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Bitcoin Government The Almighty Buck

What Happened After El Salvador Adopted Bitcoin as Legal Currency? (foreignpolicy.com) 123

Posted by EditorDavid from the 12-days-of-bitcoin dept.
Foreign Policy magazine explores just what happened after El Salvador adopted bitcoin as legal currency and launched its official government-approved bitcoin wallet Chivo: Chivo launched just after midnight on Sept. 7. The system started failing at three a.m. Server capacity was increased, and app installations were not re-enabled until 11:30 a.m. Transactions failed through the day; customer service lines were jammed; Chivo ATMs ran out of cash. Shortly after ten a.m., the price of bitcoin crashed by $10,000 in three minutes...

After protests on Sept. 6, more than 1,000 people marched on the Legislative Assembly on Sept. 7, jumping barriers placed early that morning to keep them out. One group of protestors set some tires on fire. Opposition politicians attended the day's session in "No Bitcoin" shirts. The protests were not against bitcoin itself. People protested the forced acceptance, the complete lack of transparency from the government, and the dysfunctional Chivo payment system — "people are against how things are being done in the name of bitcoin," local businessman Patrick Murray said....

[T]he Bitcoin Law, and the disastrous launch of Chivo, has frightened the bond markets; El Salvador's sovereign debt dropped almost five cents in a single day, ending Sept. 7 trading at 87.6 cents on the dollar. The World Bank and the International Monetary Fund are already reluctant to supply further funding because of the Bitcoin Law...

Traders were reluctant to accept bitcoin. "I'd rather lose the sale," one trader told La Prensa Grafica. Others didn't trust money they couldn't hold in their hands. Street vendors may not even have phones. Many of their customers are illiterate. Some government offices didn't accept bitcoin payments. Transfers from Chivo to bank accounts were not reliable. The Chivo ATMs didn't work well — one machine had a reported three successful cash withdrawals in a day. Even transfer of bitcoins in and out of Chivo had problems...
"El Salvador's Bitcoin Law Is a Farce," blares the headline on the article, saying El Salvador's system "doesn't work, the currency crashed, and the public hates it."

"Fears of criminals bringing in dirty bitcoins and exchanging them for clean dollars, draining the $150 million trust that was set up as a buffer between bitcoins and dollars, have not come to pass — because Chivo doesn't work well enough."
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What Happened After El Salvador Adopted Bitcoin as Legal Currency? More

What Happened After El Salvador Adopted Bitcoin as Legal Currency?

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  • So... nobody saw this coming a mile away? (Score:3, Interesting)

    by Moryath ( 553296 ) on Saturday September 18, 2021 @10:09PM (#61809397)

    A banana republic government decides to base their currency on a fake currency primarily used for money laundering and pump-and-dump scamming, and they thought it would go well?

    I'm sure Generalissimo and El Presidente made out like bandits by prebuying some bitcoin before implementing the policy, and then selling it at the "dump" point though...

    • Re: (Score:2)

      by Jeremi ( 14640 )

      A banana republic government decides to base their currency on a fake currency primarily used for money laundering and pump-and-dump scamming, and they thought it would go well?

      It would make a good plot for a Marx Brothers movie, if only they were still around to make one.

    • Goes without saying bitcoin is not going to be a good medium for day to day trade in a poor country. It's barely useful for day to day use in rich countries.

      It is also a given that corrupt government officials and their associates are going to be profiting off of this. I'm not so clear how this new type of corruption is going to be more profitable than the old fashioned style of corruption they have been practicing successfully for generations though.

      • Re:So... nobody saw this coming a mile away? (Score:5, Interesting)

        by Moryath ( 553296 ) on Saturday September 18, 2021 @10:48PM (#61809459)

        The primary way people "make money" off of bitcoin or other cryptocurrencies is pump-and-dump manipulation. They buy some of it up, announce they're going to do something that causes a price spike, then sell off before the crash.

        Similar to how Elon Musk last propped his net worth up [gizmodo.com] on a couple occasions by buying bitcoin, announcing Tesla would start accepting it for purchases, selling off, then announcing "oops guess we won't" to let it crash again...

        • The best strategy historically has been to hold it for as long as possible. Nobody is making money off "pump and dump" but I can understand why you believe that.

          • Re:So... nobody saw this coming a mile away? (Score:5, Insightful)

            by BAReFO0t ( 6240524 ) on Sunday September 19, 2021 @02:09AM (#61809651)

            Yeah, sorry, he backed up his arguments and had a verifiable example.
            While you didn't even have an argument. All you had, was a statement. Followed by a personal attack (aka showing us you know you lack arguments), that makes us think you're the one thinking in terms of beliefs, and are projecting.

