"Bitcoin is positioned to disrupt the remittances industry in El Salvador, estimated at about $5 billion annually. Most families in towns like El Zonte do not have bank accounts, and rely on services such as Western Union WU +0.5%, which take 5-10% in fees. The closest Western Union is approximately one hour by bus, requiring the recipient of the cash transfer to take the bus back with cash on hand, creating a safety issue." [0]
It's important to note that El Salvador's currency is the US dollar. WU doesn't even need to convert currency. They are simply taking up to 10% from a low-earning demographic group in the US just because they can. Even if bitcoinization itself "fails", if it forces WU to lower its fees it'll do net good.
Among U.S. Hispanics and Salvadorans, the median annual personal earnings for those ages 16 and older was $25,000.
Salvadoran Americans, even those who are poor, have an incentive to send money to family and friends in El Salvador because a U.S. dollar buys much more there than in the States. In all, they send approximately $800 million back home per year—close to $1000 per person
1000 bucks per person is not some exorbitant amount, it's some people's yearly starbucks budget.
Interestingly Bitcoin can’t really “fail” in the conventional sense. It won’t go bankrupt and isn’t beholden to profits. It will be an interesting experiment
I think if it plummeted to fractions of a dollar it would be considered a failure. Especially if they spent millions on something now worth a few dollars.
According to the article, the town didn't even want to use Bitcoin.
An anonymous donor gifted them a large amount of Bitcoin on the condition that they must learn how to use Bitcoin and advocate for the use of Bitcoin:
> After meeting with several philanthropies in the region, all of which wanted to take the funds and convert them into fiat to cover the community's immediate needs, the donor partnered with Michael Peterson, a San-Diego native that spends up to 9 months of the year volunteering in El Zonte. Michael was given the opportunity to administer the Bitcoin on one condition - he would not cash it out. Beneficiaries of the digital currency had to learn how to use the Bitcoin itself, creating a Bitcoin economy
In other words, a wealthy Bitcoin holder gifted Bitcoin to one of the poorest towns he could find on the condition that they don't cash it out.
They basically forced a poor town to use Bitcoin in exchange for free Bitcoin and now try to use it as an organic success story.
Meanwhile whoever donated it is seemingly furthering adoption of it helping solidify the unnecessary increasingly large wealth transfer from later adopters to earlier adopters - a promise where the money is only worth the artificial price if enough of society adopt it to allow early adopters to be made whole again without crashing the price..
So what. That guy helped the poor people, and helped himself even more. However on absolute terms, everyone involved is better off. If you are unhappy on how he did it, maybe you can donate your funds to poor people in a no-strings attached way. I don't see however why that would be much better for society.
This is the same argument Facebook made for giving free internet to facebook.com but charging for every other website
There are hidden costs to economically disrupting developing economies even if it's "for the poor people". For facebook, it was decimating any local ISP growth by snatching their market. For this, there could be any other number of normal payment systems that are squashed even as this BTC patron moves on to pumping bitcoin elsewhere.
> For facebook, it was decimating any local ISP growth by snatching their market
When the hated big guys move, there is always the suspect that somehow, somewhere, somebody else could have done it better, or with less externalities or with less publicity or with less branding or in a way that it's local.
It's not the act itself which troubles people. People will always find a way to hate on Zuckerberg, Bezos, Brin or Gates.
Now that Netscape went belly up everybody suddenly imagines a world where if only Microsoft was broken up then we'd all live in a Jetsons type future with flying cars and tubes carrying us around, all thanks to Netscape
If we dismiss all corporate criticism as just another inevitability, then corporations will run unchecked without any criticism. I'm also not sure what Netscape has to do with decimating a developing country's economic infrastructure either.
It's well known that free models, like those of Tom's Shoes, hurt developing economies more than they aid them, so much that even Tom's eventually switched their model.
> If we dismiss all corporate criticism as just another inevitability, then corporations will run unchecked without any criticism
Who needs criticism when you are in control of B2 bombers? Let corporations play, let them compete and give them free reign, while remaining chill knowing that you always have the last resort option to tame them: violence in the form of B2 bombers
I'd be worried much more about the public officials who are in control of the aforementioned B2 bombers and should use them for the benefit of Americans.
He only helped the poor if the MLM-Ponzi scheme doesn't collapse and the poor aren't left holding the bag - which requires the remainder of society to be stupid enough to be the latest adopters, holding the bag, and then giving up a substantial amount of their buying power - in part because they're now competing with the extra money earlier adopters have because of the wealth transfer. Otherwise the poor then have transferred their actual money to earlier adopters who sold them the Bitcoin at an ungrounded-artificial price - which they're not going to get back and their Bitcoin then is arguably worthless, which it becomes when no one's willing to put more money in - or once there's a bank run and there aren't billions of USD in reserve from large institutions to try to counter a crash of future bank runs.
Also, the person, let's say they bought Bitcoin at $100 - and they gave it to them at $20,000 - then what they gave is 5% of that amount - and the full amount is actually realized/then paid for/"donated" by others; sure they potentially gave up 90% of the Bitcoin if they could have even realized a significant amount of that without influencing the price too much.
You don't seem to understand bitcoin. You're talking about cashing out. Why would anyone cash out from bitcoin? Ok, you get some dollars. What do you do with them? They lose >10% yearly, whereas BTC has gained >200% yearly over the past 10 years.
Instead you hold it. And if you need money you borrow against it.
Likely the poorer people won't be able to save & hold much bitcoin at least in the beginning. But the government can keep their reserves (and pension funds for example) in BTC and thus benefit everybody.
I've had some experience with this myself, although I haven't gotten robbed outside a WU yet; I wrote a little about my Argentine experience in https://news.ycombinator.com/item?id=27448744.
It's important to remember that WU's fees are so high in large part because WU is assuming risks (of identity fraud, of regulatory blockage, and of cash theft) that Bitcoin largely avoids.
WU incurred $41.3 million in "non-credit related losses," which includes fraud in 2020[1] which is only maybe 1% of their revenue. It had another ~$40 million in expected credit losses (primarily from agents), so I think ~2% of the fee goes to losses.
Since their gross margins are consistently 40% and their operating margins are ~20% I think barriers to entry/international government regulations better explains the high fees.
Because you push the government to legislate an alternative on an immediate country-wide level. At their scale they could've been taking smaller profit for many years without poking the bear.
Amazingly shortsighted. The primary beneficiaries of this will be organised crime, who will now be able to wash the Bitcoin via El Salvador to convert it to dollars, which they can use to buy trade items and export the profits.
The number one export of El Salvador is actually people. If they were concerned about remittance fees they could just set up a bank in the US with low fees, instead of getting kickbacks from OCGs and Western Union / Money Gram etc.
El Salvador is set to be a big climate change loser, and every joule spent on bitcoin is bringing them closer to disaster.
"El Salvador has seen a steady increase in extreme events (storms, floods and droughts) during the last 30 years. The Pacific coastline is already experiencing rising sea levels and it is expected that 10–28 percent of the country’s coastal zone territory will be lost by the end of the century. Coastal areas, home to over 30 percent of the population, are highly vulnerable to the combination of sea level rise and El Niño events."
There was a quote recently from a high ranking former FBI agent that worked on money laundering where she said she wasn't really concerned about crypto making money laundering worse (trying to find the article again).
Her reasoning was: "what people need to understand is, 95% of money laundering with fiat currency already succeeds today without getting caught."
In other words, this won't really change much, it was already really hard to catch money laundering.
of course crypto would not help criminal money laundering. Bitcoin and Etherium are very traceable by design. In fact, it is often much, much easier to trace to origin of Bitcoin funds than the origin of USD funds, especially when cash was involved. There are "private" coins like Monero but they aren't getting much traction.
I actually see monero as a kind of lurking beast in bitcoin's shadow, as if it's whispering "Oh, you think bitcoin with it's completely public ledger is bad and dangerous. Why yes, it's very, very bad. Please attack people who use it and show them why they need me."
It's an interesting game that law enforcement is caught in. On the one hand, they want to demonize bitcoin because it's outside of their control. On the other hand, if they attack bitcoin users too strongly, they push people to alternatives like monero that are both outside of their control and legitimately untraceable in system.
I'm not a monero folk and think it has no real world application outside of criminal dealings.
Monero is being used as a currency though which is relevant because bitcoin used to be used as a currency too before the first bubble/speculators got a hold of it. It's critical to any conversation with claims about bitcoin being a great currency (it's not)
I am of an opinion that deflationary crypto (like Bitcoin) can not be used as currency. It should absolutely be used as a store of value (kind of like gold) and as a way to transfer value.
ETH is not deflationary and it is a good candidate to be used as currency.
The characteristics that make Bitcoin unsuitable as a currency right now isn't is deflationary printing, it's that it's unregulated, uncontrolled, and subject to tragedy of the commons (as is seen with the multiple rejected block size increases).
APY on stacking won't be as good as today. I am not sure everyone will stake once ETH2 rewards will be around 1-2%.
ETH2 won't be deflationary because such things is nearly impossible in a PoS network. You need issuance to rewards validators. It can't be network fees because if network fees are high, the network is doom to fail.
Also shortsighted. With increased ability to convert between hard currency and bitcoin it will be more practical for criminals to move large amounts of cash. The overhead of existing money laundering is significant -- the expression "follow the money" exists because it's a useful attack on criminal activities.
Money laundering is one problem; getting a large payment of cash is another, particularly if you're in the business of, say, demanding ransoms. This story was posted recently: https://news.ycombinator.com/item?id=27396804
This weird meme that Bitcoin is so beneficial to criminal activity (especially in comparison with physical cash)... I don't know where it started, but I wish its completely bad-faith nature would die. Sure, the Silk Road started, but the feds have wised up on how to trace Bitcoin since then - it's fairly straight-forward given the public-nature of the blockchain.
I totally agree that Bitcoin should not be primarily identified with criminal activity.
However, I think it's very easy to understand where it started and why it generally isn't in bad faith. Digital currencies (of which Bitcoin is the largest and most well known) make certain types of crimes easier (drugs by mail, ransomware). Those crimes (as they are understood) always involve a digital currency so they feel new (even if they aren't in many ways). Most people don't pay attention to digital currencies so it's not surprising that they associate them with new behavior that doesn't seem possible without them.
I also suspect that, if you were to break down digital currency activity, that most exchanges of goods and services (as opposed to investments) do choose to use a digital currency because it evades some regulatory processes or laws. With the transaction cost of Bitcoin at over $4[1] (down from over $50 recently), I really doubt that people are using it for many exchanges of goods or services where its digital qualities don't enable the transaction in some way.
Edit: added a clarification about ransomware and drugs-by-mail. Ransomware and "darkweb markets" are based on older practices that, to an extent, are distinct because of digital currency. Corporate espionage and ransom demands are quite old, but we call generally call it "ransomware" when the extortion is based on holding digital assets and paying digitally as well.
This is both true and not true. It is true that transactions on the blockchain is public. But it's not true that it makes it trivially easy to identify the actual entities behind those transactions.
The only thing that's actually public are the public keys of the transacting parties. Public keys can be anonymously generated for free. It only becomes possible to deanonymize transactions if the money actually touches a deanonymized terminus.
Even assuming all the fiat off-ramps are properly KYC'd, it still gives the criminal unilateral control to arbitrarily decide when and where to risk deanonymization. You can commit a crime, then wait years for the heat to let up and make sure you're in a safe country without extradition treaties.
You must be joking? There is a trivial way to hide the traces by using mixers. Why do you think ransomware and black markets today exclusively run crypto not fiat?
Also stable value, if I stole $1 million, I'd probably want to bury it in the desert for a few years and then come back to dig it up once the heat died down. With BTC it's a big gamble what it will be worth. Fine to sit on it when the price is going up, but if the price of my ill gotten bitcoins is crashing it might force me to make a stupid mistake and get caught.
So, what you're talking about is a USD market consensus on another currency/entity (i.e. people who currently work with USD primarily arriving at a consensus on the price of bitcoin), run a simulation in your head if you will, something interesting and fairly complex comes up, there's a lot of information asymmetry around it, what do you think happens around the consensus of it as time progresses? (does the information asymmetry decrease or increase?)
We can do this soon in El Salvador (and some pockets in the US too).
The thing is, this is a strange argument, you want a sudden world wide adoption, like, tomorrow every biz owner wakes up and decides to accept bitcoin, so that you can buy your coffee at your local starbucks, have you thought through this? how does the total adoption happen what steps should happen before.
Most criminals are stupid and eventually get caught. Can you show an example of large-scale ransomware where criminal could convert Bitcoin into fiat currency? Most of them store Bitcoin and wait, probably realizing it is not easy to clean that bitcoin. This idea of using mixers is a myth.
Come on, many ransomware packages are quite sophisticated and the operation's run by organized criminals. We're not talking about people impulsively robbing a gas station.
> The primary beneficiaries of this will be organized crime
Michael Morell, a former acting director of the CIA, has some things to say about the use of BTC in crime:
> Based on our research and discussions with industry experts, I have confidence in two conclusions:
• The broad generalizations about the use of Bitcoin in illicit finance are significantly overstated.
• The blockchain ledger on which Bitcoin transactions are recorded is an underutilized forensic tool that can be used more widely by law enforcement and the intelligence community to identify and disrupt illicit activities. Put simply, blockchain analysis is a highly effective crime fighting and intelligence gathering tool.
There's also a strong (IMO) argument that energy-intensive crypto-mining can make renewable energy more competitive, by only mining when renewables are producing excess power. That lessens the problem of renewables creating excess energy (which can be damaging to power grids).
I'm not trying to downplay El Salvador's vulnerability to climate change. But actual solutions to climate change - or even just mitigating its effects - is going to require considerable capital and other resources. If using BTC gives El Salvador an economic advantage, then more power to them.
> There's also a strong (IMO) argument that energy-intensive crypto-mining can make renewable energy more competitive
If this is true then the goal is to create a mining algorithm that focuses on being as wasteful as possible.
> by only mining when renewables are producing excess power.
This is simply not true. There is no such thing as excess power, whatever is not used should be stored or sold to other countries.
> (which can be damaging to power grids).
Excess energy production has always been a thing and there are mitigation efforts in place much better than "lets put a server farm that wastes energy"
> I'm not trying to downplay El Salvador's vulnerability to climate change. But actual solutions to climate change - or even just mitigating its effects - is going to require considerable capital and other resources. If using BTC gives El Salvador an economic advantage, then more power to them.
The problem here is El Salvador is basically burning its clothes to keep itself warm. any cryptocoin would've been a better solution. hell even dogecoin would've been a better choice.
> If this is true then the goal is to create a mining algorithm that focuses on being as wasteful as possible.
This wouldn't be profitable for miners, so the economics of the coin would collapse. Bitcoin is designed to balance these incentives.
> This is simply not true. There is no such thing as excess power, whatever is not used should be stored or sold to other countries.
You don't understand power grids. Electricity is diminished the further it travels over transmission lines. Only fossil fuels like oil can be "stored and sold to other countries", renewables don't work like this. Excess power generated by renewables, and even by some non-renewables, is frequently wasted because (at certain times) it's either not economically feasible to transport it to population centers, or the grid is at full capacity. You can't pump that excess power into the grid or you will break it.
> Excess energy production has always been a thing
Sure, but this is a new solution.
> and there are mitigation efforts in place much better than "lets put a server farm that wastes energy"
Why do you think current plans are better? Bitcoin mining gives a financial incentive to produce renewables as a direct result of the technical details of power grids. You're being awfully dismissive for someone who knows so little.
El Salvador has (and will have) negligible impact on both generation of and popularity of cryptocurrency, so I don't think that argument is very important given the far more pressing matters they have to deal with as a country, and ones they have control over.
The point about opening up a bank is interesting though. The amount of money WU is skimming off the top must be a non-negligible percentage of the country's GDP. There's gotta be a less pie-in-the-sky way to disrupt that without making El Salvador a money laundering haven, which will absolutely happen with this idea.
> The amount of money WU is skimming off the top must be a non-negligible percentage of the country's GDP.
20% of El Salvador's GDP is remittances, and WU takes a 5-10% cut. I don't know how much of that business WU controls, so let's pick a range out of a hat: 75%.
That would imply that WU fees represent something in the neighborhood of 1% of the country's total GDP.
Bitcoin mining is mostly a subsidy to renewable energy (fossil fuels are too expensive to make fossil-fueled bitcoin mining profitable), so although I could be wrong, I expect it to ameliorate global warming, not worsen it.
> fossil fuels are too expensive to make fossil-fueled bitcoin mining profitable
This is incoherent. Nothing ties these prices together. If tomorrow the price of BTC goes up 1000x, the price to buy a joule of energy via burning coal doesn't change at all.
The ratio of joules of energy to bitcoin mined isn't fixed; it's varied to keep the rate of bitcoin mining constant, although not from one day to the next. If the price of bitcoin goes up 20% in the next two weeks, then bitcoin mines that would have been running at a 10% loss start running at a 10% profit instead, which increases the hash rate and then the difficulty. This increases the amount of energy (and hardware investment) needed to mine bitcoin, which reduces the miners' profits, but disproportionately the profits of fossil-fuel-driven miners.
It's true that rapid price changes can make fossil-fueled mining temporarily profitable, and things like burning off flare gas are also profitable, but bitcoin mining is already dominated by renewables and becoming progressively more so: https://hbr.org/2021/05/how-much-energy-does-bitcoin-actuall...
I'm sorry I abbreviated this whole explanation so much in my original post that you ended up so confused.
But that's true for renewable energy too. Nothing about the two energy sources are different.
Either energy prices are decoupled from mining rewards, in which case reduced prices of either fossil fuels or renewables (or increased price of BTC) means more profit for miners or energy prices are coupled to mining rewards, in which case changing prices of fossil fuels or renewables means nothing to miners.
Please tell me why mining does not incentivize cheaper fossil fuel energy technology in the same way it supposedly incentivizes cheaper renewable energy technology.
> that you ended up so confused
I am not confused. I've heard this argument 1000 times. It is bogus.
Well, read through this 1001st version of the argument, and finally you'll understand why it's not bogus! It's really terrible that you've been arguing with such stupid people, because it's not really that complicated to explain why bitcoin mining is a renewable energy subsidy. It's really very simple, although it involves a lot of facts you aren't acquainted with.
