A Week of Failing to Pay with Bitcoin in El Salvador
reason.com
reason.com
Of the businesses in El Salvador marked on a map as supposedly accepting bitcoin (in bitcoin hotpots like Bitcoin beach), ~1/3 wouldn’t actually accept it for some reason or another.
That said, Bitcoin acceptance in El Salvador was still much better than I expected (perhaps my expectations were too low).
With a bit of planning, patience and persistence it is possible to have an entire trip in El Salvador using only Bitcoin
There were protests around this back in 2022. See https://moneyontheleft.org/2022/07/16/bitcoin-in-el-salvador...
There is usually an "international company" selling the "core technology" at a very inflated price, then there is the required middleman who is THE friend of the government and is in practice the one anointing the "tech company", and finally a government which has No Idea what problem they want to solve.
Remember since launch Chivo had high downtime, bugs and even easy system abuse like stealing people's entry bonuses. And the local Chivo network was an already more reliable than its integration with bitcoin.
The main feature for the target population was to streamline receiving money from their relatives who worked abroad.
The few transactions I've used BTC for have had some hefty transaction fees.. and order of magnitude higher than CC/EFTPOS etc and yes I tend to choose the slowest transaction speed to lower the costs.
For online service.. a $80 purchase costs at least $2.00
For a online purchase for computer hardware I paid over $45 for a $2k purchase.
BTC fails hard in the real world as far as I'm concerned. The little I have left from mining while the sun was up, I'll use for just silly purchases online.
Another issue is that it takes millenias to even onboard every adult to the L2, because every such transaction needs to be done on L1. So ti will take between 15 to 20 years just to onboard everyone on L2 without even doing any other transaction. Same 15 to 20 years to move back to L1 if needed.
Next issue is idiotic architecture of Lighting. It requires people to open a bidirectional tunnel from their L2 wallet to every single peer they will transact with and and lock inside the channel the amount of tokens in excess of all transactions with this peer. You want to buy a coffee - go open a tunnel with a cafe and lock 5$ in it until transaction is completed. You want to buy 50$/m subscription? Open 600/1200/1800$ tunnel to the provider in advance, or open a tunnel for every transaction. And every tunnel creation and every destruction is an L1 transaction, which is limited to 5-6 tps for the whole world.
Then L2 need to solve NP=hard problem for every transaction, and the difficulty will scale exponentially with the number channels.
All this, plus atrocious technical implementation, where a lot of transactions just fail due to bugs and instability leads to the worst monetary system I have ever heard about.
Both are wrong:
1. Lightning has several thousand routable nodes which you can connect to, which means it's not centralized
2. Those nodes have channels between each other, so to reach some target there just needs to be a path between some nodes to that target. E.g. you have a channel from your wallet A to node B, B to C, and C to target. You can do a payment to the target without a direct channel.
The big chains around here will pay the fee, but anything local tacks it on as an extra charge.
The base Bitcoin layer/network is optimised for storing large amounts of value for long periods of time.
The price doesn't care if you're using it to buy a $5 coffee. It cares that businesses and countries use it as their reserve asset.
It has nearly doubled in the past year. Which is great if you're holding it as a speculative asset. Not great if you simply want a stable price "store of value"
Edit: Feel free to downvote or disagree, although if so I'm curious what your definition of "store of value" is and how price volatility factors in if at all.
I put "volatile" between quotes because it's only ever volatile one way: inflating into irrelevancy.
To me it's simple and all that is needed to go is to look at the message Satoshi put in the genesis Bitcoin block:
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
It's a giant middle finger to governments that do always manage, one way or another, to ever print more money and to grow their public debt ever bigger.
That Bitcoin managed to get in this month of October both the FED and the ECB to synchronize publications saying it's time to think about banning Bitcoin shows Satoshi's middle finger worked.
This is still better than a currency which is deflationary by nature, which BTC is.
Deflationary currency doesn't get spent. What fool would hand his Bitcoin over for some bread now, when he could buy twenty loaves of bread if he just waits until the last BTC is mined?
But from a consumer's perspective, deflation is a feature. I don't want to spend my money! I want to save it, and to be rewarded for saving it, so that by consuming less I can also work less.
