theory predicts.
You're correct, it's a loose analogy.
> people can instantly exchange one for the other
"El Salvadorans without a bank account (70% of the population) can only convert bitcoin to greenbacks at a bitcoin ATM. At present, El Salvador only has two active bitcoin ATMs" [1].
[1] https://sites.krieger.jhu.edu/iae/files/2021/06/Bukeles-Bitc...
I would predict that people prefer dollars to bitcoins, since they are less volatile.
The U.S. dollar is a transactional currency. It's very good at that. If you're holding value over longer terms and want cash-like liquidity and security, you hold Treasuries, which are inflation resistant.
To my knowledge, this could only be changed through unanimous consensus across the entire Bitcoin network. That’s possible, but practically speaking this would nearly certainly result in a fork.
Is there another way that the 21m Bitcoin constraint could be broken that I’m unaware of?
The theory doesn't predict deflation. Any trade imbalance must be balanced out with an equivalent flow of money in the opposite direction. This means the quantity of money, and by extension the price level, will change according to the balance of trade. Therefore the theory predicts inflation in countries that have a trade surplus, and deflation in those that have trade deficit.
Can someone explain how a country plans to implement a monetary policy (e.g. inject new currency during a recession to fund expansion) when they don’t control their national currency (Bitcoin).
My guess is ppl will quickly cash out to dollars. But how will the dollars get back to the local exchanges unless people are buying bitcoin there?
This seems like a disaster in the making.
To me, it seems like El Salvador should have created a MoneyGram competitor and left it at that. They could remove/reduce commission without all the rest of the risks.
Does El Salvador need a blockchain or crypto? No, of course not. They need inexpensive facilitation of domestic financial services and cross border remittance to reduce currency import drag.
Instead, inept politicians (for various reasons out of scope for this thread) are going to cause a lot of suffering, but it will be helpful to have a case study to point to in order to demonstrate the nation state policy failure. This is worse than being reliant on another country's monetary policy and central bank. You're tying your economy to a speculative asset with few governance mechanisms. C'est la vie.
[1] https://www.vocalink.com/payment-processing/real-time-paymen...
Scenario: I want to send my mom $1,000. That would cost me $200 with a remittance, but it's only $20 with Bitcoin. Success! I send her the $9980. Now my mom has $9980 equivalent in Bitcoin. So she goes to the store. The local grocery store has to accept Bitcoin, so she buys up stuff. Success!
Suddenly the grocery store needs to pay its bills. It pays its suppliers in Bitcoin. Success!
The suppliers' suppliers, who are importing many of these goods from abroad, say FUCK NO and don't accept Bitcoin, they need hard cash. Or perhaps the farmers who grow the crops need to purchase fertilizer from abroad, same story. Okay, the suppliers need to convert their Bitcoin to dollars, piece of cake, right? Suddenly there's a problem: Bitcoin is converted to dollars only when dollars are going to be sent out of the country, and suddenly all of those Bitcoin transactions need to be backed up by USD. USD which never flowed into the country in the first place, because I sent BTC and not USD. Suddenly USD is much more scarce than BTC. That sinks the exchange rate.
Similarly, there is not really a reason that interest rates should be fixed by a central banks. Markets can do that as well.
that's a relatively new concept that hasn't exactly worked out so well for anyone that's ever done it
BTW Panama has been on USD since 1903.
I’d argue that while it remains outside their control, it does change things substantially. USD has effective tools to impact monetary policy; using USD puts El Salvador at the mercy of the US. Bitcoin does NOT have effective tools to impact monetary policy - that’s part of the reason for its existence. That puts El Salvador at the mercy of the Bitcoin network as a whole.
Moving from USD to BTC would be equivalent to saying “it’s better to have no monetary policy than to have a monetary policy controlled by the US”. That’s not what they’re doing here - they’re adding BTC as an option. Doing that means that they have the ability to react (relatively) quickly if they ever reach the point where they no longer trust the US to perform that function.
Monetary sovereignty is a spectrum, with countries having high degrees of MS and low degrees of MS. Since El Salvador pegs its currency to the US dollar it has a low degree of monetary sovereignty.
Having a low degree of monetary sovereignty is the reason countries like Greece ran into so much trouble after the 2008 financial crisis. Greece doesn't control its currency. Where as the US does and it did much better.
Do people use regulated money transfer services (Western Union) or do they use informal trust based money transfer services?
https://en.wikipedia.org/wiki/Informal_value_transfer_system
On the other hand, the power requirements of Bitcoin seem like they make it a very poor choice - both from an ethical point of view and a practical point of view. In the same way that using a foreign currency exposes you to the ups and downs of that currency, El Salvador now has to deal with the operational realities of bitcoin. This seems potentially worse than simply adopting another fiat currency because you've handed over control of how transactions work.