> But that's true for renewable energy too. Nothing about the two energy sources are different.
There is one crucial difference: renewable energy is much cheaper. In the quaint units used for electricity trading, solar energy is being typically sold (in PPAs) for US$20–40/MWh in China and India, and every few months there's a new record low price; the latest is US$10.40/MWh in Saudi Arabia this April, but there have been solar PPAs signed for under US$20/MWh all over the world:
By contrast, continuing to run existing coal plants costs around US$40/MWh, and US$50/MWh is a more typical wholesale price.
> Please tell me why mining does not incentivize cheaper fossil fuel energy technology in the same way it supposedly incentivizes cheaper renewable energy technology.
Oh, it totally would! If it existed.
We could imagine a disaster scenario in which someone figured out how to turn coal into electricity at US$1/MWh, and also found a hitherto unsuspected giant coal deposit that can be strip-mined, so the cost of mining is similarly low. Massive power plants would immediately be built, heedless of the vehement protests from other countries as well as the hapless villagers living atop the coal, and bitcoin miners would flock to the province just as they now flock to hydroelectric regions, and just as aluminum smelters have always clustered around hydroelectric dams and geothermal regions. The planet would warm up even more rapidly.
But that isn't the world we live in. With the exception of marginal cases like flaring of oilfield gas† and subsidized pricing, fossil fuel energy isn't cheaper. It's more expensive, and not just by a few percent—100%–400% more expensive. That's a contingent fact—it could certainly have happened differently, just as we could happen to live on a planet with abundant platinum in the crust, and fossil fuel used to be cheaper before we extracted all the easily accessible deposits like sea-coal—but it's still a fact. And it seems unlikely to change rapidly, since the bottleneck in exploiting fossil fuels is the cost of industrial-scale heat engines, which are 250 years old and consequently improving fairly slowly. The Parsons turbine, the mainstay of fossil-fuel electricity generation, hasn't changed fundamentally since 01884, although innumerable incremental improvements have raised its efficiency. By contrast, PV's getting cheaper at a double-digit percentage per year.
So, for bitcoin purposes, renewable energy is interchangeable with fossil-fuel energy, just cheaper. But from the standpoint of renewable energy, bitcoin mining has several unique factors to recommend it:
· It's perfectly portable. Portland cement kilns use a lot of energy too, but we don't see renewable-powered cement kilns in Saudi Arabia bankrupting fossil-fuel-powered cement companies in Mexico, Germany, and Akron, because cement is too heavy (per dollar of value) to be economically transported long distances, and so are the raw materials that make it up. Bitcoin, by contrast, can be sent anywhere in the world in under a second, so the new utility-scale solar plants in Chile and Huanghe are competing directly with the dirty old coal plants in Akron. Guess who wins?
· It's perfectly fungible and not subject to import tariffs. A car factory in Bangalore might survive competition from a more efficient solar-powered auto plant in Shanghai by virtue of making cars that are better adapted to local Karnatakan needs, but there's no such thing as a "bitcoin better adapted to local Karnatakan needs". The UK isn't switching to solar energy anytime soon (its average PV capacity factor is 10%, making local PV uncompetitive there) but people in the UK can easily trade using bitcoin mined in China or Portugal.
· It's very elastic: you can turn a bitcoin farm off in under a second if the price of power goes high, and turn it back on again in a few minutes when the price goes back down. (Try that with a steel mill, or even an aluminum smelting pot.) Moreover, you can load it onto the back of a truck and drive it to a different province if power is going to be expensive for a long time—an ability that has sometimes been abused by hydroelectric miners who drive their farms to regions with underutilized coal plants in the dry season, although that alternative seems to be, if you'll pardon the pun, drying up.
· It doesn't produce pollution of its own, the way cement kilns and paper mills do.
· It's very energy-intensive; the cost of energy is typically about half the total cost of bitcoin mining. An average product of the economy is about 11% energy, so a 20% increase in the cost of energy raises the price of the product by 2.2%. But a 20% increase in the cost of energy raises the price of bitcoin mining by about 10%, which is easily more than your entire profit margin. This means that bitcoin experiences much stronger pressures to seek out cheaper energy than most other industries.
Now, obviously the whole zero-sum competition aspect of bitcoin mining is bad and wasteful, benefiting nobody, and I hope we find a workable alternative soon; but it's fortunate that, at least at the moment, that wasteful competition is subsidizing renewable energy.
Does that help?
______
† Mining bitcoin from oilfield gas that would have been flared anyway doesn't promote global warming, it just makes the gas less likely to accidentally get vented without burning, which has even worse global-warming effects.
BTC is not stored energy because it cannot be converted back to energy and its creation does not increase the amount of usable raw materials available to humanity. And a future where mining is constrained by geography and friendly states absolutely obliterates any decentralization - ruining the only benefit obtained by the outrageous energy cost.
Renewables are obviously not cheaper than fossil fuels in any general sense because we are still building coal and gas plants all over the world for purposes well beyond having flexible energy sources. It is abundantly clear that the problem of transitioning to a largely CO2 free energy system is not a problem of deployment. And even if it was, sucking up the fixed deployment to support ever more BTC mining is harming the transition to CO2 free energy. You've swapped now to "The UK will just not mine locally because they are never going to switch off coal" when the original argument was "BTC adoption will speed world transition away from coal".
If one converts unused 15MW hydroelectric power in Canada to bitcoin, and sends the bitcoin elsewhere, say Japan, couldn't one then buy ~ 15MW of energy? I think that's the sense people mean when they say its a store of energy.
However, I'm not sure that's any different than saying that money (in general, not just bitcoin) is a store of energy. The difference here may be that the remote hydroelectric in Canada may not have had market demand for 15MW extra, thus it would have been wasted had it not been converted into bitcoin; that's something not all traditional moneys can do.
Buying 15MW of energy does not undo the cost to the planet if that energy is produced with carbon. The entire planet needs to drop to near zero total emissions. Something resembling carbon arbitrage does not push towards this goal. Firing up the geothermal generator in Iceland to mine BTC just produces BTC. And more BTC is not a resource that changes the productive behavior of the planet.
> BTC is not stored energy because it cannot be converted back to energy
Certainly not. I never claimed it was. Neither can cement, cars, porcelain, or most other products of heavy industry. Aluminum is an exception here.
> a future where mining is constrained by geography and friendly states absolutely obliterates any decentralization
I'm not sure what kind of future you're imagining here. Are you thinking that maybe Algeria will monopolize world bitcoin mining because it has 0.1% more sunlight than Chile and Saudi Arabia, so its mining costs will be 0.05% lower? That seems unlikely to me.
> Renewables are obviously not cheaper than fossil fuels in any general sense because we are still building coal and gas plants all over the world for purposes well beyond having flexible energy sources
This is in fact not true; having flexible energy sources has been the primary reason for building gas plants for decades (gas is usually more expensive and always less portable than coal), and coal plant operation and construction is being canceled all over the place. Outside PRC, not even enough coal plants are being built to replace those that are being decommissioned, and the coal industry is suffering extreme economic hardship as renewable energy replaces it through a combination of better prices and political programs.
https://www.eiu.com/industry/article/589070442/europe-coal-u... In 02018 European coal power output was 619 TWh/year (71 GW), down 24% from the year before, which probably means European coal generation capacity was about 120 GW; "renewables have been squeezing out coal" and now account for twice as much electrical output (not capacity) as coal.
https://ieefa.org/peabody-energy-flirts-with-bankruptcy-agai... Peabody, the world's biggest coal company, went bankrupt 3½ years ago and is at risk of going bankrupt again; "Coal bankruptcies in the United States have become increasingly common. Cheap gas and renewable power have steadily replaced coal in the U.S."
https://pv-magazine-usa.com/2020/05/28/record-low-solar-ppas... the 1GW San Juan Generating Station in New Mexico is unprofitable because its US$44.90/MWh operating cost is almost twice the average energy price at the Palo Verde Trading Hub (US$26.58/MWh) and three times the price on new solar PPAs (US$15/MWh); not mentioned in the article, but this is also why the 2.2 GW coal Navajo Generating Station, the largest in the US, was just demolished.
Now, there are some places where coal power generating capacity is increasing. PRC built 38.4 GW of new coal power capacity last year. But it also built 48.2 GW of new solar capacity and 71.7 GW of new wind capacity.
Outside PRC, worldwide coal generating capacity fell by a net of 17.2 GW in 02020, while PRC's net coal power capacity increased by only 29.8 GW (so 8.6 GW were decommissioned): https://www.reuters.com/article/us-china-coal-idUSKBN2A308U
This despite the fact that 50% of PRC's coal power generation is unprofitable and there is an epidemic of bankruptcies: http://www.xinhuanet.com/power/2019-08/22/c_1210252090.htm Factors cited include "low electricity prices" and "new energy competition" ("新能源竞"), meaning wind and solar.
(For scale, worldwide bitcoin mining is estimated at 12.5 GW. China used 836 GW of electricity in 02019 and about three times that amount of energy.)
And, as explained in the articles I linked in my previous comment, solar is not cheaper everywhere yet. Polar countries like Germany, the UK, and the Netherlands have very poor capacity factors (around 10% for fixed PV). But the vast majority of the world lives in places with much more sun than that, so for them solar is cheaper. Bitcoin mining, as I explained, doesn't care where it happens.
> You've swapped now to "The UK will just not mine locally because they are never going to switch off coal" when the original argument was "BTC adoption will speed world transition away from coal".
I have not swapped, and I do not endorse your attempted restatement of my thesis. Allow me to clarify.
Today, PV in the UK is not cost-competitive with coal because even though PV modules cost 10% what they did ten years ago, they are still too expensive to be cost-effective in such a marginal region. Also, possibly the UK needs to build more energy storage—not necessary for bitcoin mining, but necessary for some other uses of grid power. What drives the price of PV modules is the learning curve: a 20% price reduction for every doubling of shipped volume. Another couple of doublings in volume, whether driven by bitcoin or (as seems overwhelmingly more likely) just general industry, and we'll get the price low enough to beat coal in the UK too. But not low enough that the UK can mine bitcoin profitably.
This learning curve for PV modules is an empirical phenomenon with vast amounts of data to attest to it, and it's so fast because PV is such a new field that's still in a rapid exponential growth phase. The absence of such a rapid improvement in costs for fossil-fuel technology, and indeed the gradual increase of its cost due to resource exhaustion, is an even better known phenomenon, one which has been central to geopolitics for half a century.
So, I do think bitcoin mining will speed the world transition away from coal, by subsidizing the development of solar panels and solar-panel factories, which drives down the price of energy, although the total effect is small. Although even in China bitcoin mining is not currently a major percentage of total electricity consumption, much less total energy use, it is a percentage with characteristics that have already driven it to be peculiarly dominated by renewable energy, and those characteristics are intensifying. I do not expect bitcoin mining to become such a large industry that its effects on the renewable transition, though positive, will be large. But bitcoin mining definitely moves the world, even if in a small way, in the direction of a world where net CO₂ emissions are not merely small but actually negative.
It is understandable that, since you were unaware of the most basic facts of the situation, you were unable to apprehend the causal relationships in play, and misinterpreted perfectly straightforward points like the ones I was making. Hopefully this quick primer will save you from making such embarrassing errors in the future!
> Neither can cement, cars, porcelain, or most other products of heavy industry.
These are resources. The more we have of them, the more we can do. BTC does not operate this way. If 100BTC exists and if 100,000,000 BTC exists the network functions in the same manner.
> I'm not sure what kind of future you're imagining here. Are you thinking that maybe Algeria will monopolize world bitcoin mining because it has 0.1% more sunlight than Chile and Saudi Arabia, so its mining costs will be 0.05% lower? That seems unlikely to me.
I'm hoping to imagine a future where no nation uses a considerable amount of carbon to generate energy. The claim is that BTC adoption moves us in this direction (though this is later dropped).
> Now, there are some places where coal power generating capacity is increasing. PRC built 38.4 GW of new coal power capacity last year. But it also built 48.2 GW of new solar capacity and 71.7 GW of new wind capacity.
Given that China is one of the regions you mention earlier where glorious cheap renewables are dominating, I think this is a pretty darn important fact. Any increase in carbon use is terrible. We need it to go to nearly zero.
There is still the undressed assumption that deploying more solar lowers the cost but that the same effect is impossible with carbon.
Possibly because they're in New England where the sun barely shines, but more likely because they're totally clueless and going to lose money; that page says they have "a power plant capable of generating over 100MW of clean energy an hour," which is incoherent; power plants don't generate more megawatts of energy if you run them for more hours. New York is not really a well-known bitcoin mining hotspot, and for good reason. Though I guess the state does have Niagara Falls.
Still, who knows? Maybe they have some kind of tricky angle on the problem, like using bitcoin mining to convert earned income into capital gains in order to evade taxes, which might make their clients money even if the actual operation is unprofitable.
> When you are in El Salvador you use actual, physical US Dollars for all cash transactions. This is not a de facto standard as in some other countries - it is the official legal currency in the country.
El Salvador has very strict cash regulations. Most transactions over $100 in cash require an ID. Even paying for a new laptop in cash would require you to fill a form stating source of income.
The price of bitcoin determines how miners get paid, which determines how much energy they can (and rationally should) spend on mining.
This news appears to have spiked the price of Bitcoin.
Presumably, if El Salvador actually implements this policy and starts using Bitcoin that would also increase demand for Bitcoin and increase its price.
Additionally, a full bitcoin block with high fees pays for more mining expenditure than an empty one. So if there is high demand for block space, that also can increase mining energy usage.
As they use lightning network the reasoning that there will be high demand for block space is not a valid assumption. Theoretically, it is possible that the government of el salvador is doing a single transaction on the blockchain as channel funding and sends bitcoin via lightning to 6,4 million people from el salvador from that channel without touching the blockchain...
Block space isn't the point. The price of a Bitcoin is. Raise the price, and mining will naturally spend more energy on it. Therefore, anything that raises the price of Bitcoin contributes to Global Warming.
Price of bitcoin * total block reward (new coins + fees)
The total value of the miner reward does increase with price, but because of halvings every 210,000 blocks it's a slower rate than the price increases on its own.
Note here, https://www.blockchain.com/charts/miners-revenue, that the current miner reward (in USD) is currently lower than it was at the peak of the 2017 bull run, despite the unit price being approximately double.
Except that's not how it works. This adoption has a massive impact on acceptance of Bitcoin. If we assume Bitcoin is a mistake for humanity - this clearly is a great wrongdoing. A smaller wrongdoing would be buying Bitcoin, holding Bitcoin or making positive comments about Bitcoin on HN. Sadly, all these are economically justified (for now).
An empty bitcoin block and a full bitcoin block use the same amount of energy
Your dissertation seems to be unrelated to this conversation. Your topic sentence says “thats not an argument.” Or “thats not how it works” and proceeds to not disprove that at all, derailing every conversation with something completely unrelated
Isn't it pretty awesome that as a bunch of environmental activists, we are ok with golf greens and almond exports? Ok with tankers which spill oil by the lake-full and intense deforestation? But when it comes to proof of work crypto - suddenly it's a veil of FUD?
How can you find fault with someone trying to make more money? This is capitalism at work. Not saying the energy argument for crypto is moot, but it is certainly blown way the heck out of proportion. Let's regulate lithium mining while we are at it, no?
Economic advantage is a like gas in a vacuum, it will spread everywhere it can, until it cannot.
Many things in the world use a lot of energy, even inefficiently.
But it's hard for me to think of another thing that makes a worldwide competition for who can waste the most energy, with a massive crowdfunded prize every 10 minutes, and the crowd that has paid into the system to fund the prizes so far wants me to join in funding it so the prize can get bigger.
Edit: for example, take Cathie Wood's claim that Bitcoin will be worth $500,000. If that happens before 2024, that would make the reward for the winner of the useless-hashing race $3.1 million plus change, every 10 minutes. Awesome!!! That kind of money can buy a lot of useless-hashing ASICs and energy to run them. The smart miner had better spend most of it that way, just to be able to keep up with the others in the race.
The appropriate answer (widely accepted by economists [0]) is a carbon tax and dividend, such that the externality is assigned a proportionate price signal. This additional price burden would be factored into the Proof of Work, and might provide additional incentive to migrate to Proof of Stake, or a low-energy Proof of Work algo. (This might eventually happen anyway, due to competitive pressures of transaction costs).
We can argue until the cows come home about which energy expenses increase human well-being, and which are “wasteful” (Adam Smith hated opera and thought it was a waste of money), but the only fair answer is to ask individuals and firms to pay their fair share proportional to usage, be it crypto mining or cloud marketing analytics or Christmas lights.
Truly an exemplary level of delusion. I marvel that people are able to function day to day in society while having deeply held views that are so divorced from reality.
An empty bitcoin block and a full bitcoin block use the same amount of energy
I wasn't commenting on whether use of the network makes it more attractive to compete for increasingly scarce bitcoin with sustained or greater use of energy
Its not that hard, just imagine you are taking a standardized test, the accurate answer is the one you choose
> If they were concerned about remittance fees they could just set up a bank in the US with low fees, instead of getting kickbacks from OCGs and Western Union / Money Gram etc.
Can you elaborate? With remittance there is people with physical cash in tens of different local currencies and countries, and they need to transfer that value to some other (obscure) country. I don't see any scenario how "just set up a bank in the US" is going anywhere near in fixing that problem.
Most of the money is coming from El Salvadorians in the US, and as El Salvador uses the US Dollar as currency, that would be fairly straightforward. Even from, e.g. Mexican pesos, it would be simple because the USD is the destination currency. It would be a different proposition if we were talking about, e.g., Indians.
My take is that El Salvador may actually want the flow of money laundering through their banking system. And it gives them an opportunity to seize some of it.
The idea of increased remittances is interesting but the logistics of doing that on the ground might be challenging for the unbanked.
Using Bitcoin for money laundering and crime is probably one of the worse ideas... I mean an open public ledger that tracks everything - makes job of FBI easier as skills improve.
Let's take drug money as an example - the solution here is to legalize and control substances, not criminalize them and then ban something totally unrelated (blockchain technology). This is patching a symptom rather than fixing the root cause which never works out.
And most importantly, withholding blockchain technology is not a solution to money laundering - it is happening already with legacy systems.