            Anyone can check that Bitcoin is not a stable market, but pumped (which seems to be half the reason BizX still runs this site) and dumped regularly.

            And mind you that I'd generally love to see a proper cryptocurrency.

            But I'd go further and say the lie or delusion that "mining" would give it value in any way, is the core problem. So it doesn't even qualify for the "belief" argument that keeps traditional fiat currencies from being jokes. It's not just a scam. It's a *bad* scam.

            • GP believes that Elon Musk moved BTC with a tweet, and then sold his position when the price spiked. It didn't happen.

              • Bitcoin? I don't know. But if you think Musk didn't pump-and-dump Doge, for example, then you need glasses and a white cane.

                • He called it a hustle on SNL and the price dropped the next day. Now you're going to say it was a reverse pump and dump or some shit. The truth is he's not holding enough to make it worth his while.

                  • For fuck's sake, the guy's been pumping Doge over Twitter for months, and he wasn't even being subtle about it.

          • Technical analysis works until it doesn't, especially on something without fundamentals.

          • The best strategy historically has been to hold it for as long as possible.

            So you're admitting that it's completely useless as a currency?

          • Re: (Score:1)

            by Anonymous Coward

            The best strategy historically has been to hold it for as long as possible

            That's great if you want to lose 100% of your principal. This is the narrative the Ponzi schemers want people to believe.

            The problem with this premise is that it's mathematically unsustainable.

            The only way to generate a return with bitcoin/crypto is to sell it to someone who will pay more. That person expects to do the same thing, and so-on and so-on. But this requires a never-ending stream of people who have been hoodwinked into

        • Elon Musk = Bitcoin Pusher (Score:1)

          by Anonymous Coward

          Similar to how Elon Musk last propped his net worth up [gizmodo.com] on a couple occasions by buying bitcoin, announcing Tesla would start accepting it for purchases, selling off, then announcing "oops guess we won't" to let it crash again...

          That's why he's called a Bitcoin Pusher [urbandictionary.com].

    • Well all currencies are "fake" by definition...
      Many countries create their own currencies out of thin air, el salvador has its own currency known as "colon" and before that it was called "peso", but because they are a small and relatively poor country so there is very little interest in their own currency.

      • No, most current ones! Not all!
        Currencies made out of materials that themselves hold value, even if nobody believes in them, are "real" by definition.
        It's an application of of "Reality is that, which, if you stop believing in it, doesn't go away.".

        And I don't even mean gold. Because gold, too, would be completely useless to me, unless I had a moron or a chip maker to sell it to. ;)

        E.g. matter-energy and space-time are the most universal real currencies in the universe. They will always be valuable.
        And work

        • Re: (Score:2)

          by noodler ( 724788 )

          So on the one hand gold is not valuable but on the other hand energy-matter, of which gold is certainly a part, is valuable.
          I think you have categorized the world well enough.

        • No, most current ones! Not all!

          There are no currencies today made out of precious metals. None.

          National treasuries are pretty happy about that because when you have intrinsically worthless coins you can make money (a practice called seigniorage) by minting them. Also if you make coins out of metals that have value even close to the face value of the coin you run the risk of commodity price spikes causing the coins to be worth more as ingots, and the coins disappear.

      • Re:So... nobody saw this coming a mile away? (Score:5, Insightful)

        by humankind ( 704050 ) on Sunday September 19, 2021 @11:31AM (#61810641) Journal

        Well all currencies are "fake" by definition...

        Fiat currency is as "fake" as the government that stands behind it. If you have a country that's been around hundreds or thousands of years and whose monetary system continues to work, it's no longer "fake." The dollar has been functioning and stable for hundreds of years. Bitcoin hasn't managed to be functional, nor stable in the 12 years of its existence.

        • "The dollar has been functioning and stable for hundreds of years."

          The US dollar was created in 1914, so that's like 107 years.

          And I suppose if you use the word stable to mean "doesn't go wildly up and down in value", I guess I could concede that. But if by "stable", you mean "preserves purchasing power", then oh, no, it isn't that.

          The purchasing power of the US dollar has dropped over 96% since 1913. That's hardly "stable" in terms of purchasing power.

    • A banana republic government decides to base their currency on a fake currency primarily used for money laundering and pump-and-dump scamming, and they thought it would go well?

      You're just parroting the layman's (and Slashdots) popular opinion of Bitcoin without having a clue what it's all about, how it can be useful in a manner of ways, and probably with no idea that Bitcoin is just one part of the larger blockchain revolution taking place before our eyes, if you dare to look. You never bothered to do some research.

