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Source: DeFi Shirasawa Research Institute
The original author | Alex Gladstein，Bitcoin Magazine
Compile the | Shakri
<h2>Lightning fast</h2>
I was standing in a small coffee shop next to an unpaved street, in a Central American village with no traffic lights, which was an hour's drive west along a winding jungle road from the nearest major city.
I walked there from the hotel, passing six restaurants with metal panels and tarpaulin roofs, carefully descending the steep muddy ravine that locals use to get from the main road to the beach. El Zonte (the village) is hot and humid, and the nearby ocean is rough and brown due to the sediments washed into the sea by summer rains.
There are no supermarkets in town, and most of the residents I pass on the street don't have bank accounts. Despite the lack of infrastructure and the fact that it is now low season, the town is still buzzing. There was a feeling of excitement and hope and opportunity that had never been felt before. Something special happened.
Karla, the barista at the coffee shop, had just finished making a delicious cappuccino and was preparing the bill on the tablet on the counter in front of me. She turned around in my direction and showed a digital QR code. I took out my iPhone, opened my bitcoin wallet, scanned the pixelated image, and pressed Send. Less than two seconds later, Karla's tablet flashed green. The transaction is closed.
I immediately paid for my coffee and didn't use the banking system. I actually bought the drink with digital cash.
Like when I paid with a $5 bill, Karla didn't know anything about me in the transaction. No third party can clear my identity, no social engineering program understands my preferences, and the company or government does not have the ability to know my last purchase or predict my next purchase. In fact, better than a $5 bill, we don't have to deal with change.
I don't need to tell any bank or any financial company about my trip to El Salvador. I'm not worried that my credit card won't work. At El Zonte, one can get a glimpse into the potential of the peer-to-peer global financial system. I was impressed by how many merchants accept Bitcoin, how easy it is to pay, and how familiar most people are with the technology.
I wanted to tip Karla, so she pulled out her personal phone and swiped a QR code from her own Bitcoin wallet. I scanned it and sent her $10 worth of BTC, which immediately reached her wallet via Bitcoin's Lightning Network. I told her that if she kept the 25,000 Satoshis for 10 years, she might use them to buy a car in 2031.
Karla has only been using Bitcoin for a few months, but seems to understand that I'm not joking. Like most Salvadorans – even those who have entered the bitcoin economy – she is still unsure of the new currency and still receives her salary in dollars. But she told me that she deposited the tip in Bitcoin, and considering all the factors, it was "worth the risk."
Five days after I spoke to Karla, a new national law in El Salvador came into effect, making Bitcoin legal tender along with the US dollar. President Nayib Bukele's first announcement on June 5, 2021, shocked the world and made headlines.
Many Bitcoin enthusiasts have predicted that one day, the government will start adopting Bitcoin. But most people believe that the state will convert fiat currency into BTC to hold as a reserve of value asset on the central bank's balance sheet. Few anticipated that the first government to officially adopt Bitcoin would use it as a payment network as a medium of currency exchange.
With Bitcoin now becoming legal tender, if their BTC appreciates relative to the U.S. dollar, Salvadorans don't have to pay capital gains tax, they can use it to settle their debts with the banking system. If the government's promotion goes according to promises, they will soon be able to use Bitcoin to buy goods or services anywhere in the country.
However, on the morning of September 7, the day the law was implemented, the voice of suspicion filled the air. Can Salvador's official wallet "Chivo" work? Will the Lightning Network become part of the system? No one knows because the government, led by young President Bukele, left citizens ignorant of the details of the launch.
Just a few days before the law went into effect, I was one of many people who doubted whether it would go smoothly. I certainly don't think the Chivo wallet feature will integrate into the Lightning Network. So, on the morning of the launch day, I was shocked to receive a message from a Salvadoran friend telling me that they had somehow succeeded.
He gave me his lightning address and I sent him $5 BTC. Funds are immediately settled from California to El Salvador, with very little fee, and my wallet prompts that the fee is $0.001. Moments later, my friend used the Chivo wallet to return $5 to me again at almost no cost.
The humanitarian impact that the Chivo wallet could have on Salvadorans is enormous. The country's GDP is 23% dependent on remittances, and the population is more than 2.5 times more dependent on these remittances than the rest of Central America. The funds come mainly from the United States, where more than 2 million Salvadorans live and regularly send money to their families.