Fixing money laundering is not the priority here - we can look at fixing this later in our journey.
El Salvador doesn't need to establish mining operation to leverage this new legal tender, anymore than Ecuador (or others) have to print USD for their own economies. countries that use large quantities of dollars do need to regularly import/export USD notes though
Not gonna lie, all this makes me want to move to El Salvador now. Strongly considering incorporating my SaaS there now but have to look further into it, but interest is definitely piqued.
To give some technical background: yes, using Lightning (as they seem to do) for affordable BTC payments is challenging for most. As far as I am aware that is why they rely on custodial solutions [1]. People hold their money with someone from their village they trust, which is not ideal but neither is being unbanked. Down the road I could easily see this trust being spread over multiple people using multisig wallets.
The amazing thing about all this is that everyone can become a BTC "bank". You need a bit of capital but orders of magnitude less than a normal bank would require, maybe 2k$ to get started of which you might spend 400$ on hardware and fees to open some channels. The trustless nature of lightning lets you and your users then join the global payment network without asking for permission from anyone and you can engage in commerce internationally.
I think, while we are still early, that this is an awesome experiment. It will highlight the UX problems so we can fix them. Hopefully at some point all this will make sense to the average westerner too, so we can finally have a money not controlled by anyone (states, incumbent banks) again. But that might take a long time.
I've always said that the most productive use of the state in response to bitcoin is by helping make better UX, protocols, optional smart contracts for industries (no different than little stickers on plastic bottles or electronics, but way more useful for builders and consumers alike).
I am salvadoran myself and I do not support the current president but I should say that the law passed by congress says that El Salvador will have it's own bitcoin reserve and an exchange for bitcoin against USD (our current national currency), so there will NOT be a transaction fee involved as you are just moving within a national reserve with a national exchange.
> so there will NOT be a transaction fee involved as you are just moving within a national reserve with a national exchange.
For buying and selling Bitcoin, possibly. Transactions with Bitcoin will still have the usual transaction fees, as you still need to pay the miners verifying/realizing them.
LN requires opening and closing channels, each of which have to be done as a regular Bitcoin transaction. The value proposition of LN is that repeated transactions with the same entity (or some subset of) can be done without high fees, but considering almost nobody is currently using LN that doesn't change things right now.
LN now has routing, so you can open a single channel with a well-connected node and transact with everyone. They will charge you a fee for this, but it is on the order of 1/100th as much as a regular bitcoin transaction.
Still all sounds really complicated, obtuse and unnecessary. They should've went with a cryptocurrency which is actually usable out of the box as a... currency.
Why? Are you saying that countries should start adopting a crypto with a market cap of barely 1B$, that's been around for a less amount of time, that's significantly less battle tested and that never recovered to it's all time high value?
Do you think that the only thing that matters for crypto is speed and fees? You don't think trust/security/decentralization have any value?
Bitcoin chooses trust and security above everything else, as it should. Then you can have layers on top where you transact at the speed of network packets.
Routing in LN has a bit of a problem where sometimes it can't find a route though. My understanding is that it's an NP complete problem and it's approximation in practice leads to the dreaded "unable to find route" problem.
Is it possible to calculate the transaction volume in BTC over the lightning network, or is the ledger non-public in the same way that Bitcoin's is?
If I understood the Satoshi paper right, after the block reward is exhausted the network's security depends on transaction fees being high enough to sustain a strong level of security. If Lightning brings transaction fees down, is that not a threat to the security of the network as the block reward becomes smaller?
LN doesn't reduce on-chain Bitcoin transaction fees, but instead attempts to move most of the transactions off-chain. With LN you would open a channel using an on-chain transaction, conduct any number of off-chain transactions in that channel, then "settle" the channel by closing with another on-chain transaction.
There basically are two different views currently on the future scalability and funding model of the network.
The LN/small block view is to keep that layer limited and small and build on top of it and the idea is that with such limited transaction volume these "settlement" transactions will eventually cost a lot. I don't really see this working since to compete with block subsidy rewards you would need very costly transactions.
The big block or "Bitcoin Cash" view is to scale the block size up and eventually you will have very high volume of on-chain transactions.
> I don't really see this working since to compete with block subsidy rewards you would need very costly transactions.
This seems to suggest that miners dictate the reward they get, rather than miners are forced to adapt to the reward they are offered.
There's no required amount of energy used for mining and miners are offered 0 guarantee of reward. Mining difficulty automatically increases and decreases depending on how profitably miners can operate. If the reward drops to the point that a miner using expensive coal can't compete with a miner using cheap solar, then they simply go out of business and hope they can sell their equipment to someone who can still turn a profit.
> This seems to suggest that miners dictate the reward they get, rather than miners are forced to adapt to the reward they are offered.
Miners don't dictate the reward they get. The subsidy is the "block reward" that started at 50 BTC and halves every 4 years, which is currently at 6.25 BTC - it will be halved again in a few years to 3.125, etc. Blocks are as full as they can be right now and rarely get to the 1.0 BTC mark, so basically if you want the transaction fee market to pay for blocks without increasing the size you'll need to pay close to 6X to 10X higher fees than the current price.
> There's no required amount of energy used for mining
This is true and actually the difficulty can decrease, but none of that changes how many transactions can actually fit into a block.
> Mining difficulty automatically increases and decreases depending on how profitably miners can operate.
Mostly accurate. Mining difficulty decreases if a block took too long to mine. There are lots of scenarios where mining difficulty could get easier - most of which don't seem plausible right now though.
If you run a node on lightning, you would know how much transactions you've forwarded, so you can make estimates, especially if you run a large node (say Bitfinex that runs their own nodes), but lightning isn't public the same way blockchain is.
The 1MB block limit makes it highly likely that there will be transactions in the mempool, you still need to open/close channels (even batched ones) and presumably large transfers for cold storage still happen on the blockchain, but then again it's very difficult to say what happens in year ~2140, we'll all be long gone by then.
At those time scales, it's pretty difficult to predict anything imo. That said, Bitcoin has been declared many times before and it'll continue to be predicted, it always comes back stronger.
It is also only 2140 if you believe that the market cap can double with the halvening schedule every four years. I see the upper bound (around gold market cap) in 3-5 halving cycles. After that the majority of the security has to be financed by tx fees
Miners will get an exponentially decreasing amount of block rewards until 2140, but even 20 years from now the (BTC-denominated) size of the block rewards will be substantially lower than they are today.
The price matters because they are BTC-denominated. If the price of Bitcoin doubles every 4 years, the security of the system can stay at parity with what it is today (assuming the real value of transaction fees stays roughly the same).
That doesn't make any sense, the channels are p2p, you can open and close channels with whoever you wish and your channel counterparties don't actually hold your funds, you hold them.
So "off chain" means LN holds the BTC in some other data structure then batches it up as one big transaction? Kinda like how a broker covers small retail trades until they hit enough volume to register an NYSE trade on the floor? Is that how it works? If so , this means lots of BTC is tied up in LN ... that seems dubious as heck.
It's not entirely off chain. It's hedged in that a transaction is created sending X BTC between us, we repeatedly update that transaction off chain every time we move small amounts of money between eachother, then after Y days we submit the final transaction to the blockchain to resolve the total amounts.
The idea being if one of us starts to be uncooperative, the other can just submit the transaction at its latest state so that we don't lose anything except that last update that we disagreed upon.
Most of the examples of Lightning that I've seen involve frequent transactions between small numbers of parties. How would this work in a retail transaction? For example, if I want to buy a cup of coffee from a shop that I visit infrequently?
My understanding is basically there's routing and there will be centralization of channels to some extent. One way to think of LN is that it is a wallet/debit card of sorts. You transfer some amount of BTC to a Lightning channel and that becomes your wallet. You can transact with that wallet quickly/cheaply but there's always the ability for that channel to be closed and put back on the chain with the last balance in the case of disputes etc..
But as you said, coffee shop needs some path to you to make that feasible. So then you get BTCVisa (c) or whatever, which is a channel provider that has built a network of channels open with lots of vendors. If you open a channel with them then you get to benefit from getting to use the wallet you already have. There is cross-channel routing of course so maybe that doesn't happen but it seems like a natural result.
LN is neat in concept, but I'm not sure I really see the point compared to Bitcoin cash or the like that just say scale on chain. I guess we'll see.
It forms a network, where transactions are routed between LN nodes/channels. You have to be in the same graph with the coffee shop. If there are small separate subgraphs, they can be connected by one common node, such as an exchange.
So, most likely the coffee shop has just one or a few channels open to popular exchanges or dedicated LN services. You open a channel either directly or indirectly to the same exchange / service.
You have onchain BTC, and you can decide to put them in a LN channel with another party (this causes an onchain transaction)
You and that party can now transact freely between each other with no fees, but if that other party is a gateway, it can route payments through it and through other gateways too, and each of them charge fees for routing.
Once any of the parties decide to close the channel, is when a new onchain transaction is created with the last balances state.
While the LN channel is open, only the parties involved know the current state of the balance.
Interesting. So it's like lots of little ledgers, each channel stays open until N number of transactions between two people complete, then the finally tally is pushed onchain when the channel closes. Am I wrong to thing this sounds a little risky? Like, that channel could be "lost" after the goods/services were exchanged, leaving the seller holding the bag. I don't understand what kind of recourse the seller has to LN if LN screws up? It's kinda like escrow, but escrow agents are heavily regulated whereas is LN "trustworthy"?
EDIT: ah, I think "nicpottier" explains a little more, below. about having an account on LN requires a certain amount of a deposit (like a debit account).
Each update to the channel is a new transaction that references the opening transaction, on each update, this transaction is replaced with a new one, so in practice only the last transaction is kept (old transactions become dangerous to publish)
The big difference is that bitcoin's scripting language is not turing complete. This is a security and scalability trade off that the bitcoin community isn't willing to compromise on, which drove people like Vitalik (started as a bitcoin dev) away to start Ethereum.
I haven't looked into this much, but there are projects like Rootstock, https://www.rsk.co/, that essentially recreate all of Ethereum's functionality as a bitcoin sidechain.
It has always had, it is just much limited than ethereum's.
But you can express things like "if X and Y cooperate they can spend this transaction or Y can spend after 1000 blocks or X can spend if it reveals the preimage of this hash ____"
These logics are what LN uses in its update-transactions
If what you want is a more technical answer of how the balances in a LN channel is trustlessly updated, then you should probably read a more in-depth resource, it's a complicated topic. But I'll try to give you some idea.
Every transaction in a LN channel is not a simple transaction, it's a smart contract transaction that, if broadcasted, closes the channel automatically but have multiple ways of spending it further, and one of those ways allows a party to get all the funds if he has proof that the counter party cheated (closed the channel using and old-state transaction).
So those transactions that are created are never published if both party cooperate, instead, they serve as a forced-closing mechanism if the other party is uncooperative
That was just a high level view of updating channels, but opening a channel and routing a payment is another story
Lightning scales with the number of transactions, but does not scale with the number of users. For that it still needs the bitcoin network to verify, and you're back at your transaction bottleneck but with added complexity.
Unless the national exchange is hosting wallets it controls on behalf of individual citizens, or acting as an intermediary for all transactions—in which case you’ve negated all the features of Bitcoin and may as well be using any random currency with the government as shared banker—I don’t see how it does.
I mean, sure, “the government will be your bank for free” solves the problem of the unbanked, but renders the identity and features of the underlying currency mostly irrelevant.
Except the main benefit of BTC is really the lack of printability. Governments can't just make more of it even if they run the LN for their country. That said I don't think it will come to full LN centralization either.
There are still other cryptos that have further benefits as well.
Monero for example is fully private and can do ~1500tps on chain atm. Bitcoin adoption is just one avenue to competing currencies that bring freedom back. If the LN can remain distributed and bring anonymity to its users, then great, but if not there's still further alternatives, and with decentralized exchanges, governments won't be able to stop the use of a better system.
Currency competition is just plain great for human rights and freedom.
Just like paying "Mastercard dollars" at the store means it might as well be pesos? Presumably for transactions that are worth paying blockchain fees, you'd use the blockchain.
> Just like paying "Mastercard dollars" at the store means it might as well be pesos?
I’m talking about specifically the benefit being sold as “Bitcoin is solving the problem of the unbanked”: if the solution involves the government being a free universal payment intermediary, the underlying currency choice isn’t what is solving the problem of tje unbanked, its the government providing free universal banking services, to which the underlying currency is mostly irrelevant, that is solving that problem.
The currency choice might be relevant to other things, though.
> you’ve negated all the features of Bitcoin and may as well be using any random currency with the government as shared banker
Since the goals are to 'give people without bank accounts access' and 'To make it easier to send back remittance payments'. I suppose they are just negating the value of bitcoin in general, though not for their specific use-case. Especially give the fact that the current legal tender there is currently USD which anyhow does not give the country any control over monetary policy.
This is a good question and I think the clues are in the way informal vendors in parts of Asia and Africa have already caught on to transacting through mobile. In remote parts of ES there aren’t any bank branches and villagers have to travel an hour or more by bus into town just to open an account, when they get back to their village that same lack of infrastructure means no POS or businesses accepting cards. Feature phones and smart phones, however, are ubiquitous and this gives an “official” way of doing this.
This solution doesn’t have to be crypto at all, however. I’ve been to China where even food carts have QR codes printed on them for people to take wechat pay and ali pay.
Electronic transfers are common. But electronic payments like that are not so much.
We have Bank QR codes and something simillar to M-Pesa, but its not that widespread because there is no one standard for QR payments or similar. That makes it less practical to use because both you and the vendor must use the same bank. (El Salvador is small and there are many finatial instituions.)
Something like U.S. Zelle or Swedish Swish would help, but banks have not standardized yet.
If WhatsApp started something like WeChat payments it would become a hit. Like they did in Brazil.
You presumably live in a developed economy. There's a reason 70% of El Salvadorans don't have bank accounts, and it isn't a context of easy online banking.
It's small payments what are are mostly done in cash, like the $0.20 bus fare, $1.25 lunch, $0.50 soda or $0.25 tortillas. There is no widespread electronic alternative for those payments yet here.
Free mobile banking accounts have been available for a while in El Salvador, and can be opened with a selfie and a photo of your national ID. They are only avaialble for those 18+ and older though.
correct, just search El Zonte or Bitcoin Beach, tons of videos on youtube on how they're using lightning network in fully circular economy since entire town has been unbanked
it's pretty fantastic people! naysayers should plan to visit El Zonte, beautiful surfing community.
I plan to visit later this year and have friends who work with Strike team etc.
The problem here lies when the merchant want to derisk btc/USD by often converting it back to USD after a transaction. That causes a miner fee, there is a penalty in breaking the lighting channel.
You can stay on lightning for exchanges, Bitfinex for example offers lightning deposits/withdrawals, El Salvador would too, considering they are using lightning right now.
Asking as a noob, isn't the whole point of transaction fees to prevent malicious actors from flooding the network with spam. How does lighting networks prevent that from happening and why can't one use a smiliar approach for the actual bitcoin blockchain?
The blockchain settles the transaction and records the finality.
Imagine a transaction as being a simple cryptographic signed message that sends 1 BTC to someone, you just broadcast it to the network and it gets recorded immediately. But if you expect to continue transacting with the same person, instead of broadcasting the transaction, you can hold on to it and keep iterating on top of it with new balances, each time signing the transaction so that your counterparty can always go to blockchain to claim their coins.
There's obviously some mechanism to avoid broadcasting old state and making sure you actually have the funds, etc, but you can't flood the network, even if you tried, you'd only be flooding your immediate neighbor which still charges fees, but much smaller fees than the blockchain. There's also mechanism for connecting those channels, so you don't need to have a direct channel with someone you want to pay, you just need a path to them.
High level answer: Lightning transactions happen off network and only "sync up" once in a while. In a lightning transaction, only the two individuals transacting know that it has happened. But in an on-chain transaction, that info is public.
Other person node who would lose money if this happend can publish the original transaction that is construscted in a way that the attacker would lose all his funds.
So attacker could potentially do this but if they get caught they get punished for losing everything and they get caught if the other side node is online when this happens.
There are also watchtowers that can monitor the network for hacks like this
Transaction fees come from the miners who will put your transaction in a block and mine it for you. Creating your own reserve changes nothing for this.
Unless if you’re going to do a bunch of off chain stuff, which seems pointless.
Lightning network liquidity should actually help solve this. If you maintain a reserve and open a ton of payment channels for folks (those HTLCs are all on-chain), this drastically reduces impact of confirmation time and fees.
That’s been the claim for a while, yes. But actually delivery of said promises has always been “soon”.
And while six million isn’t a huge country comparatively, I personally would be mighty pissed off if my entire country was used as a massive financial experiment for crypto enthusiasts.
But Bitcoin is so volatile. You deposit today let's say 10k of your USD and in one week if the market doesn't like the twits of the day you find yourself with half that.
fiat currency does not drop 50% in one month and is not at the mercy of other countries. If US forbids all banks to execute trades in BTC like China did, BTC is dead.
> fiat currency does not drop 50% in one month and is not at the mercy of other countries.
Fiat currency not controlled by major economic powers has been know to do that (and there are a few cases for major powers, too, in conditions like just after losing major wars with other such powers.)
Conversely, if you aren’t a major economic power, a fiat currency that is controlled by one is at the mercy of other countries. (And, even if you are a major power, your currency has some exposure to your relationships with othe countrieds, though “at the mercy of” may be too strong.)
Not all fiat is “the USD from the perspective of the US”.
What the normal people will use in the beginning is going to be non-custodial LN based solution like strike. Minimal fees, easy to use. If you get a bit more, move to custodial LN wallet/onchain transactions. More fees, more security and less trust. And once you have too much BTC start storing them in an offline cold storage.
I can see someone explaining to their grandmother about having to move her BTC to offline cold storage and storing her private keys securely or she could lose her life's savings in an instant with no recourse
Multisig solutions are available for increased security and reliability. Services like Casa and Unchained Capital will even hold a single key from your set, allowing you to recover your funds if one of your keys is lost, however they can never move your funds on their own because they never possess a quorum.
So you can have a wallet that requires 2 signatures to move funds, where you control 2 signing devices (mobile app + hardware wallet) and the third-party holds the 3rd key. Normally you manage all transfers without involvement of the third party, but if one of your keys becomes inaccessible they can help you sweep your funds to a new set of keys.