Tying to an already-established commodity, and an exceptionally volatile one at that, seems wildly irresponsible to me, but I'm very VERY under-educated in this area
They have a low degree of monetary sovereignty. I don't know the pros and cons of a country like that adopting bitcoin. But their willingness to take the high risk road to do the experiment will benefit all of us.
A country the like US who has a high degree of monetary sovereignty has a lot to loose and very little go gain by adopting bitcoin. If you believe in Modern Monetary Theory. Given the way things have gone since 2008 financial crisis i believe MMT is the best model available.
Any discussion surrounding adoption of bitcoin should focus on what you gain and what you loose. Because there are always tradeoffs.
I’m a huge proponent of the free market, and opponent of Keynesian economics - but even I freely admit that the US moving to a fully free market system would have disastrous consequences. That doesn’t mean a “fully floating” currency is better; it means that there is a barrier to exit.
There are lots of things in life that are easier to adopt than to abandon :)
That's a drop of 24% in purchasing power.
No, it's not, because purchasing power doesn't scale linearly with M2 money supply.
[0] https://www.commonfund.org/blog/chart-of-the-month-money-sup...
"For excess liquidity to create inflation, it needs to lead to a sustained increase in spending and loan growth. So far, bank lending has been anemic while the global velocity of money and the money multiplier (the ratio of broad money to base money) has fallen more than during the Great Financial Crisis. "
"the secular trends of automation and robotization, declining labor force participation, aging population and high debt levels will continue to suppress inflation over the long-term"
Your claim was:
> It's a drop relative to what it would be if the money supply had not increased accordingly
If the money supply hadn't increased, those secondary effects would not have happened, so any idea that M2 maps linearly to inflation net unrelated climate effects is just incorrect. If you still believe it's true after that explanation, please back the claim with some actual information.
I can't tell if this is supposed to be sarcasm, humor, or merely a hilariously misinformed view of the effect of the pandemic on spending and lending behavior (which apparently you think happened instead due to the change in money supply).
>Sorry, but "all else equal" doesn't, and can never, exist.
Which is my point! As your paper explains, these secondary effects from pandemic and other causes help explain the expression of inflation beyond the money supply effects.
Also, the correlation coefficient 0.15 and an R^2 of 0.02. It means it doesn't explain all variance in the inflation but it clearly influences it.
Finally, your last comments sounds like we actually can have a free lunch.
And re: free lunch-- keep in mind that empirical reality isn't affected by our internal sense of fairness. It is possible that we will find free lunches in our existence. Nuclear energy is arguably a kind of free lunch.
That said, my last comment was specifically contrasting more sustained M2 expansion, or an expansion of a higher order of magnitude. We don't know exactly what would happen then, but there's a decent possibility of high inflation in that case.
I cannot imagine paying for anything with this. How can user experience be compared to paying with VISA, PayPal or anything else?
It is hard for me to understand the logic of it and the only reason that could come to my mind is that some investors don't understand what they are buying.
Seems a bit farfetched, but maybe.
Bitcoin is slow to validate transactions, is environmentally costly, and its value fluctuate, so I'm not sure what they were thinking. I wonder what the 30$ they receive from the gov is worth today after the dip.
This should tell you how good of a choice Algo is for anything. There's plenty other promising POS chains on which devs are actually successfully managing to build stuff on to be focusing on Algo.
Yes, from those I follow Solana would also be my choice if I had to bet because they are already at/close to the point where they can have high tps, low fees, POS, and still be decentralized (more work on that end is needed but now they are nearing 1k validators). They also have built their chain in 2 years which is barely enough time to implement minor changes for competitors. Additionally, they just got the hype/huge investments so they have the users and attention, too.
There are already two HN startups using Algorand: 1) Lofty.AI, which has been a smash hit for tokenizing real estate and making daily income and 2) Algofi, which is S21 and intended for lending.
There's also ANote + Opulous for owning tokenized music royalties, and AlgoGems for NFTs + Yieldly for NLLs, etc. With the recent news that El Salvador will use Algorand for their infra and the $100M+ ArringtonXRP investment fund, Algorand is only getting started. Devs are flocking to Algorand for how easy it is to use the wallet and create unique tokens on a fast and scalable network.
According to their site[0] no, but now they do have a testnet demo. Looking at the demo it's Order Book, not AMM which further makes me think that AMMs are still impossible there while Order Book-style can always be done with some centralization. The docs are sadly one tiny page that has no technical details so I won't dig further.
>What would be the purpose of rushing out tools and smart contracts that need to be verified and routinely cause irreparable damage due to security and bugs?
But they did publish smart contracts. More than a year ago. They also hyped them up, and hyped up a DEX which was supposed to come last October. Some random PR articles from 2020[1,2,3]. This clearly failed quietly despite supposedly smart contracts already being functional then.