Why would I hand over my Bitcoin for some bread? Because I'm hungry and need to eat. Otherwise yes, I'll save my money for later, no need for needless and wasteful spending.
If I have to hand over more and more value over time for the same amount of bread (that is easier and easier to manufacture each decade), then "the economy" isn't doing well.
If I hold the scarcest money in the universe, then the bread will get get cheaper and cheaper to me over time. This is a great economy.
I'm not going be sitting around in my riches starving because food will be cheaper next week :-D :-D
1. It promotes El Salvador innovation and is free publicity.
2. Documented that between when El Salvador bought bitcoin and today bitcoin appreciated more than the dollar.
3. El Salvador had to replace its currency less than 25 years ago because it collapsed.
4. The IMF is clearly including bitcoin into its talks with El Salvador https://www.reuters.com/technology/imf-says-bitcoin-remains-...
So I'm going to dismiss this "anecdote" because the plural of reality is not data.
The reason we have cash is (1) we used to not have widespread electronic instant settlement systems and (2) because you still generally need some type of physical fallback system because we energy sources and communications networks aren't always up.
Bitcoin is bad at 1 - 7 transactions per second (something something lightning network), and completely fails at (2) because it can't settle transactions without the internet, and electricity.
Private transactions of a non-criminal nature ?
Legal wagers made in casinos ?
Your imagination is lacking my friend.
Cash enables some illegal activity, but at least for me the benefits FAR outweight the obvious consequences
> There’s little legitimate reason for people to use it.
Cash is “legal tender, for all debts public and private”. Pretty sure that’s a legitimate use.
I never understand this argument anyway. If you can't send funds instantly that isn't because the currently itself can't be transferred instantly - it's because for whatever reason you don't have access to a provider that will provide that service. That's a separate problem and can be solved without having to build an entirely new currency / financial system.
> HSBC...
Also a conduit for illicit trade and money laundering.
Oftentimes it takes up to 5 minutes just for the transaction to begin, and usually more than 20 minutes for the transfer to complete.
Houses prices are also very low compared to 40 years ago if you use Grade A Eggs as your unit of account. So what?
Bitcoin seems like a pretty bad store of value because it's more volatile than most index funds.
If you look at Bitcoin as in game tokens, but one where tokens are given away to people who prove they have burned cash, you see it is a negative sum system.
Even Gold as store of value is questionable. It is a commodity. But we are entering naked empiror territory and I will avoid that hill.
Back to Bitcoin: it is basically a bet on mass adoption. If that mass adoption doesn't happen it is a ponzi. If it does the price should stabilize, even then not sure if it is a store of value.
Disclaimer. I actually own some.
Which is actually happening for more than a decade now with larger and larger player buying some Bitcoin in every bear-bull cycle.
With amazing predictability that you can fit a curve to it for entirety of its existence. What's more, the more money was already funneled into it, the closer the price is to the curve.
If you are lazy you can just look at "rainbow chart" which captures the most basic observation about Bitcoin.
That curve will predict such high price but in year 3400 (I'm guessing, I didn't check yet because I wasn't interested in time horizons that exceed my foreseeable future).
It's a logarithmic curve (albeit on logarithmic plot). For example the bull market in 4 years from the one that we are currently entering will result in just doubling Bitcoin price which is pathetic (even when compared to 5-7x of the current one, let alone past ones). In another 4 years the growth will be even less.
Besides, at some point the random noise in the price signal will mostly overwhelm the shape of the curve and bitcoin will just become like stock market, growing at the glacial pace of economy growth.
Bitcoin is ending, but not in a sense of becoming worthless but becoming another boring randomly walking asset at the price around less than $1mln per unit possibly for entirety of this century.
That general insight of the shape what Bitcoin is that can be inferred from long term prices is also confirmed by plotting MVRV:
https://insights.glassnode.com/content/images/2023/02/07_mvr...
It cyclically heads towards boring.
1. That is a weak argument. None of the prices so far would reault in this clear absurdity. Bitcoin cannot store more value than there is value. I am wrong if the population booms to the trillions, or the dollar crashes like Zimbabwe.