      The problem of El Salvador's Bitcoin adoption is that they went into it head over heels, without proper planning, preparation and trials. It seems completely rushed an

      • Re: (Score:2)

        by bn-7bc ( 909819 )
        Ok here is what I think I know about bitcoin, plz correct me on whatever points I have missunderstood
        - its a virtual currency, up untill recently not backed ore used by any state
        - it canbe mined but due to the way it's designed that boat has sailed fot most people as either the power involved on commodity hw ( this is befor the chip shortage) , or the cist of asics/ high end gpus makes the barier of entry rather high.
        - it's short term vol is rather high comoaredto most other established currencies, maki
    • well, they do not have a central bank and are piggy-backing on the USD. Using internationally-recognized and somewhat adopted BTC infrastructure instead of creating their own from scratch can be a better option. BTC shares a qualities of gold due to hard to obtain nature and ease of transactions, divisibilty (one satoshi is 10 to the -8 of the BTC, compare it to the 1 US cent which is 0.01 of USD) plus cheapness (BTC lightning network has almost zero transaction cost). The only thing it lacks for a trillio

  • Prof. Feynman (Score:1)

    by Anonymous Coward

    Shortly after ten a.m., the price of bitcoin crashed by $10,000 in three minutes...

    Bitcoin Bros: [urbandictionary.com]

    "Bitcoin is 1000x better than Gold!"

    Prof. Feynman:

    " We must be careful not to believe things simply because we want them to be true. No one can fool you as easily as you can fool yourself. "

    • Re: (Score:2, Funny)

      by Anonymous Coward

      Or this one:

      "Be careful when you follow the [bitcoin] masses. Sometimes the M is silent."

      • Re: (Score:1)

        by Anonymous Coward

        Funny thing about BTC, the price only goes up. As more governments move away from the dollar, and that there are only 21 million coins, period. So, because of this, as time goes on and wallets are lost, BTC only becomes more valuable over time.

        It is funny, because the people who gripe about BTC are the ones who missed the BTC train, while the ones who are on it are pretty much set for life.

        • The freaking chart and even the damn parent comment of yours show that that is not true. It goes down all the time.
          You're as deluded as a disciple.

          And mind you that it's still, and will always completely worthless to to everyone outside the cult.
          Enjoy your 51% attack though.

          Cause you can bet your ass that is countries get involved, they are gonna do that to each other. Hell, I will do it if necessary. Just for shits and giggles. It's not like a bot army is that hard to come by.

          • The freaking chart and even the damn parent comment of yours show that that is not true. It goes down all the time..

            I believe the ACs thinking (if it can be called that) is that because the price swings of BTC get bigger and bigger that is a good thing that recommends it as an investment.

            • Re: (Score:3)

              by ceoyoyo ( 59147 )

              Well, if you want to call speculation "investment" maybe. Anything as volatile as Bitcoin is certainly good for speculation.

        • Re: (Score:1)

          by Anonymous Coward

          Funny thing about BTC, the price only goes up.

          Bullshit. It's down ~1% just today.

          Hey, i bought at $60k last April. When is it going up again?

        • Funny thing about BTC, the price only goes up.

          Then why is the current price 5% lower than it was a couple weeks ago?

        • Re: (Score:2)

          by Alcari ( 1017246 )
          That would only be true if the value of all combined bitcoins somehow represented a fixed amount of value. Most other fiat currencies at the very least have the economy of a country backing it, so even if your Zloty is useless for trade, you can still drive to Poland and buy bread. Bitcoin doesn't share that, and is only worth its current price becuase everyone thinks they can sell it for a higher value in the future.

  • Sure there was absolutely some people taking advantage of this to reduce exposure to BitCoin.

    But long term I think this really helps.

    For one thing, as much as there have been protests it will get a lot more average people using the system, and increased transaction flow attracts more nodes to the network.

    It also tests and tweaks the Lightning system on a larger scale than they might have otherwise, improving it pretty rapidly.

    But longer term, this creates a base of stability for BitCoin in a world that see

    • Bitcoin can be many things, but not currency (Score:5, Insightful)

      by raymorris ( 2726007 ) on Saturday September 18, 2021 @11:19PM (#61809509) Journal

      First let me say, I'm not saying Bitcoin is useless. It has its purpose.

      Here they are trying to use it for a very specific purpose - currency. Currency is used for two things. A) as the primary medium of exchange (products for sale as priced at X dollars/pesos/francs), and B) a store of value, you can save up X& per month to buy a car in six months, knowing that a car will cost you 1000&.

