According to all metrics, El Salvador is all the rage right now. When the government announced that their citizens and all economic actors are legally allowed to use Bitcoin as legal tender, headlines all over the world reported on the news. But interest in the country is growing steadily since, from articles and features in all kinds of media, to Google interest and searches. The world’s eye is on El Salvador.
People all over the world are searching for information on real state and citizenship in El Salvador. Those are extremely serious topics, even if the search is casual or exploratory. Just look at the spike in these graphics:
— Documenting Bitcoin 📄 (@DocumentingBTC) June 12, 2021
Smile El Salvador, The Press Is Looking
Media outlets from all over the world are trying to figure out President Bukele’s line of thought, long-term plans, and strategy. They’re also struggling to understand Bitcoin, what does it do and how does it do it. They can’t seem to understand what are the advantages and keep comparing it to the legacy financial system in a way that makes the status quo look good.
As an example let’s look into USA Today’s article on Bitcoin Beach:
El Zonte’s mini bitcoin economy 26 miles (43 kilometers) from the capital came about through an anonymous donor who started working through a local nonprofit group in 2019. Supporters of the financial change point to it as a demonstration case for how digital currency could help in a country where 70% of the people don’t have bank accounts.
President Nayib Bukele, who pushed through the bitcoin law, touts it both as a way to help those many Salvadorans without access to traditional banking services and as a path to attract foreigners with bitcoin holdings to invest in El Salvador, which is the first nation to make the cryptocurrency legal tender.
That “path to attract foreigners” seems to be working, if we take Google Searches as a valid indicator. The game is afoot, but it’s just starting, though. We’ll see how this experiment goes.
BTC price chart on Huobi | Source: BTC/USDT on TradingView.com
Do You Even Know About The Lightning Network?
As for the much smaller experiment that’s Bitcoin Beach, USA Today found a way to attack it.
David Gerard, author of “Attack of the 50 Foot Blockchain,” said El Zonte is an artificial demonstration.
At Bitcoin Beach, he said, “the bitcoins are traded inside Strike. They don’t actually move on the bitcoin blockchain or anything.”
Gerard said it appears to work because the bitcoin donor keeps pumping bitcoin into the village’s system. “That’s not a proof of concept that works. That shows that you can trade this stuff if you’re not trading actual bitcoins and someone massively subsidizes it.”
They not only found the one so-called crypto-journalist that despises Bitcoin, but they printed something like “the bitcoins are traded inside Strike. They don’t actually move on the bitcoin blockchain or anything.” The app uses the Lightning Network to process transactions. That’s Bitcoin’s answer to those that say that it isn’t fast or scalable enough.
Related Reading | Summing Up The JP Morgan Report On Bitcoin In El Salvador
In the second layer, the Lightning Network processes transactions. Eventually, the system settles those transactions in the first layer, in the blockchain. Does David Gerard not know this? Or is he being dishonest and muddying the waters? Does he not care about what this means for people in El Salvador?
The lighting network is fast, cheap and works.
LFG El Salvador 🇸🇻 pic.twitter.com/p9IAcX6TtM
— Peter McCormack 🇸🇻 (@PeterMcCormack) June 14, 2021
As for the donor, the article later says:
“Our donor made three deliveries of $40, converted to bitcoin, for each of the community’s 500 families, and they were trained to use the application and now it’s normal to buy with bitcoin,” Martínez said.
Does that sound like a subsidized economy to you?
Plus, look at this picture heavy thread to see what the Bitcoin community is doing for El Salvador:
— Roman Martínez (chimbera) (@romanchimbera) June 14, 2021
Bitcoin in El Salvador, Institutional Backing
The president of the Central American Bank, Dante Mossi, said in a press conference: “Bitcoin is a really big deal for the El Salvadorans, and we’re really proud that they’ve made us part of this new policy.” The conference title was: “In Reference To El Salvador’s Announcement About The Use Of Bitcoin.”
— Nayib Bukele 🇸🇻 (@nayibbukele) June 13, 2021
Featured Image by Eduardo Iraheta on Unsplash - Charts by TradingView