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Bitcoin Government

El Salvador Plans 'Bitcoin City' Powered by a Volcano, Financed by Bitcoin Bonds (go.com) 69

Posted by EditorDavid from the crypto-cities dept.
"In a rock concert-like atmosphere, El Salvador President Nayib Bukele announced that his government will build an oceanside 'Bitcoin City' at the base of a volcano..." reports the Associated Press.

"A bond offering would happen in 2022 entirely in Bitcoin, Bukele said, wearing his signature backwards baseball cap. And 60 days after financing was ready, construction would begin." The city will be built near the Conchagua volcano to take advantage of geothermal energy to power both the city and Bitcoin mining — the energy-intensive solving of complex mathematical calculations day and night to verify currency transactions. The government is already running a pilot Bitcoin mining venture at another geothermal power plant beside the Tecapa volcano...

The government will provide land and infrastructure and work to attract investors. The only tax collected there will be the value-added tax, half of which will be used to pay the municipal bonds and the rest for municipal infrastructure and maintenance. Bukele said there would be no property, income or municipal taxes and the city would have zero carbon dioxide emissions.

"Invest here and earn all the money you want," Bukele told the cheering crowd in English at the closing of the Latin American Bitcoin and Blockchain Conference being held in El Salvador.
CNN adds some interesting details: Likening his plan to cities founded by Alexander the Great, Bukele said Bitcoin City would be circular, with an airport, residential and commercial areas, and feature a central plaza designed to look like a bitcoin symbol from the air. "If you want bitcoin to spread over the world, we should build some Alexandrias," said Bukele, a tech savvy 40-year-old who in September proclaimed himself "dictator" of El Salvador on Twitter in an apparent joke.

El Salvador plans to issue the initial bonds in 2022, Bukele said, suggesting it would be in 60 days time. Samson Mow, chief strategy officer of blockchain technology provider Blockstream, told the gathering the first 10-year issue, known as the "volcano bond", would be worth $1 billion, backed by bitcoin and carrying a coupon of 6.5% [the annual interest paid on a bond]. Half of the sum would go to buying bitcoin on the market, he said. Other bonds would follow. After a five year lock-up, El Salvador would start selling some of the bitcoin used to fund the bond to give investors an "additional coupon", Mow said, positing that the value of the cryptocurrency would continue to rise robustly.

"This is going to make El Salvador the financial center of the world," he said...

Once 10 such bonds were issued, $5 billion in bitcoin would be taken off the market for several years, Mow said. "And if you get 10 more countries to do these bonds, that's half of bitcoin's market cap right there." The "game theory" on the bonds gave first issuer El Salvador an advantage, Mow argued, saying: "If bitcoin at the five-year mark reaches $1 million, which I think it will, they will sell bitcoin in two quarters and recoup that $500 million."
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El Salvador Plans 'Bitcoin City' Powered by a Volcano, Financed by Bitcoin Bonds More

El Salvador Plans 'Bitcoin City' Powered by a Volcano, Financed by Bitcoin Bonds

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  • And I would invest, but El Salvador seems like a country I really do not trust when it comes to investments. Are the courts legitimate? Are the police? The feds? How good are their financial markets and currency (besides Bitcoin)? There are a lot of requirements and protections that have to happen for investors to feel comfortable that if the investment succeeds, they will be rewarded, rather than taken advantage of by corrupt courts and Justice systems.

    • Re:This is something novel (Score:5, Funny)

      by Rosco P. Coltrane ( 209368 ) on Sunday November 21, 2021 @03:03PM (#62007851)

      The only thing serious I'd invest in that features a volcano-powered city built by a self-proclaimed dictator is a James Bond movie.

      • Re: (Score:2, Flamebait)

        by shanen ( 462549 )

        Mod parent funny.

        And if I wanted to buy lottery tickets, then I would NOT buy them indirectly with wasted electricity trying to win Bitcoins. Always a dumb idea, but now there is way too much competition.

      • "The only thing serious I'd invest in that features a volcano-powered city built by a self-proclaimed dictator is a James Bond movie." - Or maybe Austin Powers. So many people will be hurt by this hairbrained bungle.
      • True, Bonds are not a bad thing to invest in.