Additional resiliency and security is gained by increasing the quorum to 3-of-5. You control a mobile app plus 3 hardware signing devices, which are ideally distributed geographically. This increases reliability in case something happens at your primary site (like your house) and increases security by requiring an attacker to physically visit multiple locations. The 5th key is held by the recovery service.
Shamir’s Secret Sharing is a general solution for splitting secrets. Bitcoin multisig is superior for for its specific applications though. The biggest reasons are:
1. There is never one single key with full control. This is a huge vulnerability with SSS.
2. More flexibility, by allowing differing k-of-n subsets in combination with timelocks and other Bitcoin script features.
That someone probably will have learned how to help grandma on complex digital processes last time goverment services, communications and commerce moved online.
I agree it won't be pain-free, but hardly the first time such conversion would happen
Who the hell has time to figure out all this stuff?
I personally think the day the digital US dollar is developed and can be stored in your IPhone. If I can take my locally stored digital dollar and then send it via imessage or whatsapp, then the game is truly over for Bitcoin.
It's closer to each individual bank having their own digital currency, all of which are worth 1 USD each. The digital US dollars at my bank are not directly exchangable with the digital US dollars at your bank. You need to settle up with an ACH transaction, which takes at least a day to transact as it has to run in a central batch job. In addition, only US domestic institutions can use this mechanism to transfer US dollars between themselves -- international institutions need to use the SWIFT system, which is multiple days for a transaction. Contrast with credit card payment and settlement, which acts closer to a digital system but can't be used as a store of value (and has punitive fees for attempting to do so). The US dollar acts like a cash system with some digital features rather than a digital system.
> The digital US dollars at my bank are not directly exchangable with the digital US dollars at your bank. You need to settle up with an ACH transaction, which takes at least a day to transact as it has to run in a central batch job.
FedNow will reduce that latency from days to minutes. US is slow in that game, but RTP is widely deployed in UK, France, etc.
For international transactions, one can use SWIFT (days) or TransferWise (minutes) or Western Union (under one hour).
I want my digital cash to work like regular cash. I need to pay the lawn guy, send an iMessage. I wanna buy lunch, swipe my phone and pay with the money in my phone. I don't need the charge going through my bank or some intermediary.
I want freedom to use my digital money the way I want without someone holding my account hostage, if I do something wrong. Additionally, I have no problem losing my money, if I send the money to the wrong person or lose my phone.
That's good usability-wise, but it still has the problem of central banks being able to create money (diluting your wealth for their benefit) and also being able to cancel you, or someone you want to pay, out of the system. It's a horribly powerful way to control people.
FedNow is a digital cash system. It's not there yet, and it's still not international. As for Western Union et al, it's a bit like claiming the US has a digital cash system because Venmo exists -- it's someone else taking on the risk the funds won't settle in order to provide a better user experience. So the US is approaching a digital cash system, but it's not there.
The bank does hold a fraction of your deposits, as our banking in the US is fractional reserve banking. This has been the case for quite some time, and isn't really the same thing as digital currency, even if we transact digitally.
From my understanding, they hold most of that in reserve accounts with the Federal Reserve. But yeah, someone at some point holds some cash. But of the total US money supply (in 2018), physical currency makes up about 11% of the total value[0].
Edit: Downvoted, and I'm guessing it's the source? This is legitimate fact though. Here's the fed's own announcement.
> In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses.
Where does the Fed get the money to be a lender of last resort - by printing the money and generating inflation? If so, then how does this inflation impact the purchasing power of these last resort dollars?
I often like to take things to a logical extreme. Since the Fed can simply print all this money into existence, is there a limit to their ability to print? I mean couldn't they simply print their way out of any economic crisis or would this result in another Weimar republic situation? -- genuine question.
Printing money does not always cause inflation. The purpose of the Fed is to keep the dollar's value stable. If demand for the dollar rises, the Fed has to print money to avoid deflation.
The common mantra "When a measure becomes a target, it ceases to be a measure." applies here too, but many HN peeps seem to think it doesn't for some reason.
If you remove the constant adjustments to the CPI you get a _much_ higher rate of inflation than governments will admit.
One year ago the dollar was deflating, so this is cherrypicking data. If inflation was above 4% for multiple years then that would be a problem, but a month or two is not anything to be worried about.
I'm also not sure why you think adjustments to the CPI should not be allowed. Individual goods get cheaper or more expensive relative to other goods, and consumers change their behavior. It would be asinine to have the government subsidize certain goods (via economic policy) such that all consumers purchase the same basket today as they were in 1990!
I don’t particularly want my dollars to “hold value”.
I want currency to be useful as currency; I want my investments to hold value. The two things serve different functions, and I don't want investments compromised to be useful as currency or vice versa.
> I don’t particularly want my dollars to “hold value”
Sure, but would you really rather your dollars "lose value" as in they can purchase less and less goods and services over time? How does that benefit you personally?
> Sure, but would you really rather your dollars "lose value" as in they can purchase less and less goods and services over time?
Yes. Mostly, because of systemic effects on the broader economy I need to have functioning to earn a living, but also because of more direct personal benefits.
> How does that benefit you personally?
Because other than a small share in cash and the bank for liquidity, my assets aren’t dollar denominated, but my debts — which, while smaller than my total assets, are much larger than my dollar-denominated assets — are almost entirely dollar-denominated.
I agree that it's nice if you have assets, but I believe for most people we can't have nearly as many assets and or connections as the wealthy.
And for young people, they're basically priced out of assets by this system. _This_ literally is the reason owning a home is next to impossible for millennials and gen-zs.
Further, this encourages a debt based society that may encourage growth in the short run (debt giveth first), but then when the debts are due it holds the economy back. Typically this looks like the 2008 crash and is coined the `business cycle` by modern economists.
> when the debts are due it holds the economy back.
This is just wrong. The only debt that holds the economy back is debt that didn't actually generate growth. If you borrow to start a business, you are stimulating the economy with growth, through debt. If you rack up credit debt at the bar every weekend, you're going to cause yourself problems.
The topic is just more nuanced than you're implying. Debt is very good for the economy overall, as long as you're not overdoing it or taking on frivolous debts that don't let you grow.
Student loans seem relevant here. I take out 50k of student loans. The degree I earn empowers me to make 50k/year. After 2 years that debt has been turned into profit, and that's only for me personally, ignoring the value my education will bring to my employer, the community, and the economy at large.
Another example of good debt can be a car. I purchase a 20k car, with credit, which allows me to make 70k instead of 50k, in the next town over. After a year, that debt has paid itself off and is now earning for me, despite the fact that the value of the car instantly dropped 20+% as soon as I purchased it.
The idea that debt holds the economy back is terribly misinformed and over simplified. It's literally how we grow, and how the US has become the economic powerhouse it is. The most wealthy nation in the history of the world (what we do with the money is a different topic).
Most people have nonfinancial assets (e.g., durable items of personal property.)
> _This_ literally is the reason owning a home is next to impossible for millennials and gen-zs.
No, its not, because its been true (and inflation higher) for preceding generations, so it can’t possible explain why Millenials and beyond have it worse than Gen X who had it worse than Boomers. Tax and spending policy shifts (Reagan's being the biggest single one nationally, but there have been several subsequent national ones, and CA Prop 13 and its — mostly much weaker — copycats play a role, too) are a much bigger factor
> Typically this looks like the 2008 crash
The 2008 crash wasn't a regularly occurring event. (And as bad as it was, wasn't nearly as bad in and of itself as it is widely perceived; it gets magnified because — again for reasons that trace directly back to fiscal policy choices — the expansion after the brief and shallow 2001 recession was, up to that point, pretty much the most hollow expansion in modern US history, with, IIRC, every income quintile but the top doing worse, and even the top being mostly flat except for the top couple percent.)
How much money do you have in dollars? I have an emergency fund — 6 months of expenses. Everything else is in other assets that store value after inflation (e.g. stocks, bonds, housing).
> How does that benefit you personally?
A little bit of inflation means more economic growth in the long run. That benefits me because services and goods will get cheaper and/or better.
Not much, in fact I try to remain leveraged via debts to hedge against inflation.
But my salary is measured in dollars. I fought hard to get the salary I have today, but I must continue to ratchet up as my employment deal looks worse every year.
I believe the Cantillion effect is largely why the average peasant's wages have not kept up with asset prices.
Inflation means wealthy (with assets) get wealthier.
> A little bit of inflation means more economic growth in the long run.
When you play tricks with the CPI it does look that way. It's easy to say there's growth when revenues grow beyond a poor measure of inflation.
Inflation discourages savings and thus makes money look easy. As such, it actually encourages bad investment. Further, the business cycle that Kaynsians say are just a natural part of a large economy are really caused by over leveraged banking credit bursts.
If half of the dollars in circulation are just debts owed between banks, then that bubble bursts, it's no surprise that asset prices would fall--there's literally fewer dollars in circulation.
It's no big deal for those involved in fed policy making as they are usually the first to see it coming (and or instigate it with higher interest rates) and generally move their positions back to dollars just prior to a credit bubble burst.
But for those of us that leverage ourselves to hedge against inflation (buying a house), we get caught with a heavy loan on an asset that's no longer worth as much as the loan on it.
One should be open to viewpoints external to those provided by the people in charge of and profiting from the system.
Your salary is measured in dollars, but inflation affects your salary as well. When companies charge more for products, where do you think (some of) that extra money goes?
The rest of your comment has some interesting hypotheses (Cantillon effect, inflation encouraging bad investment) but in practice, you have to make measurements to see whether those effects actually happen. I haven't seen any empirical evidence for the Cantillon effect, and empirically we have evidence that a small amount of inflation does not decrease output (and can increase output in some cases).
> The Fed's goal is to maintain inflation at 2% for reasons more complicated than I'll discuss here.
It would be amazing if you could make the effort to explain the complicated reasons why the Fed's inflationary policy is a good thing. I have yet to hear a sound argument why sound money is worse for the people, than an inflationary currency. I can see how it would benefit the government to hide the true cost of taxation via inflation, but why does it ever benefit the individual to have their wealth diluted by the process of inflation, even if it is "only" by about 2% per year?
I can't do this topic justice from memory, but you seem to be genuinely interested, so I'll say what I can.
It seems related to the petrodollar system. This is where the world uses USD for energy (OPEC only sells oil for dollars). This forces countries who need oil to acquire dollars. However, there's a problem with that: a limited supply of dollars. How do we fix that problem? Use a fiat currency (not backed by something tangible) that allows us to print more money as necessary. How much more should we print? The target is 2% inflation, so that much is what the experts in this topic think.
This petrodollar system does a lot more than just force us to have inflation. The subject from here becomes more and more complicated, because monetary systems are highly complicated. There's a lot going on in the US fiscal policy, and the impacts vary from very good to very bad, depending on your perspective. It's in fact so complicated that I can imagine for every perspective there are good parts and bad parts of our monetary system.
There's a lot of talk in this thread and on the internet in general, especially around cryptocurrencies, that is massively oversimplified and doesn't pay any mind to the fact that, like any other field, there are many very intelligent people working to solve very difficult problems. If a monetary policy can be summed up in one sentence, it's probably not a good policy.
Well, you make it sound like there's a limited number of dollar notes and the bank will refuse your deposit/loan if they don't have enough notes lying around to make the fractional requirements.
In reality, they will accept your deposit/loan (as long as it makes business sense) with no regard for how many notes they have lying around. If that puts them over the edge of the fractional requirements, they'll just go to the Fed/Treasury, who will swing their wand and write in additional (digital) reserves for the bank.
> they'll just go to the Fed/Treasury, who will swing their wand and write in additional (digital) reserves for the bank.
Pretty sure that's true for larger institutions and lending between themselves, but not for your everyday accounts. They must go to fed member banks themselves to ask for the loans.
This simply isn't how the financial system works. The bank will only loan out amounts based on what they hold in reserve. Asking the Fed/Treasury to "swing their wand around" isn't really close to what happens. Also, the Federal Reserve and the Treasury are different entities.
They don't just "print money" for banks arbitrarily.
Printing money for banks arbitrarily is exactly what they do -- what they have to do, if they want to have any chance at meeting their target overnight rate. (Which they are.)
Demand for money comes from the market and is not very flexible, and certainly not under anyone's control. Lenders will meet the demand for money at ever increasing prices (i.e. higher overnight rates) unless money gets printed arbitrarily.
The US does not have reserve requirements; it has capital requirements. The fractional-reserve model is not a realistic description of banking in modern developed economies.
I don't have a strict definition handy, however it seems as though digital currencies would be those that are digitally based, whereas the dollar is a tangible currency first, even if it is fiat.
A digital currency would be like crypto currency, or in-game currencies or something designed to be digital. The dollar is the federal reserve currency, and not intended to be digital. It doesn't make sense to call it digital currency, when in fact it's physical currency first, and we've developed digital tools to help us use it and move it around.
> I personally think the day the digital US dollar is developed and can be stored in your IPhone. If I can take my locally stored digital dollar and then send it via imessage or whatsapp, then the game is truly over for Bitcoin
Hasn't this already happened. It's called Zelle or Venmo or CashApp or ApplePay or a million others. Heck, if you prefer Elon Musk pushed technology there's even this thing called PayPal.
And it comes with a whole series of laws that protect you in the case of hacking, fraud, etc.
I don't follow the advantage of using a government-issued (and custodially held) bitcoin wallet. Well, I understand that El Salvador wants to encourage people to use their BTC there. But other than that I don't see the value.
>Who the hell has time to figure out all this stuff?
In the early days of the internet, many things were a complete pain in the ass to do. But then services and apps were built and things became easier, same is happening in this space.
Before, even purchasing Bitcoin was extremely difficult to do, and involved a lot of research + steps - now it's trivial. Before, securing your wallet was extremely difficult, now it's easier but not ideal to those that are less tech saavy.
This is such a brilliant answer. Imposing the grandma test on early-stage ecosystems is a total naysayer move. We all know that humans are capable of doing advanced math, even though a newborn baby doesn't come even close to being able to do it.
Numbers in a retail bank's ledger are not digital dollars. They represent an obligation of the bank, and not direct ownership of dollars.
Digital dollars exist, but only banks can hold them, as they're the only ones with accounts at the central bank. The rest of us use retail bank accounts, which are the equivalent of custodial wallets in the crypto world.
This is correct in practice. But consider what I said in the context of the discussion: contrasting 'digital dollars' with cryptocurrencies.
With dollars, individuals have to choose between bank accounts, which are subject to counterparty risk, and cash, which cannot be transacted digitally.
If your holding of 'digital dollars' in a bank account is subject to counterparty risk, then there's something different about the dollars you hold and 'real' dollars issued by the central bank.
With cryptocurrency, anyone can transact the real thing. There's no counterparty risk. (Of course, there are issues with blockchain scaling, use of custodial wallets etc., which negate this to some extent.)
> With cryptocurrency, anyone can transact the real thing. There's no counterparty risk.
This only holds true if there was only one cryptocurrency in the world and everyone used self-custody. As soon as you have multiple cryptocurrencies and multiple networks and multiple wallet providers, you have counterparty risk.
Coinbase may not disappear, but others may. Similar for Bitcoin etc. etc.
So the person who transports those dollars to the bank doesn't get paid? The car that takes that person to the bank doesn't use gas? Just because you don't see the fee doesn't mean you don't pay it. It's included in the price of anything you buy.
That fee is only because we want that money settled instantly by a third party. There's no fee for a bank to bank transfer. Or heck, even writing a check. Once you get VISA involved they want a cut.
It might appear that way, but that is only because the fee is hidden.
The credit card terminal agreements signed by retailers prevent the retailer from offering differential pricing when buying via credit card or cash. Essentially, the credit card fee is embedded into the price.
This might be "good" for people who have credit cards, but it is inflationary (by roughly 2%) to people whose credit is poor and only transact by cash.
I think that using cash makes money expensive which adds some base load inflation - this will help reduces homelessness and other societal ills (such as wealth inequality).
Electronic money is never lost, not like those pounds, pennies, dollars, quarters. Losing money, takes out of circulation. While not much is taken out, it might be enough to create a base load of inflation - money becomes more scarce and therefore more expensive.
Low inflation leads to asset price bubbles - stock market and housing in particular. It also suppresses wage inflation. So housing becomes more expensive and wages do not keep up, making housing less affordable. A double punch.
Low inflation leads to more financial speculation as people with access to capital look to diversify away from a limited pool of assets (Bonds and cash become less desirable in low inflation regimes). Buying housing and leasing it out is a good use of capital. However, this leads real-estate investors to drive increases in rent as they chase yield and airbnb-empires also drive rental prices - as this is one way of driving yield.
High rents combined with low wage growth means that people's lives become priced for perfection and one small deviation can knock them out of equilibrium - losing their home / rental property when they lose their job.
All because governments and technology are conspiring to keep inflation low. Using cash is the person-on-the-street's only weapon to fight it.
Homelessness is a California’s complex housing shortage and governance/policy problem. The world is much bigger than issues in SF/Portland/Seattle. I am not following the strawman from utilitarian aspects of cash -> inflation -> homelessness & inquality.
Cheap money forces it to find a home that generates a 7%+ return. Cheap money reduces the number of asset classes that can guarantee (within reason) those returns to Housing and Stocks (and Crypto of course). Buying a home becomes out of reach for more people. In addition, low inflation also suppresses wage growth. As house prices increase (just look at Blackrock's purchase of residential property at 30-50% premiums) rents will also increase because professional landlords are seeking a 7% return and if the property changes hands at a 10% lift then rent-asked for that property will also rise. This leads to a situation of unaffordable housing (exaggerated by lack of new supply coming in line in places like California) in the face of low wage growth - this leads to homeless-ness. IMO.
From the interwebs: In the U.S., the money supply is influenced by supply and demand—and the actions of the Federal Reserve and commercial banks. ... More money flowing through the economy corresponds with lower interest rates, while less money available generates higher rates."
For perhaps the same reasons as you, I decline/turn-off auto-pay of any services I subscribe to. I actually cut checks every couple of weeks to pay bills.
I need a regular reminder of how I am being nickeled and dimed. My big fear is a constant drain on my account from a service that I had forgotten about or just the accumulative damage a lot of services add up to.