On the morning of September 7, the day Bitcoin officially became the legal tender of El Salvador, Bitcoin Magazine reporter Aaron van Wirdum walked into a McDonald's in El Salvador and expected it to be ready to accept bitcoin. To his surprise, when he asked to pay in Bitcoin, the cashier showed him a QR code directing him to a web page with the Bitcoin Lightning Network.
A few days later, Van Wirdum gave another demo when he went to the Chivo ATM to try to withdraw $20. When the QR code popped up on the ATM screen, he took a photo and sent it to a friend abroad, who then paid thousands of miles away with a Bitcoin wallet, and then the ATM "spat out" $20. The only authentication van Wirdum encountered during the transaction was simple text verification, which he verified with a phone number that he had purchased with cash from a carrier in El Salvador. This possibility would surprise any cypherpunk in the mid-1990s.
<h2>Dollarized trauma</h2>
As the Salvadoran proverb says, "Our greatest export is our people." The study points to remittances as one of the main reasons for the decline in poverty in El Salvador over the past 25 years. These migrants account for about a quarter of GDP. It is important that all the time and energy that Salvadorans spend in Los Angeles, Washington, or New York is spent building and serving the United States, not the Salvadorans at home.
In 2001, the Salvadoran government implemented the U.S. dollar as legal tender, a move that quickly replaced the traditional Cologne as its national currency. President Francisco Flores announced the currency transition in November 2000 and implemented it on January 1, 2001, just 39 days later. The country achieved 98% dollarization in just 18 months. The abrupt shift left no room for public discussion and raised suspicions that the move was meant to benefit the elite, not the majority.
However, Silvia Borzutsky, a professor of political science at Carnegie Mellon University who studies dollarization in El Salvador, said the policy "has had an extremely negative impact on the lowest income groups and has not helped the economy as a whole much." ”
A 2002 survey showed that only 2 per cent of Salvadorans considered dollarization to be an achievement, while 62.2 per cent considered it damaging to the country. Another 2002 survey by the University of Central America found that 61 percent of Respondents in El Salvador said dollarization "had a negative impact on their personal financial situation." According to a paper by the University of Central America, "The sector that has benefited the most from the dollarization process is the financial system, which no longer faces the risk that a possible depreciation determined by the political circle will lead to an increase in its payments." ”
Negative attitudes toward dollarization among the Salvadoran people have persisted over the years. In a 2007 los Angeles Times story, a potato seller named Janet was interviewed, who said she used to sell 100 pounds a day but was now "lucky enough to move that much in a week." To quote her, "Life is harder now. The dollar is a curse. ”
<h2>"Bitcoin" village</h2>
Arguably, the story of El Salvador's adoption of Bitcoin began about 15 years ago, when no one had heard of Satoshi Nakamoto.
Salvadoran residents Jorge Valenzuela and Ramon Martinez, who grew up in El Zonte, a seaside village with a population of no more than 3,000 people, told me that young people like them rarely get the opportunity to do something different. Their families have lived in the area for generations, tending property for wealthy landowners in the capital or fishing along the coast.
If it weren't for a social worker who came to El Zonte and planted seeds of inspiration in their hearts, taught them hope, and tried to get them on a new path, their lives might have continued along that path. "We nurtured a dream to change our reality," Martinez said.
In 2006, Martinez and Valenzuela created a program they called "Points of Light in the Dark" to build families for children without parents.
"A lot of kids don't have fathers," Martinez said. "So we created a social structure to solve this problem, through children creating change."
The problem is that a few years ago, martinez and Valenzuela's plan lost momentum as cash flow began to dry up.
In 2019, an anonymous donor promised a big gift to the community on the condition that it would be sent in Bitcoin and used in a loop in El Zonte.
"We don't know anything about Bitcoin," Martinez says, "but we're dreamers and we're going to learn." ”
The first to accept Bitcoin was Valenzuela's mother, whose name was Mama Rosa. In 2019, she began selling Salvadoran specialty pupusas to children in the community through Martinez and Valenzuela to earn bitcoin.
One evening, a group of friends and I walked along the streets of the village to the pupuseria food shop in Mama Rosa. It's a regular roadside business just a few feet from the local highway, but it's a popular gathering place for locals.