      • But why wouldn't you invest in these magic Bitcoin bonds? They can maybe achieve anything! [twimg.com]

      • Re: (Score:2)

        by spitzak ( 4019 )

        I don't know, those things always have terrible problems with the design of their self-destruct systems.

    • They don't have their own currency.

      The legal tenders in El Salvador are US$ and Bitcoin.

      • And both moves are not the smartest. Tying your currency to another country's, even if it's a stable currency, reduces so much of what you can do and puts you at the mercy of another government. You can't print more money, which some people think is a good thing, but it limits what governments can do when there is GDP growth or decline. It's like being on a gold or silver standard again which is not a great thing either.

        For example, right now if California has inflation it means that Alabama also feels t

        • The inability to print money, especially for a small import-dependent country, is a great thing .. it actually reduces the power of government to abuse its citizens. It prevents runaway inflation (Zimbabwe in the 2000s.) Inflation is the biggest stealth tax on the poor. The rich own assets like houses and other property which never go down in value. Governments establish their own currencies as a means to have power over their people. It doesn't help in anything other than fooling people into working for wo

    • Re: (Score:3)

      by fermion ( 181285 )
      What is interesting is that we have not had a lot of investment in geothermal. The recent interest in heat pumps due to heat waves and cold snaps might have increased interest in geothermal heat pumps, but we have not heard much.

      Using bitcoin to fund expansion of energy resources is beneficial. Especially if it is an underutilized resource.

      • Until it turns out that most of that energy ends up being used by bitcoin farmers, and the elite of El Salvador get richer while everyone else is still stuck using candlelight and wood burning stoves.

        • Re: (Score:2)

          by fermion ( 181285 )
          The peasants had no electricity before, and they still do not. But a center requires supporting services, and escalating crime rate often encourage more equal footing. The fact is that now there is electricity in the region, which is hope. When I was a kid, my relatives did not have reliable electricity. Only the elite had a landline. Development meant that reliable electricity became necessary, and the elite required cell phones which became accessible to most. I am not a tinkle down kind of guy, because m

      • My understanding is that geothermal has the problem of not being very commonly available (Iceland loves it) and in some cases, it runs out locally (again, hello Iceland [icelandreview.com]).

    • You can check out a lot of data on the stability of El Salvador here [theglobaleconomy.com], including in particular the freedom from corruption [theglobaleconomy.com] score...

      The scores are decent but even better is that the trend is in a good direction.

      I might invest in this idea, it seems way more feasible than something like the SeaSteading institute, and getting in early on a project like this might be a very good idea as first world countries continue ruinous fiscal policies and a steep slide toward totalitarianism.

      And it looks like you might be

      • I might invest in this idea, it seems way more feasible than something like the SeaSteading institute...

        Sorry, but i have to ask. What exactly are the returns you plan to see from such an investment?

    • Are the courts legitimate? Are the police? The feds?

      Yes. At the end of the war, El Salvador got a new civil police force, and it's legitimate.

      The biggest problem you will run into in the country are gangs, and they are really violent. That puts a huge damper on investment of all kinds.

  • The onion posted this recently: https://www.theonion.com/fanni... [theonion.com]

    The supporters of Bitcoin should be concerned that the stories are probably equally as absurd and plausible.

    • I Intended to connect the idea between Bitcoin and NFTs with a thoughtful, cogent argument. Instead I come off as a non sequitur wielding simpleton. I accept your derision and embrace it.

    • With how accurate past stories from the onion becomes, this one may come true if more crypto products become regulated. 

    • Re: (Score:1)

      by shanen ( 462549 )

      Mod parent "Funny but not really".

    • Re: (Score:3, Insightful)

      by gweihir ( 88907 )

      The onion posted this recently: https://www.theonion.com/fanni... [theonion.com]

      The supporters of Bitcoin should be concerned that the stories are probably equally as absurd and plausible.

      No surprise. The whole crapcoin hype is 100% built on fantasy. Even hot air would have more real-world value. And as soon as the contact to reality is broken, the most outrageous fantasies are taken for fact. There are some nice other current examples were people believe complete crap as if they were not-too-smart 5 year olds. There is, of course, also the long-term example of the fantastical baseless claims made by religion. As we only have around 16% fully rational (i.e. non-religious) people on this plan

  • and when the USA bans it? china may full ban it as well.