      If you're going to price a subscription for 10& / month, you need to know how much 10& is worth. If you're going to save up to buy a car with &, you need to know how many & a car will be worth six months from now.

      Even more so when you sign a 12 month lease for an apartment, or a five year lease for a business location, or for a car. Stable value is the first requirement of a currency.

      That's why the US increased the supply of dollars by 20% last year - so that supply would match demand and the value of the dollar would remain stable.

      Bitcoin is by design astable, and can never be stabilized. If BTC is "doing well" more people will want it. That's higher demand, which means higher prices. Because there is no matching increase in supply. The supply, th creation of new BTC, is preset at a low percentage that keeps getting lower, and cannot respond to demand.

      That's why the price is so volatile and always will be.

      Suppose the price of BTC did stop going up. Then a bunch of people who are currently enjoying the upward roller coaster of BTC would hop on over to the Reddit "short squeeze" strategies or wherever else they think they can make a quick buck, if BTC was no longer rising. People selling BTC means prices fall, since there is no change in supply. What do you think happens when the price of BTC falls for months straight? The longer it falls, the more people pull out, the faster it falls.
      (Same increasing prices cause higher demand cause higher BTC prices).

        BTC has a POSITIVE feedback loop. It can only ever shoot up or shoot down. It can never be stable. A currency requires a compensating NEGATIVE feedback loop, a damper, to stabilize prices.

      • A currency requires a compensating NEGATIVE feedback loop, a damper, to stabilize prices.

        Not so sure about that. Gold has been more stable over history than fiat money, for sure.

        (This isn't as obvious as it might be, since we moderns price gold in fiat money ... the value of gold usually remains pretty stable while the price in fiat money fluctuates a bunch. )

        • Not so sure about that. Gold has been more stable over history than fiat money, for sure.

          Um, you might want to look a bit deeper into that...

        • > A currency requires a compensating NEGATIVE feedback loop, a damper, to stabilize prices.

          Not so sure about that. Gold has been more stable

          Gold has a negative feedback loop.

          When gold prices go down, fewer people mine gold, reducing supply. Mines shit down entirely at times. Reduced supply pushes the price back up.

          The higher the price goes, the more people mine (and sell) gold, pushing the price down.

          I think that if you looked at the purchasing power of gold over the last 50 years vs the purchasing powe

    • If a major terrorist attacks in the US is funded by Bitcoin transfers, Bitcoin will go to zero.

      The US has the power to end Bitcoin any time it likes, it can close all the formal on/off-ramps worldwide (see Iran sanctions). If the only on/off-ramps are physical exchange, Bitcoin dies.

  • But in an echo of the Silicon Valley model—“Move fast and break things”—the government tried to sell speed and totality as an advantage. One government figure said: “We can do this slowly, or we can just put it on the people and people will learn. If they’re forced to do it, they’ll learn and they’ll learn quickly.”

    Shortly after ten a.m., the price of bitcoin crashed by $10,000 in three minutes. Chivo users watched their $30 in bitcoin drop below $25 in real time—a strong practical education in bitcoin’s volatility.

    I'd say they got a quick education on cryptocurrency volatility...

    • It recovered in about a week [yahoo.com]. The typical day-to-day fluctuation is probably a better lesson in cryptocurrency volality.

  • There is no way that anyone with a working brain and doing the bare minimum amount of due diligence wouldn't quickly learn that Bitcoin could never work as a currency for a large population.

    I mean, it could never work in general for hundreds of reasons, but specifically it doesn't scale so you have to use something that isn't Bitcoin first, which defeats the purpose.

     

    • We need a BTC 2.0... (Score:1)

      by Anonymous Coward

      The Lightning Network sort of helps here (although a good DDoS can easily mean a double spend attack), but what is really needed is a true Bitcoin 2.0. Not Etherium, Doge, or one of the many altcoins out there, but something designed from the ground up, maybe with a way of doing a "hard snapshot" of the blockchain every so often, so one doesn't have to parse all 200+ gigs to be sure of a transaction.

      Most altcoins have something new and cool, but what is needed is something that can take the anonymous facto

      • We need something that doesn't store transactions forever, can handle many transactions a second, is easy to mine without ASICs, and has some modern features to ensure trustworthiness, and to ensure a 51% attack doesn't happen.

        Congratulations. You've just described classic, centrally-managed currencies.

      • "Easy to mine" and "decentralized trust" (/trustless) can not be together by any way using current / known tech.

        Even with all that, it's the fact that the originating group/person went missing a long time back which infuses the required confidence in the users.

      • Bitcoin 2.0 is called "Ethereum".