To be sure, our corporate overlords love the auto-pay, cashless society they have created for our convenience.
I have all of my credit cards and bank accounts set to notify (text) me whenever there is any transaction whatsoever. I find that helps with the subscription concerns, as well as confidence in catching fraud/incorrect charges quickly.
A cryptocurrency backed by the united states could certainly succeed as many people want to do business that way, but the point of bitcoin was decentralization and preventing government control of the currency.
The same people (lots and lots and lots of criminals, but you know, regular people too) who use bitcoin would probably not want a us dollar coin very much.
But the vast majority of people don't use bitcoin at all, for anything... I think a us dollar coin with FDIC protection or whatever protection it takes to make grandma feel safe that her $100k account is protected, would be wildly successful if they tried it.
> Who the hell has time to figure out all this stuff?
Nobody will have to learn this stuff, if the BTC economy develops there will be professional custodials for all levels. Eg. banks.
But the importance is that there is always the option to self-custody if you want to. With fiat you don't have that option even in theory. I think the option for self-custody is what makes BTC powerful alternative, not necessarily how widespread self-custody is going to be.
Physical cash is ridiculously cumbersome and difficult to handle in larger quantities. I wouldn't probably be able to get $10k worth of cash from my local bank, and getting something like $100k would probably require days and lots of work. However if I have millions worth of BTC at some big exchange, I can move that amount to a secure self custody in 10 minutes without a hassle.
So you agree that you were wrong to say that you don’t have the option even in theory? Convenience is a discussion point but it’s predicated on being possible – and since this happens not-infrequently (people buy cars, farm equipment, even houses with cash) it’s far from theoretical.
One other area to learn about: security – while it’s true that you can move millions on yourself own, the risks of theft or accidental loss are why most people do not avail themselves of these theoretical options since they consider the cost of banking fees to be an acceptable trade off for the security and convenience of letting a professional handle those problems.
… and the people who made that possible for the hacker will laugh at you and say it's your fault rather than admitting that the system they sold you is fragile.
How do you think bank accounts get hacked? It's much easier to yank a password/credit card number people use daily.
The benefit of private key is you only need to use it once. Then store it away in a safe or _bank_.
More UX will develop over time as adoption grows. We already have hardware wallets that even babies could use.
Finally you somehow imply that FIAT theft doesn't happen. Even in recent modern history people have lost all their savings in a snap be it their house burning down, colleague stealing everything or even your bank going under.
"More UX will develop over time as adoption grows. We already have hardware wallets that even babies could use."
The difference is this: If people have a hardware wallet they use digitally they think it's like a bank account on their phone. They do not realize that with that wallet if the wallet is gone so is the money. Wheras if the phone is gone, nothing happens to their money.
FDIC insurance prevents your money from being lost in this case, no?
Also, it's a bit ridiculous to think that private keys won't be stolen because you can just store it away in a safe or bank or whatever. People are susceptible to all sorts of scams and this private key won't be a panacea for human stupidity or ignorance.
Basically everything in your post highlights why crypto is a horrible idea for your average person:
> How do you think bank accounts get hacked? It's much easier to yank a password/credit card number people use daily.
Exactly, and when a credit card number is stolen the consumer is almost never liable, as opposed to crypto where your life savings are gone forever.
> The benefit of private key is you only need to use it once. Then store it away in a safe or _bank_.
As another responder said, you need your private key to sign every transaction. Giving you the benefit of the doubt and assuming you're talking about wallet keywords, even then if you have an account you still need the ability to sign transactions, and according to crypto enthusiasts the no-middleman, non-reversability of crypto transactions is a feature, not a bug.
> More UX will develop over time as adoption grows. We already have hardware wallets that even babies could use.
> Even in recent modern history people have lost all their savings in a snap be it their house burning down, colleague stealing everything or even your bank going under.
Which is exactly why everyone with a mortgage is required to have home owners insurance, and FDIC insurance exists.
The only way to introduce these kinds of benefits (e.g. to have someone adjudicate allegations of fraud; insurance; etc.) is to introduce middle men, which then defeats the entire purpose of crypto in the first place.
I'm all for getting the government out - but cash or gold is way easier to use.
If you have a political problem, you need to solve it politically. You can't hack it with a technical solution or politicians and their rich friends will just find a way to use it against you (like it's happening with btc, enjoy limitless tracking and the rich elite profiting from btc as much (if not more) than you) or ban it (like it happened to e-gold).
And what do you do when politics are fully captured by corporate and oligarchical interests?
The majority of bitcoiners see no way out of our current political system. The dollar underpins the US hegemony.
Bitcoin wouldn't be necessary if the government would allow alternative currencies, but until bitcoin, it had squashed numerous attempts at alternatives.
So to say that we need to solve it politically misses the point. Bitcoin is a solution to solve what is seen as a political mess. Further, politics is just non-violent war. This _is_ a political method.
> their rich friends will just find a way to use it against you
I don't entirely disagree. I see bitcoin as a start. The lightning network already brings some anonymity to transactions, but it could be made to do better.
Monero (XMR) is a privacy based crypto that already does so and can currently do 1500tps on chain (BTC does ~7). Crypto is war against oligarchs motivated by failed traditional politics. Monero and other techs like decentralized exchanges are a step up in weaponry of this war.
I have a feeling Monero et similia will be banned together with encrypted messaging (encryption = terrorist).
We lose more freedom every year at the hands of governments, I don't see why this trend is bound to improve.
I think what you do is you flee the country and move somewhere smaller where you have greater freedom and a greater chance at influencing politics.
My granddad was putting bombs in nazi buildings, but I don't think it really helped. We needed the USA to come over and kill the bad guys.
Well, the concept of holding cash and gold at home is easier than managing a private key. But as soon as you want your money to work i.e. earn interests or invest it, crypto currencies are easier to work with. I mean, you can literally deposit and earn interest by touching a button inside your Coinbase wallet, right now.
Regarding your second argument: Change in the financial system does not happen by itself. You need severe pressure. DeFi has a huge potential to put pressure on the traditional financial markets to make them more accessible to the poor and limit their excesses (monetary inflation).
The government could of course “ban” Bitcoin and DeFi. But since they are decentralized it can’t make them really disappear — only more cumbersome to get into (and out of), for example, by closing down centralized exchanges. But the government can’t really prevent you to meet a “dealer” cashing in/out on your cryptos.
> But the government can’t really prevent you to meet a “dealer” cashing in/out on your cryptos.
If that “dealer” doesn’t report your transactions under KYC or either of you don’t pay taxes, you’ll get a hard reminder that governments can and routinely do prevent things like this. It’s especially risky to break those laws with cryptocurrencies because you’re leaving a full irrepudiable history of every transaction so when they bust your dealer they get _every_ transaction, not just the one that was caught, and that’s for everyone they’ve dealt with — and since those transactions are all by definition illegal, they have both grounds to investigate and an easy lever to pressure each person to turn in bigger players in exchange for leniency.
Both. Some people (probably minority) will use self-hosted wallets. Majority will use custodials (banks).
> And if the latter, why would bitcoin be of help at all? A normal bank account would be simpler and less worrisome.
USD will still stay as the official currency of El Salvador. However now merchants have to accept also BTC. The hypotheses is that for example foreign businessmen will bring BTC in form of investments to the country, and people will send BTC via remittances. There is possibility that there isn't actual demand, but there is also possibility that El Salvador might get some serious economical boost because of this.
The original conversation was about how Bitcoin could help the 70% who are unbanked have access to something like a bank account. The proposed mechanism for this is "well, they can go to a bank and register something like a bank account, or else they can be a high-SES self-educated tech person who builds their own bank using computer hardware". I do not think this could help the 70% who are unbanked have access to something like a bank account.
Whether or not it has spinoff economic benefits in terms of tourism or parking capital flight from other countries, you might be right, but that's not what was being discussed, right?
I'd also say it's easier to give everyone the right to an account as in Germany (if the reason is that they can't get one b/c of a missing/bad credit history and not because they don't live to a bank and have no phone), to solve the 70% unbanked problem instead of introducing BTC.
> The original conversation was about how Bitcoin could help the 70% who are unbanked
And this isn't the best argument for bitcoin. The best argument for it is the limited supply.
Considering the BBC has a dog in the fight, I believe that's probably why it doesn't mention the anti-inflationary argument that is the true reason a country would want to transact in BTC.
The USD is available to the US to make more of at any time. Imagine trying to run your government on someone else's currency. You'd always be at a disadvantage.
In the past the US hegemony has regime changed several countries that tried to use their own currency. (See Lybia)
let's not put the cart before the horse? you can't solve the trickiest problem in a day. This news, is a major development and is going to open many, many doors, eventually solving this problem, too
I don't know how do you expect people to understand two disparate, absolutely differently working payment systems (LN and BTC) with different threat models, and moving between them always costs a lot of money.
But hey whatever works.
I think this will work as well as Petro worked for Venezuela.
My understanding is that Strike is already reasonably popular in El Salvador, because it's much better than taking a bus 2 hours to the Western Union, paying 10% to them, then paying 10% to the gang that hangs outside.
Could a more "conventional" system do the same job? Probably, but I won't begrudge people a working solution.
Yes, it's far more efficient now. Now the gang will just take 10% of your entire savings (because it's all on your phone) every time they see you. Or 30% if they don't like you that one day. Because if it's one thing I try to do in a situation with lots of street crime, it's carry the maximum amount of my net worth on my person in the least recoverable form in case I get robbed.
In Latin America people kidnap you and take you around to ATMs at gunpoint until you've reached the withdrawal limit. This seems so much more dangerous with bitcoin wallets.
There are wallets that will show a fake lower balance in distress mode.
Further, why walk around with all of your BTC available to you? If you really have enough to worry about gangs stealing it, put it in cold storage or on an exchange, but don't carry access to it around in your pocket the same way you wouldn't carry cash around in your pocket.
A fake UI screen? Wow, that's useful. Good thing there isn't an easily verifiable public ledger with the true value of the account that the criminals can check while holding you at gunpoint.
Meanwhile, you expect people to have cold storage where? IIRC, they cannot just memorize a private key, but they need an actual file on a device.
LN still requires periodic on-chain transactions to close and open payment channels. So either these costs are being passed along to the users in El Salvador or the wallet provider is subsidizing it.
Are you buying daily essentials using LN, or running a small business? Also how could someone in El Salvador run a node without reliable electricity and internet? Also remember that the hardware cost of a full node is likely more than a month’s wages.
>Also how could someone in El Salvador run a node without reliable electricity and internet?
A lightning node doesn't need to be on 24/7. To prevent your counterparty from stealing your funds you only need to be online every 2 weeks (or never if you use a watchtower service). Syncing is also fast, so 1 hour of internet access/electricity should allow you to catch up 2 weeks of blockchain history.
>Also remember that the hardware cost of a full node is likely more than a month’s wages.
Yeah that's a fair point. You probably[1] need to be online to make a transaction, but you can potentially have a thin client setup where you communicate with a hosted node somewhere, but the signing and stuff is kept on-device. This allows you to make transactions in the case where power is out, but your phone still has internet access. I don't live in el salvador so I'm not sure what the frequency of power outages is relative to telecommunications outages, but at least in the US cell towers and landlines run on backup power so they're up even when there's a blackout.
[1] For maximum convenience it's mandatory, but it's conceivable to update the state of a channel entirely offline. This would allow you to make offline transactions with a node you have a direct channel to, but multi hop transactions (ie. transactions with nodes that you don't have a direct channel to) would still be a hassle.
While you do need to close/open payment channels if you want to move the funds off the lightning network, I don't really see why you'd need to "periodically" do it. Lightning channels can stay open indefinitely so you can theoretically park your money on there indefinitely.
If someone sends me 1 BTC and the transaction is recorded in mysql, the database operator can revert the transaction and I have zero recourse. That's not possible with lightning. If someone sends me 1 BTC over lightning, then decides to reneg on it by trying to commit an older state of the channel (where they haven't sent me 1 BTC), then my recourse is to rebut that transaction with a newer one.
Is there some writeup with details on how El Salvador will implement things? One obvious option would seem to be a wholly custodial, national, off-chain payment system. So El Salvador would hold BTC reserves, while people would actually transact on a government-operated ledger, only interacting with the Blockhain when withdrawing or receiving actual BTC outside the system, if that will be allowed.
I think you have your custodial/non-custodial terminology mixed up.
If you aren’t holding the keys that control your funds the entire time, it’s a custodial service. If USD is involved in any form besides paper cash in your own hands, it’s a custodial service.
Where I live ordinary bank transactions are free for ordinary consumers. I never pay a transaction fee or any annual fees. My bank used to charge an annual fee for a credit card but they have stopped charging now.
In fact in my whole life (I'm 65 so about 50 years of having bank accounts) I have never paid transaction fees for ordinary transactions (in the UK and Norway).
Where I live (USA) I tried to transfer money between my Wells Fargo account (that charges large fees for foreign ATM withdrawals) and a credit union account (that required heavy bureaucracy to open a business account, that's why my main accounts are in Wells Fargo, but the credit union withdrawals at the foreign ATMs are free). Wells Fargo offered Zelle for ACH but I got confused. Then I tried transferring through Robin Hood, where I had both accounts connected. RH presented a pop-up saying that if I want to transfer to a different account from the funding account, I have to email them some documents to comply with AML. Same with WeBull. PayPal charges fees. So I came to the conclusion that the only simple way was to write myself a check, and deposit it in the phone app to the other account. And that is only permitted because checks were created before the current Orwellian financial system. But I could not write a check, because I am abroad and do not have my checkbook.
The baroque steam punk vibe of signing a cheque to yourself, then depositing it to your own account by taking a photo of it with your handheld supercomputer... I must order some more cheques.
I wonder if you could just fudge it with Photoshop (Gimp)? Could you get in trouble for forging a cheque to yourself?
Yes, I think cryptocurrency has a potential use case of cheap international transfers. I too faced issues living abroad and transferring money back and forth from the US. There are both flat fees, making small transfers expensive, and %age costs, since banks don't give you spot price for cross currency transactions but instead skim the spread between spot and whatever exchange rate they choose.
If the above doesn't sound correct to a reader here, then either you've never lived outside of the US or, please tell me how to transfer money via banks and not get fleeced.
You can add non-WF banking destinations once you are logged in. They put up a disclaimer to expect registering the account as a recipient to take up to 3 business days.
Articles on the Internet from May of this year claim that there are no fees, even outside the WF ecosystem. However, they refuse to publish fees as they vary by account.
I do wish you luck, and I hope that it was just a matter of that link being hard to find (they definitely try to funnel you to wire instructions.)
Living in Germany here. Many traditional banks charge a monthly fee of 10 euros for maintaining the bank account.
Additionally, my parents wanted to send me some money from another country and the cheapest fee they could find was $10.5 (Wise) most other options were from $30 to $100. This was for transferring roughly $2000.
I can agree that for a simple in country tx I've not had to pay living in Germany, that is largely because of smaller banks challenging and whittling down fees.
I might not be remembering well, but I sort of remember receiving extra charges from my bank (Germany at the time) because I passed the number of transactions limit for the month. All transactions above the limit came at a charge.
Greece here, transactions cost 3 EUR. I think they're possibly free if you use the same bank, but the apps are cumbersome to use and the potential for fees is a deterrent, so nobody uses them for transactions of less than hundreds of EUR.
You mean that a transfer from your Greek bank account to another Greek bank account would cost you 3 EUR?
What happens if you get a bank account in another EU / SEPA country (e.g. via n26) and use it instead of a Greek bank account? Would there be any downside? Would a Greek company paying you a salary refuse to transfer the money there rather than a Greek bank account?
> You mean that a transfer from your Greek bank account to another Greek bank account would cost you 3 EUR?
Yep! Sad.
> What happens if you get a bank account in another EU / SEPA country (e.g. via n26) and use it instead of a Greek bank account? Would there be any downside? Would a Greek company paying you a salary refuse to transfer the money there rather than a Greek bank account?
No, transferring money to N26/Revolut is free (well, minus whatever fee the Greek bank will charge, which I think will be 3 EUR), but receiving money from N26 gets a 3 EUR fee again...
If the payee has a Greek bank account I suppose? But then it means that if both payer and payee have a n26 bank account and use it in Greece, they don't have to pay this fee anymore, right? So why would they use Greek banks?
I just don't see how this 3 EUR fee still exists given the current competition.
> If the payee has a Greek bank account I suppose? But then it means that if both payer and payee have a n26 bank account and use it in Greece, they don't have to pay this fee anymore, right? So why would they use Greek banks?
Indeed! I think Greek banks are just running on inertia now, they'll soon have to abolish these fees. One thing keeping people from switching was ATM usage (N26 only lets you withdraw for free up to some amount). This was especially since until a few years ago we were pretty much cash-only, but now that we're basically card-only, there's much less incentive to use an ATM.
Ok I see. Yes you're right, needing cash also helps incumbents, ATM operators can also charge whatever they want when you withdraw. Let's hope these fees disappear soon.
As far as I know, the only actual legal requirement is that SEPA transfers to other countries can't be more expensive than in-country bank transfers. It just happens that a lot of European countries don't generally have charges for bank transfers.
Yeah I knew it's not a legal requirement but still I thought it would lead to zero fees everywhere, because now when you need to do a lot of transfers, it makes sense to create an account in a foreign SEPA bank and then even the transfers to greek accounts would be free. Granted I don't know how much are bank transfers used in Greece (given the fee probably not to their full potential).
You do, but I've found that some countries don't really want you, and they'll slam you with onerous KYC requirements to drive you to leave. I currently need to fill out 30 pages of documentation and have "a Skype call" with my bank "for verification".
A lot of banks in many countries charges heavily for not maintaining the minimum balance. I think a lot of people can't afford that. Though the minimum balances are usually much lower than a normal BTC transaction.
Where I live (Canada), transactions are usually "free" up to a certain amount per month, but they often hit you with monthly fees. That is unless you can maintain a minimum balance in your bank account, in which case the fees become the interest they earn off that chunk of cash, I suppose.
I'm in Canada too and a couple years ago my regular bank sent me a notice saying they needed to increase my fees on my account plan by $1 making it a total of $16 per month IIRC. I already thought $15 was a total ripoff and trying to squeeze the extra $1 a month out of me got me annoyed enough to go looking for alternatives.