    • How exactly do you ban bitcoin?

      • Re: (Score:2)

        by jd ( 1658 )

        You block the main protocol, or you seize control of a botnet and spam the hell out of the blockchain with fake transactions. As long as the number of VMs you cn create on the botnet exceeds the number of legit users, you control what the blockchain sees.

      • Re: (Score:2)

        by gweihir ( 88907 )

        How exactly do you ban bitcoin?

        Lowest level: Making using, holding and mining it fully regulated on the level of a bank. That would already kill it nicely, because fulfilling the regulatory requirements for a bank is both exceptionally complicated and exceptionally expensive. And you need to have it in place and audited before you are allowed to do any transactions. Mining without that would then just be the same as counterfeiting currencies and treated accordingly.

        There are numerous more strict levels including making holding it a crimi

        • Lowest level: Making using, holding and mining it fully regulated on the level of a bank. That would already kill it nicely,

          Just like drugs? Oh you're serious...

      • Prevent people from converting it to cash.

      • Easily. Here's how: Ban the sale of crypto-currency assets, and ban financial services from supporting the sale of crypto-assets overseas. Instantly bitcoin becomes severely impractical to trade: There will be no legal service to turn it into usable money that can also do business with your bank. It's still possible, but the increased risk of dealing with organised crime will put a lot of people off.

        If you need a legal justification to push the law through, just say it's linked to terrorism and child abuse.

      • You make exchanges illegal.

        Suck the hard-cash liquidity out of the system and watch BTC die a steady death. Pretty much everyone "investing" there is just looking for a quick payday.

  • As far as pyramids go, it makes the ones in Egypt look puny

  • "the value of the cryptocurrency would continue to rise robustly." the only ones making money here are the companies and individuals involved at the beginning. The investors? and citizens of El Salvador will be the losers when the shakers and movers split with their gains..

    • Bitcoin may go up for a long time from here. If the US government can't manage inflation, then bitcoin is going to keep going up as long as inflation goes up. How much do you trust the US government?

  • Repeat after me (Score:3)

    by peppepz ( 1311345 ) on Sunday November 21, 2021 @03:45PM (#62007951)
    The only way to create wealth is by producing goods or services.

    • Re: (Score:2)

      by mspohr ( 589790 )

      Wall Street seems to do a good job of "creating wealth" out of thin air.

    • Hard to do that when the gangs are shaking you down. Yeah, they have garment factories in El Salvador, or at least they did. I haven't seen a "Made in El Salvador" tag in years.

        Nobody wants to live in a blood soaked gang state, and the decent people are trying to get out. This leaves just the gangs and crooked politicians.

  • What a waste of human talent, human energy, and the volcano's energy.

    • The country is such a mess, and by that I mean having to worry about being gunned down or decapitated on your trip to the grocery store.

      I really don't know if crypto will solve anything there or if it will just line the rich's pockets even more. Likely the latter. The country is beaten down bad by it's crime problem, and there is no incentive for the politicians who live inside walled and heavily armed camps to change anything there.

      I really have nothing more I can think to say, other than I

  • Just sounds better and better, doesn't it?
  • I guess that as long as people have extra cash, are nervous about their currency and economy, want to make a profit, and know of businesses extremely eager (discount for bitcoin) to accept crypto, then this could turn out well for those investing in it.
  • it shall be known..

  • That would be a good place for a geothermal plant and a server farm, but it would be a very bad idea to have an actual city there (I didn't read the TFA so I'm assuming there is not a major population near the volcano).

      There is the risk of triggering an eruption (likely toxic gas but magma is a risk too) by tapping into the volcano for power and I'd rather be at a safe distance if something does go terribly wrong.

     

  • Keep pushing this snakeoil !!!

  • There will be lots on virgin nerds to feed to volcano.

  • Do you really have nothing interesting to report on ? Bitcoin is a pointless use of energy to produce precisely nothing as a product. This isn't news for nerds, it also isn't stuff that matters (except for the horrendous negative effects). A ludicrous proportion of stories on here now relate to this ridiculous pyramid scheme instead of actual tech, and that's why people don't come here so much as they used to.

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