    • Re: (Score:2)

      by Megane ( 129182 )
      The first bad thing about using Bitcoin as a daily currency is how long it takes to clear transactions. Of all the ones out there to choose, it is going to be in the back of the pack, and it's a sign that someone with a PHB-tier brain forced it through without any research.

  • So ... business as usual? (Score:3)

    by Opportunist ( 166417 ) on Saturday September 18, 2021 @11:05PM (#61809483)

    It doesn't work and everyone's required to use dollars instead of the local currency.

    Same as it ever was.

  • A balanced article would have listed some positives of the event (even if they were overwhelmingly outweighed by the negatives).

    But no. It's all just one big horror story.

    Any intelligent person will question the motives behind any completely one-sided story like this...

    Oh, and by complete coincidence, the author of the article has also published a book called "Attack of the 50 Foot Blockchain", which, in his own words is "a sober riposte to all the upbeat forecasts about cryptocurrency".

    Talk about unbia
    • Looks like you would like they ended an article about an air crash, where dozens were dead, like: "But hey, at least it's one less airplane burning fossil fuel and contributing to global warming".

    • Re: (Score:1)

      by Anonymous Coward

      A balanced article would have listed some positives of the event (even if they were overwhelmingly outweighed by the negatives).

      But no. It's all just one big horror story.

      Any intelligent person will question the motives behind any completely one-sided story like this...

      Oh, and by complete coincidence, the author of the article has also published a book called "Attack of the 50 Foot Blockchain", which, in his own words is "a sober riposte to all the upbeat forecasts about cryptocurrency".

      Talk about unbiased "journalism"...

      They did list a positive at the end - since the system for transferring from bitcoin to something of value worked so poorly, the problem of money laundering hasn't materialized.

      That aside, introducing an extremely volatile, high transaction cost "currency" to a country was something everyone would recognize as a disaster - in a low tech country, even more so. A currency should be stable, and when most users are buying it because they think someone else will buy it from them for more real currency - you know

    • Events aren't balanced that way, so you can't write a balanced report in the way you want. There is no upside to disasters like hurricanes, flooding, airplane crashes or economy crashes.

      'Balanced journalism' has its place in discussion-type settings where you can invite proponents and opponents to debate the merits of a proposal.

      • Right. Because optionally allowing bitcoin payments in a country is the same as a hurricane or a plane crash - it killed hundreds of Salvadorians, no doubt.

        The right way to write about this would be to go to El Salvador and talk to the different people involved, gather all opinions, both positive and negative. Preferably, after the inevitable initial problems were resolved.

        I'd bet a whole bitcoin that the author wrote this article from his basement office. I very much doubt he'd be able to find El Salvado

    • A balanced article would have listed some positives of the event (even if they were overwhelmingly outweighed by the negatives).

      But no. It's all just one big horror story.

      Yes. It is a balanced article. You just missed the obvious point: There's no positives.

    • Re:Is this a balanced article? (Score:4, Insightful)

      by Lisandro ( 799651 ) on Sunday September 19, 2021 @05:38AM (#61809903)

      The story is about the rollout of BTC in El Salvador and, yes, from what i've heard from people living there, it's been one big clusterfuck.

      The fact that the story lists no positives doesn't mean it is biased. Maybe they're just not there to be listed.

    • A balanced article would have listed some positives of the event (even if they were overwhelmingly outweighed by the negatives).

      I note that you didn't mention any positives in your comment, either. I presume that's because there aren't any, or surely you would have mentioned at least one to make the point that there are examples to support your argument.

    • There was a scene in "The Newsroom" (the one with Jeff Daniels) where they discussed this very logical fallacy. Not every story has more than one side, not every story has two sides. There is a bias towards fairness that is demanded in reporting. Sometimes a bad idea is just a bad idea. Sometimes a bad thing is just a bad thing. Sometimes there is no fairness because there is nothing to be fair about.

    • Re: (Score:1)

      by danda ( 11343 )

      slashdot editors and community seem to be mostly bitcoin hostile, so no real surprise the article appears here.

    • Re: (Score:2)

      by ceoyoyo ( 59147 )

      Oh, you like the shit sandwich!

      Let's see...

      Bitcoin has a pretty cool name. {insert article here} But despite its problems, Chivo is also a pretty cool name!

  • Whats the problem? :/

  • Chivo means "goat" in Spanish (Score:4, Funny)

    by Hemi Rodner ( 570284 ) * on Sunday September 19, 2021 @05:26AM (#61809883) Journal

    So as they say: "A prudent man does not make the goat his gardener."

  • We're witnessing the saddest self-delusion yet.

    Your track record on most issues is shit. Time to shut up.

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