I got a free Tangerine account for free unlimited debit transactions. As a bonus I can withdraw cash with no fees at Scotiabank ATMs in addition to my normal bank. They also give you a VISA debit card that can be useful as a backup card for important online services (as long as you keep some money in it).
I also got a free (prepaid) Stack Mastercard. They give you a virtual credit card number you can use online plus a physical card. The main benefit though is 0% (or near 0%) foreign exchange fees. Most online services bill in USD and my normal bank charges around 2% extra in fees for the foreign currency conversion.
Then I reduced my normal bank account to the bare minimum $4 per month plan. So instead of squeezing an extra $12 per year from me, my bank gets $132 less per year now. However, that shows you why it works. Even if 9% of their customers do what I did they still make more money and I'd bet a ton that barely anyone reevaluates their banking because of a $1 per month increase in prices.
Canadian banks have a cosy non compete arrangement, and they are allowed to charge enormous Interac and CC transaction fees. Tangerine (Scotiabank's online only brand) and Simplii (CIBC) offer no fee accounts and unlimited free Interac. Canadians are very traditional and change resistant too, they like to go into the physical bank.
I think cheques still exist because there is no system in Interac for associating a destination account reference with an Interac transfer. In Australia cheques have been replaced by BPay (owned by the banks) and PostBillPay (owned by the Post Office) https://en.m.wikipedia.org/wiki/BPAY. In fact, I've never had to use a cheque as an adult except for e.g. buying a car/house. Interbank transfers and instant payments (Osko) have been free for ages, at least 20 years. https://www.rba.gov.au/publications/bulletin/2020/mar/two-ye...
It shows how arthritic banking is in the West that payment systems like AliPay haven't been allowed.
Sometimes it's lower, sometimes it's much higher. Usually the more people that are using the blockchain the higher the fees. Bitcoin right now mostly follows a trend where it gains in popularity, which causes a surge in transactions, which causes fees to go up, which in turn causes people to stop using it, etc.
Low on-chain fees are actually a disaster for Bitcoin. Once mining rewards dwindle to nothing due to halvings fees would have to rise astronomically to maintain hash power.
How much hashpower do we need to keep the blockchain secure? Maybe it's less than what we have today, though I suspect it's more. (ASIC mining reduces the risk of 51% attacks because there's no huge mass of "dark silicon" that could be temporarily redirected from running Slack or Monster Hunter to mount a 51% attack; the vast majority of hashpower that has been manufactured so far is busily mining away to support the blockchain.)
I'm not convinced that higher transaction fees would be a huge disaster. Maybe Lightning will work out (El Salvador seems to be betting heavily on it), or maybe people will use "custodial wallets" like LocalBitcoins, or simply run up a tab at the bar; with any of these approaches, relegating the public blockchain to weekly, monthly, or trimestral settlements for most people would be a mild inconvenience rather than a disaster.
El Salvador is using the lightning network to facilitate transactions for the most part. They are using the work of Strike & bitcoin beach in El Salvador as an example.
Before they can even pay $10 per transaction, they need to buy Bitcoins first.
The problem of the unbanked isn’t that they don’t have access to financial services, it’s that they don’t have enough money. They live paycheck-to-check, if that. There’s no point in converting what little they have to Bitcoin and paying fees on the conversion, and then more fees when spending it.
It's fees all the way down. I'm not even joking. I wanted to buy an ENS domain last week, so I put $100 CAD into an exchange (~$80USD). I abandoned the attempt because, after the fees to transfer out of the exchange to a private wallet and the fees to actually make the transaction on the blockchain, I wasn't sure if I'd have enough money. That's $80 to buy something that's supposed to be $5. I couldn't even figure out how to figure out what the damn thing would actually cost in the end.
I really wish comments would be more focused on telling the whole story rather than focusing on outdated information.
Lightning transactions are cheap and fast - so this argument is misinformed.
A core reason for El Salvador to adopt Bitcoin might be related to remittance - big part of their GDP is based on remittance and this will save people money.
They are using Zap/Strike (Lightning) and zero fees.
The phony "fees are $1,000 a tx line" and $10 hyperbole simply show you have no clue what you're talking about when speaking about Bitcoin. Even on chain the past solid week you could send free BTC transactions, or for a couple of cents.
I am sorry but what is the point of adopting BTC if vast majority of the transactions are going to be handled by a third party service. Makes no sense to me.
> what is the point of adopting BTC if vast majority of the transactions are going to be handled by a third party service
Because they've saturated the technical audience who can do bitcoin without a 3rd party service and now need regular people to shovel money in to keep the prices propped up.
This is the "please buy a single tube of toothpaste from my Quixtar stash" phase.
The point of adopting BTC is generally to get wealthier. Merchants accept BTC to have more customers, more revenue and ultimately more profit. As I have witnessed it, there has been increasing adoption of BTC slowly but surely. In El Salvador however now they have to accept BTC because the government mandates that. Whether that makes sense or not, I don't know, but it is happening in any case.
There is open market competition for these third-parties. The system is fully trustless. Furthermore, onion routing (akin to Tor) is in development to prevent that third-party from knowing the content of your transaction and who you transacted with.
> There is open market competition for these third-parties.
Like banks?
> The system is fully trustless
Except for those third-parties, you mean? The people running the Lightning network are essential to this system functioning and very, very few people won’t be fully reliant on a bank to store their Bitcoin — especially after the first time someone makes the news for losing their wallet.
The third-party can't steal your Bitcoins. Assuming your node is online 24/7, you can verifiably cash out your Bitcoin on the blockchain at any time.
The third-party doesn't hold your Bitcoin– both parties can close the channel and cash out, again without any trust.
Your Bitcoins can't be stolen by a third-party, unless you and your watchtower fail to broadcast a transaction with proof there was a channel transfer.
That sounds like a lot of infrastructure which you need to operate to avoid trusting your back. Do we have any reason to think the average Salvadoran wants to do that? If not, it’s not exactly realizing the sales pitch.
Because it's a global currency not reliant on the US dollar? Not everything is about perfect decentralisation too, third parties can run decentralised infrastructure so it's verifiable by users of the network.
With USD (and indeed any national currency), generally all functions except issuance are handled by third party services, that would be the status quo for a currency, wouldn't it?
Sure, but is Bitcoin trying to improve that status quo or replicate it? Am I supposed to be impressed that Bitcoin has built a system that is also reliant on third-party services, just like modern banking?
For the moment, starting up a lightning provider is simpler than starting up a payment processor, but how much of that is because of regulation? And do we have any evidence that in the future lightning providers won't be as regulated as modern payment providers? Why should I assume that in the future the situation with lightning providers is going to be any different than the current situation with PayPal?
Here in NL, everybody is "entitled" to a bank account. However, banks can, and do, freely reject people. They will block and ban your account if they want to. For businesses it's even worse.
So even if everybody has the right to have a bank account, it just doesn't work like that.
The main benefit from this that I can see is that El Salvador will attract bitcoin businesses with a lot of money and other bitcoin whales who might move there and start businesses, employing locals and injecting money into the El Salvador economy.
The average person isn't going to use bitcoin and the average merchant will likely never be paid in it.
The bigger concern might be that Bitcoin offers zero privacy; anyone you pay with Bitcoin can know exactly how much you have in your account, which is a huge personal security risk, possibly especially so in El Salvador.
If people use Bitcoin to store their life savings instead of banks, expect gangs to run around robbing people for their bitcoin because all it takes is one unscrupulous vendor to inform the gangs of your net worth.
The poor always pay more than wealthy for services. E.g. if you have a poor credit history you are unlikely to get the same rate as someone who doesn't
Right now, doing a Bitcoin transaction costs $0.97, so it's already false. If you are willing to wait ~48 hours for confirmation, it can cost as little as $0.15.[0]
Furthermore, the system in question is not Layer 1 Bitcoin, but Layer 2 Lightning. To use Lightning, one must perform a Bitcoin transaction to open a channel– akin to opening a bank account– which provides access to the entire lightning network.
I find opening a bank account for less than a dollar very attractive.
That being said, layer 2 fees exist as well– you must pay someone, usually a hub, to securely lock some amount of Bitcoin to a channel so that you may transact. (Note that the secure lock isn't a security deposit; a channel be closed with funds returned without any third-party trust.)
Doubt they will be using the Bitcoin blockchain, likely a custodial wallet powered by a normal database.
Like paying with your coinbase account to another one
Sigh. Bitcoin BTC, at 3 transactions per second, doesn't have the capacity to support El Salvador's economy. Even if Lightning worked (it doesn't), BTC doesn't have enough capacity to open channels for users at a reasonable cost. Salvadorians will end up forced to use proprietary payment networks denominated in BTC.
BTC is not cash anymore, it won't work as such. There are other cryptos that could work, we'll have to see how broadly 'bitcoin' is interpreted.
The CGT exemption will be of interest to crypto whales and entrepreneurs and may attract some, but organized crime is a concern given the nature of the asset.
Lightning does work. I've used it myself as have many others. You should really work on explaining what it is you actually mean by that statement instead.
Apparently they are using Lightning and a service LN Strike that recently launched.
LN requires an on-chain transaction for both opening and closing a channel and requires the node stays online 24/7 to receive payments. That's garbage.
Because Visa and other payment processors don't require opening an account? (e.g. a credit card, which is a much more involved process than opening a channel). Or 24 hour servers?
It's for sure a step backwards from regular cryptocurrency where ownership of private keys is enough to receive or spend. No servers, no "opening accounts" etc.
You can compete with Visa and other payment processors AND not have these arbitrary requirements through on-chain scaling and larger block sizes.
Lightning is not decentralised. You have up keep your node online 24/7 to prevent theft. Most people can't do that. So they will end up keeping their coins in the custody of nodes that run 24/7. Leading to centralisation. Lightning is just like a MySQL database extra steps.
You don't have to be on exactly 24/7. The default delay for spending coins from a commitment txn is 144 blocks in some clients and is usually scaled with channel size. Most clients let you configure it manually too.
That means you'd have to be online once within 24 hours of your counterparty trying to steal your channel balance to stop them. IMO this is pretty reasonable for a cellphone user.
It doesn't follow that this would lead to centralization of custody either. If you want to pay for better liveness you could pay someone to run a watchtower to watch your channels. Basically, it watches the blockchain for bad channel closes and posts the justice txn with the correct settlement for you in case it sees it. I'd be surprised if a service like LN_Strike didn't start using these.
According to Bitcoin maximalists 2mb blocks are too much for our infrastructure, and will hinder everyone from running their own node. But apparently keeping a node online 24 hours is not a big deal.
Are there any videos of Lightning in action in the real world (I.e. not abstract explainers)? Genuine question, I don’t know enough about it and would love to learn.
3 transactions a second is 100m transactions per year. So everybody on the planet gets one transaction per 70 years. So everybody gets one transaction in their lifetime to open a channel to a lightning network provider and that's it.
You can do far more than 3 tx per second in mainchain. Look into channel factories. 100s of trustless lightning network channels in 1 onchain transaction. Layer approach is the only viable scaling solution.
They're literally using Lightning for payments right now in El Salvador. They didn't do this without having local projects already. Bitcoin Beach (https://twitter.com/Bitcoinbeach) made a lot of this happen.
I don't think it is. Startups fail at tremendous rates and are well known for playing it really fast and loose, even if some of them are wildly successful. Not exactly something I'm interested in relying on for finances until there is a much longer track record.
The cost and complexity of opening channels for users is prohibitive. Any widely adopted solutions will therefore be custodial. Might as well use PayPal.
There's a big difference between a solution which requires you to use a custodial service, and one which gives you the option of non-custodial service - the latter allows for a much greater ability to hold custodial services accountable, by opting to self-custody, without forcing you to change your payment medium in the process.
Sure, I just installed it and its saying some impenetrable stuff about a swap address that is not controlled by my wallet and deposits will be converted to Lightning channels.
I'm not sure how you can say lightning doesn't work when it in fact does, 1ml.com shows you growing adoption and there are many private channels that won't even be known. There are many easy to use wallets, etc.
Channel factories will bundle channel open/closes into a single transaction, so it won't be burdensome on the main chain.
It is not hard to scale Bitcoin for millions of people for everyday transactions. You give people a custodial wallet and track the balances off-chain using a trusted third party. As long as a government is willing to allow such a service to legally operate:
1. You can easily support billions of bitcoin transactions a second since the transactions only change centralized database entries.
2. Users can send and receive funds using a website. You could even issue tokens that user could use to authorize fund transfers at Point of Sale (see Credit Cards).
If you want to ensure that this trusted party isn't hacked, you can have five trusted parties instead of one and use multisig so that 4 of 5 of them must consent and sign to do an on-chain transaction. You can something similar for the internal ledger maintained by the trusted parties to ensure that one of them doesn't maliciously alter user balances.
The typical rejoiner to this is: Why do you need Bitcoin to do this? Why not do it with fiat? They aren't wrong per se, you could do this with fiat and it would work pretty well. However building a system like this with Bitcoin does have some advantages:
1. User's can withdraw funds on-chain,
2. there is a clearly defined on-chain layer for settling large balances between institutions,
3. bitcoin isn't created by fiat from a government bank. This removes the risk of inflation in longterm international contracts, etc...
Thats all great until fractional reserve banking enters the game. In the end we will efficiently trade IoUs and the best outcome would be that they are redeemable and we have a gold-standard-like thing again. That in itself would be a godsend already though probably not what Bitcoin maxis vision looks like
>That in itself would be a godsend already though probably not what Bitcoin maxis vision looks like.
Bitcoin maxis have a very ambitious and grand vision and I don't think they should compromise it. It sets a high bar that drives innovation. I do think that over the short term any nation scale usage of bitcoin for everyday payments will look very different from that vision and that is ok.
What about using a blockchain internally within the country to manage the high throughput and still avoid centralization by relying on a single "trusted" third party?
For e.g., mining operations can be distributed within the country itself to ensure decentralization within the country. Then this internal blockchain network interfaces with the slower and more expensive bitcoin blockchain to do final settlements?
>Why bother with Bitcoin at all if you need a trusted third party?
This is a good question and we should always be asking "Why Bitcoin?" and think about the trade-offs.
For small amounts of bitcoin a trusted third party, especially an institutional trusted third party, makes a lot of sense. Convenience, availability and low transaction fees dominate the user's needs.
For large amounts of bitcoin, you probably don't want to use a trusted third party and you can afford to run your own infrastructure. For instance a national bank should not keep all its bitcoin on coinbase.
Bitcoin allows you to choose between these two trust models. It is very hard to remove a trusted party from a system which fundamentally relies on a trusted party. However it is often easy to inject a trusted party into a system to make it more useable or scalable. Thus, for maximum flexibility you want your base layer to be as trustless as possible and then add trust as needed to solve different use cases.
I’m still not seeing the value of Bitcoin for smaller transactions. Just use the existing banking system and if you want to buy Bitcoin then buy Bitcoin.
Haha as someone who listened to the entire Twitter spaces chat last night, it's amazing how ignorant HN is about what's actually happening on the ground in El Salvador.
To add color to the source you shared, no where in the article (or in my research) does anyone claim that what the majority elected Salvadoran government did here was illegal, only that their opposition didn’t like it and so called it a ‘coup’.
Based on my understanding the elected government was well within it’s rights to replace these judges under the constitution of the country. Also to echo the sister comment here, many of these judges were highly politically active oponents of the newly elected government.
Here is another good read if you want to understand the historical context in which El Salvador is operating [1]
In short, one of the primary reasons that El Salvador is in a difficult position financially and politically at all is the history of war crimes committed against them by foreign governments such as the United States.
In the 1980’s the US Government spent $1-2 million US dollars per day to fund a 12 year long proxy civil war to defend US imperial interests. This resulted in the US Government directly funding the training and recruitment of an army of child soldiers. The country is still dealing with the ramifications of this war today.
I see your claims that new El Salvador government is evil and raise you 1 US Government with a history of war crimes against the country.
There's statements from the EU,UN, and Human Rights Watch condemning the actions. I'm not an expert, but dismantling the justice system utterly (especially when it is critical to the government) isn't something to be taken lightly in any democracy.
I will admit that I don't know the reality on the ground as an outsider. However, it seems to me just as likely that this is a political struggle between the new government and their opponents.
As for the EU and the UN, these are the same orgs that supported the US/Canada/French/German/Italian 2011 War of aggression against the Libyan government, with the backing and support of the UN. Ostensibly it was in the name of taking down a dictator, but we now know it was for his crime of daring to try to build a pan-African currency (the gold-backed Dinar) that was not subject to the central banks.
I hear you claim that credible first world organizations (the United Nations!) condemned the action. (Please share those articles so I can review sources). However, given the track record of western colonial powers oppressing smaller and weaker governments, or invading them based on false pretexts, I find your unsourced claims to be dubious at best (Where are those WMDs in Iraq that the US and the EU claimed existed?)
It's really superficial, for example it mentions arbitrary descisions from part of the supreme judges, but completely gloss over the fact that they were members of political parties and we're seen at rallies all over the country, they delayed clear cases of corruption from previous governments and that's more than enough reason to get them out according to the constitution.
People want ARENA and FMLN out of the country for good.
Are you saying its surprising (or “amazing”) that people didn't spend 4 hours on fake Clubhouse listening about a country with an economic output of a single US equity talk about a plan that was unveiled less than a week ago and passed a day ago?
Even the most enterprising enthusiasts have barely gotten back home from the bitcoin conference in Miami
On HN if you try to post anything even remotely positive about bitcoin you get downvoted to oblivion, so it usually doesn't feel worth posting. For an introduction about El Salvador I highly recommend Jack Maller's talk where he made the announcement.
Regardless of your feelings about Bitcoin, it was really exciting to see the president of El Salvador himself pop into a Twitter Space last night, as the bill was being voted on, to chat with bitcoiners about the implications of the new law. This is exactly the appeal of Twitter, if you think about it: it's a kind of "direct democracy" where the leader of a country can chat casually with everyday people -- and not in some scripted townhall photo-op, but within a space moderated by the people themselves!
Sorry if this is not on your sensibilities, but that assembly was very corrupt so much so that people wanted them out as soon as possible, he did not command the military to do what they did, the military showed up in support for the people who were also there.