We ordered various pupusas and paid for them in Bitcoin. At the end of our meal, Mama Rosa and I sat down and asked her: How did it feel when her son said she should start paying with the magic of internet currency? She thought he was crazy?
She laughed and said, "I don't think he's crazy, but I'm hesitant about currency. ”
She suffered the last time the government made a major adjustment to the currency. When I mentioned dollarization, Rosa's mother made a grimace as if her body was in pain. "We don't want dollars, we want to keep Cologne," she said. After the transition began, she experienced severe price increases. "It's very difficult," she said.
So, at first, she wasn't sure about Valenzuela's plan. But she trusted him and began to accept the new currency, and more notably, she deposited some of it into her phone wallet.
Today, she keeps all her income in Bitcoin. She knew its price was unstable, but had accepted the feature. She proudly pointed to an impressive truck sitting next to the restaurant behind her and told me she was recently able to buy it due to the increase in her bitcoin savings.
She told me she was incredibly proud of her son, not only because he made the wise and sensible decision, but also because he was improving the lives of so many people.
I asked her what advice she would give to her compatriots who were afraid of the Bitcoin law.
She said: "There's nothing to be afraid of. It's just another currency. ”
<h2>Become your own "bank"</h2>
Enzo Rubio is an Salvadoran entrepreneur with a large café in the nearby town of El Tunco. He told me he grew up in El Salvador and moved to the El Zonte region in 2016, mostly for surfing.
Rubio loves the area and opened his coffee shop in El Tunco in 2017.
"I love coffee, but there's no good coffee around," he said.
As gang violence began to decline, a new wave of tourists poured in. El Tunco is much larger than El Zonte, with more shops, restaurants, hotels and more foot traffic.
One of his first customers was Burtey, the developer of the popular Bitcoin Beach wallet, who was visiting El Zonte with his wife and children at the time. They came in on the first day of the café and asked for a few cappuccinos. When it came time to pay, Burtey asked, "Do you accept Bitcoin?" ”
Rubio said no, but he was willing to accept.
In less than two minutes, Burtey helped me set up a wallet and paid me $8.50 worth of BTC. This is my first deal," Rubio said. "Now it's worth about $25."
Burtey then helped Rubio put up a sign indicating that his coffee shop had accepted bitcoin. Rubio says that in the first few months, the bitcoins accepted actually accounted for 10 to 15 percent of his sales. He told me that he was lucky that business was good in both places, so he didn't need to sell Bitcoin. He watched it grow over time in dollar terms.
Perhaps, in different years, the price will go in another direction, and he may panic.
Rubio initially had some concerns about Bitcoin's liquidity, but once he realized that banks would cash dollars for him at any time, he stopped worrying. It is impractical to wait 10 or 20 minutes for a Bitcoin transaction to settle. But the Lightning Network changed the game.
Rubio said the economy of the entire region is indeed recovering. El Tunco's turnover is three times his location in El Zonte, but the latter is now in business at a much larger volume than the former's.
"Point Break Café is now a must-see place for you to visit El Salvador," Rubio told me. Because he was interviewed by Bloomberg and the Wall Street Journal.
However, when I asked Rubio about President Bukele, his tone changed. Rubio argues that the president's imposition of bitcoin on the people is paradoxical.
"Bitcoin is so challenging to government," he said. "So it's surprising that the Salvadoran government wants to bring Bitcoin to the people."
"There are a lot of anti-money laundering laws," he said. "Opening up the economy to Bitcoin is another way."
Rubio said that two months before the bitcoin law was announced, there were even rumors that the government would change the national currency back to Cologne. His mother warned him that they needed to withdraw money from the bank, fearing that the dollar would be removed when the currency was exchanged.
"Bitcoin is about challenging the government," he said. "It's about taking away the government's power to fiddle with our economy, our money, and our savings, not government intervention."
He called the act of forcing the receipt of bitcoins "a big mistake."
He also criticized chivo wallets, saying it "isn't even a government wallet, it's a private company created for this purpose in just a few weeks." ”
Rubio worries that this is a plan to build things with taxpayers' money, and private companies are reaping the rewards.
"It's not regulated by any public body," he said.
Rubio tried to do his part to boycott the government's wallet. He hasn't downloaded it yet, and he'll do everything he can to help people use other wallets.
"The revolution is about being your own bank," he said. "If you're using the president's wallet, you can't do that."