2. Past performance is not indicative of future results. For the past 40 years I have been alive. If you said anytime in the last 40 years I would die tomorrow, you'd be wrong every time. I will therefore live forever. Biology and statistics be damned.
Also see: https://xkcd.com/1122/
It's merely an observation.
> Bitcoin cannot store more value than there is value.
There no hard cap on entirety of future value that will exist at some point in time. And bitcoin growth is slowing down in a way. Same way since the day one. Hence simple fit to a single curve. I have no idea what fraction of value bitcoin will ultimately "store". You can look at gold amd take some guesses but there's no real reason for any of them to be right.
> Past performance is not indicative of future results.
Yes. And this is not an investment advice.
> [...] I would die tomorrow, you'd be wrong every time. I will therefore live forever.
Which is true to some approximation and good assumption to live by. Vast majority of people lives everyday with assumption they won't die tomorrow or anytime soon (for their definitions of soon). Then, if they were lucky they grow old and everybody seeing their decline adjusts their expectations. Where are the signs of decline of bitcoin? Is market cap shrinking? What about transaction volume?
> Biology and statistics be damned.
What statistics or rules of science understood at least as well as biology contradict the working assumption that bitcoin will keep for the foreseeable future its shape that it's been keeping since it popped up?
To answer the last question. First principles. Exponential growth tails off when resources limits are met.
At best Bitcoin takes over all currency usage and the value of it (at some point $ comparisons become useless as it has become more used than dollars) follows human progress i.e. the things we do to trade for bitcoin. There is no reason to believe that the growth rate of all human civ will be as high ad bitcoins break out from Satoshi. And if it is, it has nothing to do with Bitcoin and everything to do with AI. However the future is uncertain enough that we can't pretend this curve is a predictor.
Now my back foot is hurting so lets turn this around.
What are the underlying principles and systems that make your curve predictive?
Isn't it just a factual observation of reality (even trivial one) that you also agree with? Or did you observe something different?
I just stated something. I did not propose argument for anything. I didn't even tell you that you are wrong, only that you'd be wrong if you said it at any moment in the past. I don't find it even mildly provocative. You might still be right right now. It's just very unlikely in my option.
> Exponential growth tails off when resources limits are met.
Do you believe that Bitcoin grows exponentially when I just told you it fits logarithmic curve not straight line on logarithmic plot?
Are you sure you are basing your reasoning on relevant first principles?
> What are the underlying principles and systems that make your curve predictive?
Statistics. Large number of uncoordinated trades so far and large number of capital exchanging hands in various ways, places and contexts makes it unwise to dismiss it as purely accidental and prone to flipping on its head any moment. Global "once in a century" pandemic didn't affect it. Neither associated disruption to global trade nor partial transition to remote work. No political changes. Nuclear power instigating war in Europe didn't affect it. Raise of AI didn't affect it. Evolution and degradation of global economy didn't affect it. Brexit. Trump's win. Trump's loss. Loss denial. And if we are looking at events "closer to home". Countless bankruptcies of crypto exchanges didn't affect the fit. Billion dollars scams in crypto coming out didn't affect it. Bans on mining in leading countries. Forking of BCH, BCC and Bitcoin gold. Invention of stable coins (also NFTs) is not visible on the fit. I'm sorry, but all that makes it super hard to believe that suddenly it's gonna deviate from the fit when it stayed pretty much on track while all other real world and crypto charts were going bonkers due to real world events and trends and whims of the markets.
Some other cryptocurrency could solve all the problems Bitcoin has and it will still be valuable because it was the first one.
So a dollar is a terrible long term unit of account. So if your salary, as your career progresses doesn't raise at least as much as price of gold (or grade A eggs or whatever) you are getting shafted by the economy.
I'm sure there are some other insights you can draw from simple observation of gold and housing prices.
You’re confusing speculation with taking a risk. If people are putting money in a bank with the expectation of profiting from its government guarantee, we’re in a credit crisis. The system is working as intended. Most of the time, the money in there is expected to stay still.
Most crypto buyers are buying with the expectation of appreciation.
I would argue that the risk of bitcoin being a lower value in ten years is tiny, and also that chance of the dollar's value halving or worse over the same period, is almost certain.
You might speculate the opposite.