He has 90% approval rate on the opposition owned polls, and he has supermajority of the assembly for a reason, 30 years of pure corruption without any consequences by the previous governments, you'll not find enough people to oppose him to fill a boulevard.
The new assembly just passed a bill finally allowing Salvadorans in other countries to vote in all future elections, if that's not democracy I don't know what is, if the opposition is against the overwhelming support he has, maybe they should've done things right by the people in those 30 years, but they didn't and they're finally out.
And it was done democratically, by the people without a single protest.
Read into what the traditional parties did to try to block Bukele for running for president, they closed a political party overnight with a congressman from that party still in the assembly, which was unconstitutional, but nobody said a word there.
These are the same arguments people used to defend Hugo Chávez back in the day. He’s very popular, the military loves him, other politicians are so corrupt, he’s just doing what he has to do in face of American imperialist manipulation, etc.
They are both tapping the same deep vein of authoritarian populism, although nominally at opposite ends of the political spectrum.
El Salvador is not Venezuela as much as you'd like to think we're all the same, it's a totally different political landscape, we had a civil war where 80k people died in a cold war proxy and the guerrillas were consolidated into FMLN and death squad members formed ARENA, nowhere else in Latin America did a communist/capitalist conflict had this outcome, guerillas never became a party anywhere else as a means to end the war, all these deaths, for the very same people who formed political parties and for what?
Endless corruption when they got to power, we're sick of it.
check how the former ARENA candidate for presidency Javier Siman, who's also a high ranking member of ANEP and ARENA's party leader lobbies in the US for support of his own interests, it's not a secret except for the vast majority of people in El Salvador who are not educated enough to research on that, oh btw, who didn't prioritize education for 30 years? You guessed it ARENA and FMLN,
you might call giving most kids in school a populist move by Bukele, but he's actually closing a technological gap by doing that.
Remittances are a significant part of the El Salvadoran GDP. As a percent of GDP, remittances have been up to 21.8% of total GDP in recent years [1]. If encouraging Bitcoin reduces the 5-10% typical remittance fees charged on 20% of GDP, that could be a 1-2% boost to GDP purely through legislation.
Even if it doesn't last, it does force remittance companies to become competitive, which will benefit El Salvador for years to come.
This is good news in that we will see a real country with decent population use it and fail badly proving that Bitcoin is not viable as a valid currency. Once that is done its value should plummet dramatically. Until now it is not used for any payments and mainly for speculation/gambling to make easy money. Most of the people are just supporting it to hype up the value so they can make most profit.
Or, maybe just consider this, you are wrong and it ends up being very successful and more countries adopt it. For what it's worth, they have already been using Bitcoin in the El Zonte for some time now [1].
It doesn't really help my faith in BTC when the article never refers to actual Bitcoins like currency, and instead uses USD equivalent everywhere.
> Transfers of $35/family are made to 600 families every 3 weeks, which covers 50% of basic needs per household.
$35? Or $35 equivalent in Bitcoin? The article never really explains why giving them bitcoin is better than just giving them $35 in paper bills and coins. Just that the person giving the money will only do so as BTC, it doesn't sound like the townsfolk have any say in it.
> At the time of writing, the price of Bitcoin is $9226.56.
So anyone who paid their utility bill with Bitcoin at the time of the article overpaid by 4x compared to current bitcoin prices, or about 6x compared to the peak.
How realistic is it for this to continue when delaying a utility bill by a month could possibly make the value of that bill half, or double. I don't see how this can scale, and it sounds like the El Zonte situation only works because of the guaranteed BTC income by a benefactor.
Not only I have used it many times, I've even built a lightning network wallet (link in my profile).
You just have to look around and you'll see that millions of people are using it on a regular basis. Pure speculation can't make something become worth as much as Bitcoin is worth right now.
I would consider you wise then to use BTC for day to day activities considering you have used it many times. Did you use it to buy coffee when it was $60K and then use it to buy more BTC when it fell to $30K? Would you buy coffee with it when it is $150K or when it is $1 per coin?
Can we use Omni assets on Lightning yet? I havent checked in two or three years if anything besides bitcoin can be exchanged on that blockchain or state channel again
I'd suggest you write down on a piece of paper a measurable fact that would disprove your hypothesis. (The hypothesis you write down here as if it were a fact.)
In order for bitcoin to be used as valid currency it needs to be pegged to the local government issued fiat currency. If BTC fluctuates so much would you like a coffee or groceries with it knowing its value can be half or double tomorrow. Real question to ask yourself is have you used it to buy anything in the real world with it.
Right which proves the point that you believed in it and once it was practically put to use you see it is not practical anymore. Why use a currency that is not practical for day to day activity.
I continue to hold a small amount of bitcoin as a speculative investment. I hold much more ethereum as a speculative investment or to get yield from DeFi.
I am happy to pay and be paid in cryptocurrency, but I wouldn't want to allow my rainy day fund or funds set aside for specific purchases (i.e. maintaining continuity of life/business) to have exposure to the extreme volitility that cryptocurrencies have.
Just because one of the many potential use cases of cryptocurrency doesn't seem to be panning out very well doesn't mean that the other use cases are invalid.
They're using Strike, which has no fees, nearly instant transfers, can send globally (again for free) and only need a name and phone number. Isn't that better than a bank aside from clawbacks?
But you see that's the problem. With Strike you aren't tranasacting on the Blockchain, you're transacting through Strike which I then would settle the transaction for you. Yes it has the advantage of no fees, instant transfers, etc. But you aren't really transacting on the blockchain, at least not directly.
El Salvador picked BTC because of it's popularity, the problem is BTC is a terrible currency to actually use for something like this because of slow transaction speeds and high fees, so to get around that they augment it with Stike, which takes the decentralization out of the transactions, which makes the whole thing moot in my mind.
Strike is a custodial wallet. However, it is fully interoperable with self-custody bitcoin and lightning network wallets. I can send and receive payments with any other bitcoin wallet. Strike is the "rails" to/from traditional finance. It is possible to deposit USD and withdraw true bitcoin immediately. In my opinion, it is a good balance.
The biggest problem to me is that it is REALLY hard to understand the lightning network. I have tried most of the lightning wallet apps[1] and they are not very clear about where your keys are, how channels are managed, and what tradeoffs have been made. I am optimistic the infrastructure and technology will get there quickly. I think the lightning network will be kind of like email. Decentralized but most people use a few big players. I have been able to bounce back and forth tiny payments (less than a dollar worth) between most of these wallets in seconds. It's pretty amazing.
[1] Muun, Phoenix, Wallet of Satoshi, BlueWallet, Breez, Lightning Labs (beta, no longer available)
They may also have picked bitcoin because of its liquidity and its stable techno-social scaffolding.
Also, I assume that users will have the option to move funds from Strike into a hardware wallet (or similar) of their choosing. Either way, if El Salvadorans get in on the ground of floor of the state adoption phase of bitcoin, they are gonna make bank.
Yes, it's a smaller problem to lose even all your ransom money, than to be physically captured and put in jail for decades. Can't we just agree on that?
Also "fairly trivially traced" can be naive. Here's one scenario from a million possible scenarios. You hate politician John Doe and happen to know me. I have a stash of millions in ransom money on my public anonymous wallet.
So I start sending money to organizations close to John Doe, and John Doe himself, implicating him in crime. You give me cash personally for a job well done. I just laundered some of my money and used the "trivial to trace" money against someone else.
Things aren't as simple as you may believe. Sure, if you're stupid and directly cash out your coin to your persona, you'll get traced and caught.
But money is money, it's a resource you can use in countless ways to move the pieces on the board around and get someone to pay you for it.
Here's another example. I start donating 100k USD worth of coin to bunch of charities. You may assume one of those is a pawn. But you can't prove who it is. Well, I happen to know one of the charity owners. I give him 30%, I just laundered 70k. I also lost some, but eh? I can blackmail some more people. Other people's money are cheap to me when I risk nothing by taking them.
Those are relatively simple schemes. If you sit down and think, you can come up with much better ones.
For example what I use this ransom money to pay for some other criminal activity? Like kill someone. I move the problem to them, but they can pass the ball around more until you can't prove WTF is happening. You have no idea whom those wallets belong to and why are there transactions happening. You can trace the money but you have no idea after some point if the recipient has any clue about the origin, or if there's criminal intent.
Here's another weakness. Who has worldwide authority over crime? No one. So if I shift my coin to the opposite side of the world and cash it there, due to fragmentation, lack of cooperation and so on, I may have cashed out before someone manages to even make the right calls to begin negotiations on cooperation.
If your end goal is to get to cash it's quite difficult without doxxing yourself. For eg. imagine you do a ransomware hack, you have a BTC address with the BTC on it. Law enforcement as well as the company hacked both know the address. From that point they can follow where the money goes, it really doesn't matter how many different ways you elaborately transact.
You might try and run the BTC through a coin mixer however these attract attention and afaik are unreliable against an opponent like Chainalysis.
You can send the BTC to an exchange like Binance where you have not done KYC, however two issues with that. Firstly, law enforcement can contact the exchange and request halting the account. Secondly, without KYC you'll have very low daily limits and it will likely take a while before you can swap the BTC into something more private like XMR.
All your examples don't consider that we can trivially follow a wallet, get notifications when it does something and follow where the money goes. Yes law enforcement could absolutely knock on the doors of organisations that receive tainted BTC.
Speaking of global fracturing, partially true but I would still ask how do you intend to cash out? The only way that would work would be on a p2p website where you can directly sell to other users. This won't work if your somewhere off the map where there is not a lot of wealth. And somewhere where there is wealth you open yourself up to being caught if you have many large swaps.
The article claims that WU's fees in El Salvador average 10% of the remittances. You can read about my experiences with bitcoin vs. WU in https://news.ycombinator.com/item?id=27448744.
> the charges are ten dollars or so, that's bearable.
Sorry, but no that's an extraordinarily privileged take. $10 is a lot of money for just transmitting some USD. And it goes a long way in El Salvador. I highly doubt the average remitter is sending more than $500/month, so it represents a 2% tax. I only consider $10 an acceptable fee if I'm sending tens of thousands of dollars.
There isn't any currency conversion because El Salvador's official currency is USD. Assuming it's WU on both ends there's no settlement risk. It sounds like pure greed.
Honestly, I have completely given up on criticizing BTC - there was a reddit thread about post-apocalyptic society, and the BTC zealots were arguing that was the perfect place for cryptocurrency.
The argument was that, after society had completely collapsed, and people were killing each other over food and water, there would still be a need for wealth transfer and escrow services.
That is when I realized that I shouldn't take most BTC/crypto arguments seriously, because the people are way too invested personally and economically to be rational.
Instead of being a jerk and trying to shut down a conversation, and making completely unwarranted assumptions about people participating in it, perhaps you could actually make the case. Yeah?
When Bitcoiners bring actual facts to the table, people ignore it.
Bitcoin has been used in the El Zonte town for some time now and lightning is functioning and allows almost instant and practically free Bitcoin payments, yet if you read half the comments here, Bitcoin is very slow/inefficient system and is only used by criminals.
Maybe before such an ad hominem you need to become a bit more familiar with recent developments in El salvador. Associating this government initiative with criminality is a very reasonable thing to do.
I read the article and then I did some more research. His government was elected with a significant majority. Per the constitution they have a legal right to replace judges and even though the article skips those facts they never actually claim criminality - since there is no evidence of such.
Looking back at history, El Salvadore was devastated by a 12 year long civil war [1] in the 1980’s funded to the tune of $1-2 million USD per day by the US Government (Carter and Reagan administrations) funding child soldiers and such - let’s talk about that criminality.
This represents yet another valuable opportunity for crypto skeptics to set up falsifiable measure to check their skepticism against, but I'm afraid most won't bother going through the exercise.
Reading these comments has me a bit confused. Even in remote parts of Central America Androids are extemely common, there is less of a barrier to entry to a crypto wallet than there is to a bank.
There is so much misinformation about bitcoin, misunderstanding about the problems within countries, banking, politics. It's really unbelievable how almost everybody seems to be living in bubble where banks are safe and good.
The president said last night, in a Twitter spaces group, that they, the government, are offering a free wallet that will instantaneously transfer bitcoin to USD to any merchant that doesn’t want bitcoin exposure. He clarified that there will be no obligation for merchants to use this government funded wallet.
There are services that convert to fiat currency on the fly, no risk to the business. With the caveat that I have no idea if they are available in El Salvador..
Bitcoin will never be able to beat official currencies in developed countries in this important metric - short term inflation risk.
People tend to forget this but no other asset is safer in the short-term than the dollar, euro, etc. Why? Because no other asset has a powerful central entity whose job is to prevent loss of value above the 2% inflation target.
Is bitcoin specifically legal tender, or other digital currencies, or layer 2 solutions, or what exactly? If bitcoin only was made legal tender, then layer 2 solutions will not be legal tender, and businesses could choose to only accept direct bitcoin payments via the blockchain, forcing customers to pay high fees.
Then maybe as a customer I would buy from the seller that doesn't have the high fees. As soon as one business chooses to use the "cheaper and faster" option, then all other businesses sort of have to too, unless they want to be out of business.
Sure, if businesses collude to undertake user hostile actions, they could get this experiment to fail. Let's hope the incentives lead them to treat their customers better.
The President of El Salvador doesn't want to get couped. He figures his best bet is to establish a public persona, in English, and appeal to Americans (tech bros) directly.
Its the same in Europe. Russian Oligarchs bought British Soccer Clubs so that they could become public personalities and avoid being assassinated by the Russian Government or other oligarchs.
The political class in South America exists in a different sphere. They are ancestrally directly European, whereas the working classes of the country are ancestrally native American or mestizo. The concern for the every day worker is minimal as is the overlap between the worlds of these groups.
No, Japan recognized bitcoin as legal tender some years ago.
But smart move. Even the poorest of the poor have smartphones with a (limited) internet subscription.
So a web based wallet like www.coins.io will work wonderfully for them.
But the reason El Salvador is working together with Strike.me is because they have a service where someone pays you in bitcoin but you can choose to receive all or part of the payment in dollars or another currency.
I've read a bit about what Japan did in relation to Bitcoin, and I've read a bit about what El Salvador is proposing to do in relation to Bitcoin, and I've read a bit about what the term "legal tender" means, and honestly I can find almost no points of similarity between those three things.
y'all most not have heard of https://strike.me/ which operates on the lightning network to send whatever local currencies through btc instantly for little / no fee
If you run your own lightning node, lightning is non-custodial. But strike is just a wallet that uses their own lightning node. So, if using strike, strike has custody of your funds.
>If you run your own lightning node, lightning is non-custodial. But strike is just a wallet that uses their own lightning node.
I don't know the implementation details of the strike app, but I don't see why you can't keep the signing keys on the device itself (as opposed to the server), and the server is only used for communication with the bitcoin network. That way you don't need to run a lighting node, but they don't control your funds either. Thin wallets use this model I believe.
You seem to be correct, based on their suggestion that you download another lightning wallet[1]. My prior impression was that strike contained a lightning wallet and a custodial wallet (for their fiat exchange). That said, with low cost and instant lightning network transactions you can basically use it in a non custodial way (ie. transfer out the moment you exchange for fiat).
Regardless of your opinion of BTC or of crypto in general, 10 minutes to confirm significant monetary transactions that all parties can agree on, without the need for a central trusted authority, anywhere in the world, at any time of day, is a pretty significant achievement.
So how does paying in BTC via Lightning actually work? What kind of integration will store owners in El Salvador have to make within the next 90 days? Does this apply to buying a can of soda at a brick and mortar?
There's a bunch of open source payment processors they can use [1], BTCPay is my favorite. I think strike and a bunch of other Bitcoiners are helping them.
Does anyone know how the Strike app works? They say they use bitcoin to move usd to usd? Strike is the partner with the El Salvador gov that will help convert bitcoin to usd for any merchant who doesn't want the bitcoin. Merchants will be forced to accept bitcoin for payment for goods and services, and the government will basically subsidize the transaction (a huge tax on its people for the benefit of bitcoiners).
I kind of assumed this is a play to get $ from bitcoin tourism, but also clearly El Salvador is not a country that needs to take into account the affect it has on their own currency. They gave up on their own currency in 2004.
I think it's interesting that people are still harping on the transaction fees.
It's a fair point, but I don't honestly think that most people who've studied Bitcoin for more than a minute wants to use it for transactions. More and more people are seeing Bitcoin as either a store of wealth or a money making scheme. In either of those cases, the transaction fees really don't matter as much.
Incessantly bringing up the transaction fees seems to be missing the contemporary vision of BTC. The original intent of BTC is pretty much dead outside of black markets, and even then BTC wouldn't be a first choice.
I am just surprised how much negativity is in HN towards Bitcoin. This is the first case of decentralised open source tech winning against big established powers - governments/faceamagoos. We should be celebrating this. I sure hope that Bitcoin is going to be Linux of money/finance.
Lightning might not be at the scale it needs to be now but it will improve greatly. maybe it is good enough already? Like Ruby on Rails. People keep talking about it being slow while massive web applications are being built with and billions of dollars being processed.
I'm not. Bitcoin has stagnated, and it hasn't delivered its promise of being used as a DeFi currency.
I bet if it was Ethereum that El Salvador had chosen, the opinion wouldn't be as harsh. Proof of stake doesn't have the same energy consumption concerns.
imo this is still a great development for all of crypto and DeFi. It will also help protect people who aren't connected and wealthy from losing their value due to ever higher levels of inflation (it is currently much higher than 3%) http://www.shadowstats.com/alternate_data/inflation-charts
it's part of the larger argument: proof of stake systems give up explicit and transparent cost of decentralized permissionless currency for obscure and hidden costs of centralized and permissioned currency. and that cost is generally higher, because proof of work is the most efficient known (or possible) solution of such problem.
If BTC used proof-of-stake or some other scheme that was less energy-intensive/made graphics cards a scarce resource there would probably be less hostility towards it.
Just a small correction: You can't mine BTC using graphic cards, so BTC mining has nothing to do with the shortage of those. Ether on the other hand...
by comparing it to Linux do you mean where the backbone of finance is run by Bitcoin (like Linux running servers), or where <1% of users directly use Bitcoin themselves?
