Beyond the Western Bitcoin Bubble
Bitcoin Beach, El Salvador
Earlier in 2021, I spent a couple months in El Salvador at Bitcoin Beach. There, like in most of Latin America, few people are traditionally banked and most lack access to any form of digital money.
El Zonte, also known as Bitcoin Beach, is about 45 minutes from the capital San Salvador. It’s small surf town known for its consistent waves and beautiful sunsets. Over the past year it’s become known as Bitcoin Beach thanks to community organizers who’ve developed environmental, health, and educational projects with the financial support an anonymous Bitcoin Whale (large, early Bitcoin holder) who wanted to promote its use as an everyday currency.
I first began paying attention to this project in March 2020. Bitcoin Beach organizers played a massive role in keeping food on the table of hundreds of families during El Salvador’s severe covid-lockdown. Using Bitcoin’s Lightning Network I was able to send money directly to desperate families. No third party. No global aid organization and inefficient bureaucracy. No delay.
Most people in affluent countries don’t realize that people in places like El Salvador often lack access to financial apps like Paypal or CashApp. Fewer have Robinhood, Fidelity, or brokers to help access stock markets. Bitcoin, however, is a free to use open-source network that cannot discriminate. Right now in El Zonte bitcoin is used to purchase coffee, food, and other goods and services. Of course most people still deal in dollars, but many I met prefer the ease and simplicity of transacting with bitcoin on their phones.
Bitcoin serves as a useful medium of exchange. Additionally, Bitcoin is a store of value. A store of value should maintain, or even increase the purchasing power of your savings over time. The dollar is a good medium of exchange but a horrible store of value. The question becomes how can people save and build wealth in an inflationary environment where a dollar loses purchasing power over time?
There is exponential growth in the number of Salvadorian’s using Bitcoin for remittances because it offers a better user experience and a much lower cost. Bitcoin brings the cost to send money down from a massive 30% to less than 1%. Since remittances make up 21% of El Salvador’s GDP, Bitcoin will contribute Billions to the economy on this savings alone.
El Salvador uses the dollar as their national currency. This simplifies and stabilizes their currency relative to weaker currencies in the region. But it also presents risks and disadvantages. For example, the US can print money for stimulus check and for financing deficits, to the immediate benefit of US citizens, while El Salvadorian citizens receive none of these direct benefits. To their detriment, they face a weakening of the dollar over time as additional money units entering the system through money printing (US Citizens face this issue too).
While Bitcoin is just one tool for helping countries achieve independence and develop wealth, it shouldn’t be overlooked or underestimated by those, particularly on the Left, pushing for more fair and inclusive systems. My next article will address the criticism that El Salvador’s adoption of Bitcoin is Colonization 2.0.
Beyond theories, it’s important to listen to the perspective of those “on the ground” working with on the problems that Bitcoin solves. El Zonte surfer, entrepreneur, and Strike ambassador Roman Martinez was someone I met in El Zonte who recognizes how Bitcoin brings positive change to communities like his.
It’s important for relatively privileged Western commentators to consider Roman’s experience and perception before negatively evaluating Bitcoin or claiming that it’s a “waste” of electricity, for example. To Roman and countless others (including myself) Bitcoin is not a waste- it’s hope.
Bitcoin in Africa
Financial insecurity and oppression are huge problems faced by everyday people in “ascending” (developing) countries. I recently met Kal Kassa, an Ethiopian entrepreneur and all around amazing guy. He’s currently in the US after having fled Ethiopia at the start of their ongoing civil war.
Did you know that in Ethiopia, it’s illegal to hold US Dollars? He told the story of his brother who was jailed for the “crime” of saving in a better currency- the USD. Police found Kal’s brother with a $20 bill in his pocket, and sent him to prison for the crime of saving in a stronger currency.
While some may sympathize with a government trying to protect the value of their currency, we must remember that individuals pay the price in all cases.
Financial privilege comes from living in stable currency systems like in the US (who enjoy world reserve currency status) and Europe. So this is a problem that many have never stopped to consider. But with privilege/power comes responsibility. It would be naive to think that Ethiopian financial tyranny, Argentinian hyper-inflation, or any other monetary injustice is disconnected from the current fiat monetary system. Financial tyranny forces people to save in a weak local currency where debasement, unfair taxation, and outright confiscation are possible.
Bitcoin fixes this.
