> To warm up a skeptical public, Bukele has promised every citizen $30 in bitcoin if they sign up for a government digital wallet. Ahead of the launch, El Salvador bought 400 bitcoins, Bukele said, helping drive the currency price above $52,000 for the first time since May.
> 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?
The government is going to have to make an official recommendation for which wallet to use, and from their perspective the risk of promoting an existing wallet whose provenance they don't know is pretty high.
The most logical reason is that they want to connect the human identity to the wallet/address, thereby easily removing anonymity and ensuring the government can monitor their population effectively
> There are plenty to choose from now, so what features exactly were missing in those?
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.
This probably eliminates this whole "bitcoin is privacy and independence from government" thing but I think for majority of bitcoin buyers it was not more than just a nice talking point anyway.
I've been watching this situation from 50K feet and I think the reason they built their own wallet is for the ability, for merchants, to cash out any bitcoin payment in USD instead of BTC using the government swap system
Found this interesting deck[1] on El Salvador's digital climate while looking for smart phone adoption statistics. It would appear that there are more than enough smart devices to allow for such a transition successfully. Already on Twitter we're seeing crypto-punks there using Bitcoin to pay for their McDonalds, paying something like 0.000002 Bitcoin. I can't help but wonder what the outcome +1 year / + 5 years will be.
I don't know the exact law in El Salvador, but in general "legal tender" does not imply an obligation to accept as payment in stores, it just means that most debts are discharged if the debtor offers (tenders) to settle the debt using a 'legal tender'.
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.
what an awful waste of energy. Each bitcoin transaction uses the energy equivalent the entire lifespan of a tree. Effectively, each bitcoin transaction is cutting down of tree... in this case, for a hamburger
They are using lightning wallets. So no on chain settling. No (extra) trees were harmed for hamburgers (though obviously opening and closing of channels and initial mining it self is energy intensive).
I think awful is how the banks of the developed world are earning money with the poorest. The fees for remitance make up for a large portion of the el salvadors GDP. The developed world is responsible for climate change, so I guess the poorest have their right to use their money how they want and not in the way some banks or you consider it.
The impact of the lightning network on energy consumption is even neglible...
How do you reach that number? (CO2/block) / (transactions/block)?
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.
Nope. 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.
Bitcoin could be used by the whole world with mining only happening on a laptop. That would not change anything for Bitcoin users.
Fixing crippling poverty a big part of fixing murder. The president thinks that this is their path to leap-frogging into the lead w/ a digital economy and giving people opportunities not linked to drugs and crime.
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.
Yes that'll show those checks notes professionals.
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.
I read the whitepaper around early 2011 if my memory serves right. I remember finding it rather intriguing but also quite far-fetched for the lack of a better word. A whacky thought experiment on how to reimagine money only just after the GFC. Now 10 years later that whacky thought experiment is an official tender of a country. We truly live in interesting times :)
As a country where remittances make up roughly 20% of the GDP, and with remittance fees as high as 20% or more, this could boost GDP by 4-5%. Not surprising to see them be the first to do this. Others will likely follow.
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.
Allowing BTC to function as currency bypasses the fiat conversion at the ATM; so your statement emboldens the argument for El Salvador making it a legal tender.
Well if you include the fact you have to pay 1-2% to an exchange to move USD->BTC, and your $0.50-60.00 transaction fee then wait a day or so, and deal with astronomical FOREX risk in the meantime (like today's 30% instant drop in BTC) suddenly Western Union doesn't look so bad.
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.
What exchange are you using? A major exchange like Kraken charges ~.25% for small traders and lower for bigger ones. You can also buy face to face from someone; if you're lucky someone may need to dump some coin and be willing to trade at par with market.
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.
How are they getting around the very long wait times and large fees for transaction confirmations? I'm guessing the "government digital wallet" is just an account on a government service that changes values in a (centralized) database while holding a bunch of btc under the hood? Or maybe there are private bank options that do the same?
Credit card transactions take 3 days to clear the visa network, but swiping your card to pay for something is still instant. These things have already been solved in the application layer.
The mempool is relatively empty to fees are pretty minimal at the moment. But you are mostly right about holding balances on the app on a centralized database. However they are partnered with large lightning payment providers like Strike to make bitcoin transactions over the lightning network to non-government wallets.
> that its only used for money laundering and buying drugs
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.
Energy use is not energy source. There's been no full accounting of the carbon footprint of bitcoin mining, only its use. Much of it is done using geothermal or other renewable sources. (edit, incorrect)
That El Salvador is adopting it refutes your second claim.
Then there's the lightning network which increases the transaction throughput.
Bitcoin and cryptocurrency in its current form is environmental lunacy. I don't know what problem digital currency solves when the planet can no longer sustain human life due to climate change.
Using renewable energy still takes that opportunity away from other users who end up stuck with X% of their energy use provided by non-renewables, so the real carbon footprint is still similar.
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.
Seems you have really outdated info about Bitcoin, Bitcoin being not fungible is a great tool for analysing/tracking transactions. Money laundering and drugs use FIAT or Monero.
Hundreds of millions in possession of bitcoin maybe, but the number using it for any legitimate purpose is a miniscule fraction of that. The vast majority are in it under the assumption that bigger rubes will come along later to buy it off them.
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".
My mistake, I should have not said security holes. It's leaking and collecting private information. Did you look into the Android Manifest for the virus tweet link?
Merci beaucoup for correcting my mistake.
Readit News
> 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?
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.
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[1] https://datareportal.com/reports/digital-2021-el-salvador
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.
The impact of the lightning network on energy consumption is even neglible...
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.
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Bitcoin could be used by the whole world with mining only happening on a laptop. That would not change anything for Bitcoin users.
Murder good for Bitcoin?
It used to be like that. Now the homicide rate is the lowest in modern history of El Salvador.
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...
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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.
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...
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.
https://en.wikipedia.org/wiki/Informal_value_transfer_system
[0] https://lightning.network
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.
https://en.wikipedia.org/wiki/Lightning_Network#2021_adoptio...
https://twitter.com/nayibbukele/status/1435197879795212291?r...
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.
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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.
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?
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-...
1: https://www.eia.gov/todayinenergy/detail.php?id=23452
And let's ignore the actual criminals who legally counterfeit US dollars to finance war all around the world.
I've not heard of a legal counterfeiter. How's that work?
The rest still stands.
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https://twitter.com/Rchr2M/status/1435236141112905732https://twitter.com/david_a_garcia/status/143525911196544614...
Protests:
https://twitter.com/OscarMachon/status/1435272669189087236
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".