>There are already two HN startups using Algorand: 1) Lofty.AI, which has been a smash hit for tokenizing real estate and making daily income and 2) Algofi, which is S21 and intended for lending.
Cool, if I see them working how I see similar dapps working on so many other chains maybe I'll change my mind.
>Devs are flocking to Algorand for how easy it is to use the wallet and create unique tokens on a fast and scalable network.
Are they? I see devs that try and fail to build there, and less devs discussing it than other chains. I see a lot of PR. That's it. Maybe it has a future but it seems much further behind, despite claiming it was already there in respect to smart contract last year. At this point if they catch up I'll give it another look but for now their PR seems to just make claims that don't reflect reality.
1. https://blockonomi.com/idex-complete-rebuild-ethereum-scalin...
2. https://coinpedia.org/press-release/algorand-crypto-hidden-g...
3. https://www.coindesk.com/markets/2020/08/06/idex-raises-25m-...
As if installing a custom browser plugin and managing a wallet thru the browser is convenient for any average user. Lofty.AI is far better than the current crap-dapps workflow. Add the token to your Algo wallet, buy them on Lofty with CC or bank account. Done.
>Are they? I see devs that try and fail to build there
I literally just provided two HN startups that are using it now, including one that pivoted to use it. There's also $50M+ in assets on Yieldly and there is still no simpler crypto wallet to use than the Algorand branded wallet.
He’s on record at a Bitcoin conference saying “BTC is worth x billion dollars, if we can attract just 1% of that to El Salavador as investment…”
https://www.coindesk.com/events/2021/08/31/el-salvador-to-la...
What's likely is they'll end up with wrapped Bitcoin on the Algorand chain and using all the Algo tools.
I can't imagine this going poorly in any way what so ever.
So join me and Bukele in raising a big ol' middle finger to the IMF. [4]
Maybe next they can move to Bitfinex Securities, a Kazakstan corporation, to manage their stock exchange! [5]
[edit] I mean, holy shit, what did I even write? This truly is the dumbest timeline. Well, second dumbest - after all the entire country of Albania got swept up in Ponzi schemes, jailed their finance minister and had a civil war over it. You know what they say about history rhyming. [6]
[1] https://fortune.com/2021/07/26/tether-crypto-bank-fraud-doj-...
[2] https://ag.ny.gov/press-release/2021/attorney-general-james-...
[3] https://protos.com/tether-minted-usdt-stablecoin-crypto-two-...
[4] https://www.france24.com/en/live-news/20210610-imf-warns-of-...
[5] https://cointelegraph.com/news/bitfinex-launches-security-to...
[6] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...
It has the significant disadvantage of adding an additional trust entity (the backing bank) which could prove untrustworthy.
Over a long enough timescale, I would argue that all backing banks have proven to be untrustworthy.
All forms of money have risks. I think the diversification of supporting BOTH USD and BTC seems to get a bit of the best of both worlds.
USD-denominated stablecoins have the union of the risks and disadvantages of both.
Before anyone tells the Salvadorians to export more products... they do... and they do it by working in a country that exports to El Salvador.
Who in America would benefit from fighting this? Crypto is a real industry. It’s more profitable for the financial sector than similar activity in U.S. dollars. And the Fed doesn’t thoroughly love that it has to take international factors into account when its political mandate is purely domestic.
There is the interventionist foreign policy elite, but they aren’t on strong footing right now. The claim that the U.S. is hellbent on preserving the primacy of the U.S. dollar is largely a myth.
Not really. An industry produces goods and services. What does crypto produce?
Money. Jobs. Aficionados. “Real” as in it has political heft.
Exchanges are industry that allows people to trade assets
Well, there would be less immigration from Salvador to the USA so basically people concerned about economic refugees. I don't mean this in a xenophobic way. Balanced trade will improve the conditions in El Salvador and thereby let people stay in their home country voluntarily rather than be forced out for economic reasons.
Could you elaborate, please? It was my understanding (perhaps mistakenly) that because so many foreign entities, be they countries, corporations etc, depend on the USD and it functions both as a reserve and for international trading, the U.S. Federal Reserve can be more aggressive with "dovish" policy.
Or stated another way, if fewer people/institutions held USD abroad, the risk of inflation would be much greater.
Over the long term it is quite foolish because a debt claim against a weaker country will turn out to be worthless.
Reduced El Salvadorian immigration will lead to a debt crisis?
El Salvador exports $2 billion to USA.
Where do they get the money to do that? By working in the US. By sending remittances through Bitcoin or conventional means.
The original claim was the U.S. would want to “lessen the reason people use Bitcoin.” I’m pushing back on there being political will for that end.
If it does turn out to be malicious it’s going to make for one hell of a cautionary tale.