Linux's Unix predecessor originated in the mid-1960s and into the early 1970s. It's almost 50 years old at this point. It didn't even get POSIX compliance until the 1980s, and it was 20-25 years old (2x BTC) when Linus got around to building the Linux kernel.
Bitcoin (and blockchain generally) is only 12 years old. Time will tell how well this comment ages... but it's a bit unfair to compare the two directly at their respective ages.
well, Linux is hugely successful open source project. Virtually everyone is "touched" by it directly or indirectly.
It is one of core components of internet infrastructure.
Bitcoin could be that.
(of course I am aware that desktop/direct usage is really small)
I think a lot of the negativity comes from the fact that this is largely a forum of technologists, and Bitcoin is objectively inferior technology. That's not necessarily a knock against Bitcoin, it was revolutionary when it was introduced, but it was the 1.0 cryptocurrency and it's already essentially fossilized and become legacy technology. Miners hold sway over the community and they're not really interested in changing anything significant about Bitcoin, so now people are talking about absurdities like Lightning layered over Bitcoin to try to mitigate some of the flaws. We can save the effort and fix the flaws of Bitcoin by just moving on from Bitcoin. It's as though we were stuck with SSL 3.0 forever or something.
The only reason the vast majority of people advocating for Bitcoin are advocating for Bitcoin specifically is because they have invested in Bitcoin specifically, and they want the price of Bitcoin specifically to go up. Seeing people advocate for us all to be stuck with inferior technology forever because they have a financial stake in the inferior technology is exactly the sort of thing you should expect negativity about on HN.
well would be good to clarify, because there's no project that followed that is better on fundamental level. lots of solutions that trade decentralization and independence for performance, lots of hype and marketing, lots of bells and whistles of questionable value, lots of money being made in scams and rug-pulls.
> well would be good to clarify, because there's no project that followed that is better on fundamental level.
This is also a statement that need clarifying. What do you even mean when you say "on fundamental level"?
> lots of solutions that trade decentralization and independence for performance, lots of hype and marketing, lots of bells and whistles of questionable value, lots of money being made in scams and rug-pulls.
All of this can be said about btc too. Except the part about trading decentralization and independence for performance. Btc has really bad performance and decentralization and independence (from what?) can be questioned.
> What do you even mean when you say "on fundamental level"?
Fundamental properties of bitcoin are its decentralization and security achieved via and expressed in, very transparently and using very simple formula, in terms of energy expenditure, tying it unambiguously to the real world physics.
No other project has such properties or comes close to the level to which those properties are achieved in bitcoin.
> All of this can be said about btc too.
Nope.
> Btc has really bad performance and decentralization and independence (from what?) can be questioned.
Only if you don’t understand what performance of a cryptocurrency is, or what decentralization of cryptocurrency means. And independence is from marketing campaigns, politics and other shenanigans that crypto world is full of.
> Fundamental properties of bitcoin are its decentralization and security achieved via and expressed in, very transparently and using very simple formula, in terms of energy expenditure, tying it unambiguously to the real world physics.
>No other project has such properties or comes close to the level to which those properties are achieved in bitcoin.
There are other PoW coins. Some of those do calculation that are actually useful on their own. That means that there are coins with better, as you say, fundamentals.
> Nope.
Yes.
> Only if you don’t understand what performance of a cryptocurrency is, or what decentralization of cryptocurrency means.
Only if performance and decentralization mean something completely different in cryptocurrency than anywhere else. If so, can you explain or provide a source that explains it that I can check.
> And independence is from marketing campaigns, politics and other shenanigans that crypto world is full of.
BTC is full of marketing campaigns, politics and other shenanigans. To claim otherwise is to ignore, or be completely oblivious, to bitcoin history and present.
> Some of those do calculation that are actually useful on their own. That means that there are coins with better, as you say, fundamentals.
no, getting anything valuable out of PoW function besides security of the chain is a subsidy to the attacker and lowers the security of the chain by that same amount. it also introduces unnecessary complexity, potential of bugs, point of contention over consensus rules, etc. objectively worse.
> Yes.
trade decentralization and independence for performance - bitcoin doesn't, it's the most performant and decentralized financial network in the world
lots of hype and marketing - there's barely any compared to shitcoins
lots of bells and whistles of questionable value - barely any compared to shitcoins
lots of money being made in scams and rug-pulls - zero scams perpetrated by bitcoin developers, shitcoin world is built on scams
so no, none of it aplies to bitcoin, all of it applies to shitcoins.
> Only if performance and decentralization mean something completely different in cryptocurrency than anywhere else
i don't care enough to argue with you about definitions of performance and decentralization, ultimately you decide what matters to you. what matters to me at the moment is best represented by bitcoin - security per joule, cost of attack and cost to participate. every other shitcoin is far behind.
> BTC is full of marketing campaigns, politics and other shenanigans. To claim otherwise is to ignore, or be completely oblivious, to bitcoin history and present
false. bitcoin ecosystem is full of people that will market things to you, some honest, some not very much. shitcoins on the other hand are built on and of marketing and scams. if you don't understand the difference, we can just stop here, no point to continue.
> The only reason the vast majority of people advocating for Bitcoin are advocating for Bitcoin specifically is because they have invested in Bitcoin
And people only hate on it because they missed out. It doesn't matter how hard they try to justify the negativity with technological argument. Everyone still knows it's just jealousy speaking. I'm guilty of this and so are you.
To add to this the blockchain solution that's likely to be adopted will ultimately be multilateral agreements between democratically elected governments deciding to use a technology not designed to align with financial incentive/greed for its adoption, unnecessarily transferring wealth from later adopters weighted tiara towards the earliest adopters.
It’s sad to see how pessimistic people here are against cryptos. Try flipping that perspective and see how this can benefit so many people in the world.
One angle I haven't seen explored much yet: This move will mean that people are legally required to use bitcoin, whether they're prepared to or not.
How does this work out for individuals running small businesses, who may not have the technical expertise to adapt well to Bitcoin? I fear they're quickly going to become the targets of phishing attacks.
Wouldn't be better to just start a government run block chain and use USDT.
The folks behind tether will probably "loan" them a reserve to start with. It costs them nothing to create so they "loan" them out like candy and the price stays fixed at or near 1 USD.
Other governments are already accumulating BTC silently. Way too many eyes on the topic lately. There will be some FUD along the way (maybe even El Salvador banning/unbanning BTC up to few times - the classic) but I believe at some time news will start popping left and right that other countries hold BTC on balance sheets. Will eventually start with ETH too if it hasn't already.
Re people below:
I don't have any sources to back up my claim, sorry. I should have put more emphasis that what I wrote is mostly based on my beliefs and observation over years. You will only hear the news after a government has acquired amount of BTC they're satisfied with.
If I wanted to acquire large amounts of BTC for the best price, I would do so quietly, while enjoying prices lowered by the Korea/electricity/whatever FUD (not saying these arguments against BTC are invalid but they would serve my goal). Feel free to dispute or downvote, whatever suits you.
I'm looking more towards ETH, so far BTC steals the spotlight but ETH has superior bullish narrative with recent development. But yeah, could be days or months of accumulation, one will never know.
>The new law means every business must accept Bitcoin as legal tender for goods or services, unless it is unable to provide the technology needed to do the transaction.
how easy is it for businesses to incorporate tech like this?
Legal tender laws do little to give a commodity value as a currency. No central bank runs the Bitcoin blockchain ledger as their payment settlement system so no one truly accepts Bitcoin in payment of taxes.
As a world, we shouldn't be encouraging the use of a currency which is literally churning out CO2 into the air when there's so many less wasteful cryptos out there
The less wasteful cryptos are more centralized. What's the point of using an inefficient data structure (blockchain) if you are sacrificing de-centralization in pursuit of gaining efficiency? Over time miners will move into renewable energies as the price of them goes down.
From a financial trading/pricing standpoint, I'd say bitcoin is centralized too, in that binance, bitfinex, coinbase and the rest of the major exchanges are necessary for the trading process.
Then when you add their dependence on centralized stablecoins like Tether to the mix, I don't think BTC would have the price it has now, if it were truly decentralized.
I know what "fascist" means. "Authoritarian" might be a slightly better epithet for the current president Bukele. His party recently voted, in the assembly, to fire five supreme court judges who opposed Bukele.
Does anyone know how Strike works? Strike is the private partner to the El Salvador government that will help convert bitcoin to usd that merchants are forced to accept.
Remittances are a big part of El Salvador's economy, and they're expensive and risky. I wrote about my Argentine experience with these issues at https://news.ycombinator.com/item?id=27448744
When will this myth die. Do you have any evidence of this? See below a report from a firm whose task is to find bad behavior on the blockchain.
Key points:
- 0.34% of tx in 2020 were illicit
- Of that 0.34% it is almost all scams and darknet market tx
In 2021, the large darknet markets either only accept Monero or accept BTC and Monero. Large ransomware gangs like DarkSide prefer Monero (they offer discounts for it). It's reasonable to assume that the percentage of BTC tx that are illicit are even lower as Monero assumes more of the activity.
That's a very good question. IMO it seems pretty unlikely that bitcoin will undergo another fork any time soon, the people that were fine with forking went to BCH and then had many subsequent forks meanwhile the people that stayed on BTC either believed in small blocks or believed in the virtue of not forking.
I meant it in serious way (as serious as Bitcoin is, which is not much).
How can you legally define what "bitcoin" is, when that definition is not clear?
Most people will tell you "bitcoin is whatever is in the consensus in the last release of Bitcoin Core, based on the bitcoin github repository"... but that is still kind of finicky
Bitcoin to their credit does not change the consensus rules all that much (only via "soft forks"). But still.
Is code in bitcoin github repository what now decides what is legal tender in El Salvador?
Does El Salvador now need to agree with all the decisions Bitcoin Core team makes? What if they don't like Taproot?
A lot of the Bitcoin software around still doesn't allow bech addresses. Does all El Salvador citizens now need to support them? Even when the software doesn't? Is bech32 part of "bitcoin" as defined by El Salvador?
Bitcoin has too many problems. Each government will issue their own crypto currency and retain full control over their currency and tax revenue. Why wouldn't they?
There's disappointingly much heat and little light in this thread; lots of people in rich countries ripping on El Salvador (and bitcoin) with little more than stereotypes to go on.
Let me try to displace some of the content-free flaming with real
information.
I'm not in El Salvador, but I do have some experience with how Bitcoin gets used in practice in low- and middle-income countries, despite the transaction fees sometimes being high. I don't have experience with Strike or Lightning in general, so while in theory they should help a lot with the transaction-fee issue, I don't know how they work out in practice.
I’ve been using Bitcoin to get paid for a couple of years at this
point where I live here in Argentina.
It’s currently 13 years after Bitcoin’s invention, and some
people think it’s regressing instead of progressing. Well, 13 years after
the internet’s invention was 01982; not only couldn’t you get so much
as a weather report online, much less IRC, but many of the early
interesting experiments like NLS at SRI had shut down, and more and
more places were disabling guest access to their hosts—you couldn’t
run so much as a game of ADVENT without getting a username. And a
password. Things were seriously regressing. The only people you
could talk to on the internet were other people who really bought into
the subculture.
If you live in a country with a highly functional banking system and
no kleptocracy, Bitcoin is probably a bit puzzling unless you have
family in Cuba. But it’s not puzzling at all for those of us who live
somewhere in the middle of the broad spectrum between Switzerland and
Somalia, because most places have a little kleptocracy. Argentina
is a stable democracy, far from being “a failed state,”† but if you
want to send US$500 abroad via non-Bitcoin means it’s basically
impossible, and the only broadly available savings vehicle is real
estate (“ahorrar en ladrillos”), which of course grossly inflates
real-estate prices, with a substantial part of the capital city
occupied by empty apartments someone bought “as an investment”.
Historically, Argentines have saved by buying dollars, but that’s
limited to US$200 a month now, and then only if you have a
non-under-the-table job (about a third of total employment is under
the table):
You can see that in September 02019 when this measure was imposed the
price of a dollar was AR$63.50; now it’s AR$155. So whatever savings
you had in pesos in 02019 have lost 59% of their value to peso
devaluation.
In 02001 a lot of Argentines had saved dollars in their
dollar-denominated bank accounts. This did not preserve their savings
through the financial crisis that year; the cash-strapped government
limited withdrawals to a trickle, then converted dollar deposits to
pesos at a one-to-one rate, then released the exchange-rate peg, at
which point peso went overnight from being worth US$1 to being worth
US$0.25 before settling at about US$0.31 for the next few years. The
US did something similar in 01933.
Some might suggest using “alternatives to banks like credit unions
where customers—as owners—hold more power,” but Credicoop depositors
suffered the same two-thirds confiscation of savings as depositors in
for-profit banks. And they pay the same 3% tax on bank transactions
including checks. That’s more than a fast Bitcoin transaction fee of
US$15 for transactions over US$500.
But we’re not a failed state. There are no gangs of bandits roving
the streets in Argentine cities (though there are some pretty bad
slums where you’ll get robbed if you wander in without knowing
anybody). Courts, free public hospitals, and roads continue to
function, though there are more potholes than a year ago. Argentine
infant mortality is 10 per 1000 live births, down from almost 20 in
the late 01990s and the same as the late 01980s in the US; life
expectancy at birth is 77 years, worse than Switzerland’s 84, but the
same as China and Hungary, and better than Saudi or Mexico. (Somalia
is 54.)
Most of the world, and notably El Salvador, is worse off than Argentina, although not
necessarily in such a statistically transparent fashion. About one
fourth of the people in the world are unbanked, 51% here in Argentina,
70% in El Salvador;
even advanced countries like Russia, Hungary, and Uruguay have roughly
a quarter of the population unbanked:
And if your family lives in a country like Iran or Venezuela subject
to US sanctions, and you live in the US? Good luck sending them an
ACH, instant or otherwise!‡ It’s well known that Bitcoin is very
popular in Venezuela, which kind of is a failed state, so one of the
Venezuelan governments is trying to tax Bitcoin remittances at 15%.
Bitcoin handles a few billion dollars per year in such
remittances, which are the lifeblood of the Salvadoran economy.
A few billion dollars a year might seem like a trivial amount of money to someone
in a rich country, but in poor countries, it’s enough to keep several
million people alive.
Even in the US, it’s common for the police to confiscate large amounts
of paper currency just because they can (“civil forfeiture”); US bank
accounts are probably fine for US$100K but probably somewhat risky for
US$10M if the bank thinks you don’t seem like the kind of person who
ought to have it. US$10M in US$100 bills fits in a box you can wheel
around on a dolly, but Bitcoin is a lot more practical. (And of course
US$10M in dollar bills loses about US$200k per year to inflation.)
The problems with official corruption in El Salvador are reputed to be
dramatically worse than in the US, and Bitcoin should help a lot with that.
Transaction fees are usually high enough that you wouldn’t want to use Bitcoin
to pay for a can of Red Bull or even a restaurant dinner. But it’s
extremely practical as an alternative to Western Union or US$100 bills
or gold, even with the current very high transaction fees. At the
moment, the Bitcoin transaction fee is very low—the median Bitcoin transaction fee
in the last block was 0.0495 millibitcoins, which is US$1.72:
Three months ago it was at what I think of as a more normal rate of 0.31 millibitcoins, US$11, which is lower than the 3.4% spread you’d pay to a jeweler or black-market money
changer for transactions over US$350:
So, Bitcoin doesn’t have to be a cypherpunk utopia to be a big
improvement on the status quo ante. For those of you living in
stable countries where your worries are things like “instant and
extremely low-fee ACHs” and “decentralized utopia”, this may be very
confusing, but try to remember that most of the world lives in places
with much more pressing concerns, concerns that Bitcoin helps a lot
with. And you may live there too, soon—the loyal subjects of Kaiser
Wilhelm in 01913 certainly didn’t expect that in 15 years they’d be in
the middle of a hyperinflation episode that remains legendary a
century later.
I think that, by providing workarounds to the people who need them,
cryptocurrencies probably not only ameliorate the most immediate and
pressing concerns of poor parts of the population like Venezuelan
immigrants and MS-13 victims, but probably also adjust the power
balance in a more liberal and democratic direction. This will improve
the chance of those concerns being ameliorated by public policy over
the next decades as well. But it’s hard to tell what will really
happen. The potential disaster scenario is that, by making most
taxation impossible, cryptocurrencies destroy the modern welfare state
without providing anything to replace it. So the public hospitals
close, the enormous police force starts to support itself by
extracting tribute, and the infrastructure decays. Pretty similar to
what’s happened in the US over the last 50 years, in fact, only more
so.
However, at this point I think the modern welfare state is already
doing a good enough job of destroying itself without any significant
help from cryptocurrencies—as evidence, I can point to Maduro, Macri,
Bolsonaro, Trump, and Brexit, and metonymically to the social changes
they betoken. So at this point I’m more worried about cushioning the
collapse than preventing it.
† We’ve remained democratic since 01983, electing presidents from
three different political parties (UCR, PJ, and PRO), and there’s no
serious insurgency. It’s the economy and government policy that
are ruinously unstable, to a point that seems satirical to anyone
accustomed to the US, but is lamentably common worldwide. Rich people
sometimes say they don’t know of legitimate uses of Bitcoin outside of
“failed states”.
> The potential disaster scenario is that, by making most taxation impossible, cryptocurrencies destroy the modern welfare state without providing anything to replace it. So the public hospitals close, the enormous police force starts to support itself by extracting tribute, and the infrastructure decays. Pretty similar to what’s happened in the US over the last 50 years, in fact, only more so.
Why does it make most taxation impossible? Goods and services still change hands.
Maybe it won't! It's a potential disaster, not a guaranteed one. You can read Tim May's Crypto-Anarchist Manifesto for a slightly more detailed argument, and there are decades of cypherpunk stuff to read on the subject, mostly from the perspective that destroying the welfare state would be really super great.
I don't agree, but the immediate and pressing problem for most people (especially in El Salvador) is not the potential collapse of the welfare state but the depredations of kleptocracy.
Destroying the welfare state doesn't imply the end of governments.
In my opinion, it would be good if we could focus on taxing the things that actually should be taxed: land property and pollution, and stop taxing transactions.
And it would still be egalitarian, since people who own tons of land are not poor.
> Destroying the welfare state doesn't imply the end of governments.
You might be right (nobody knows what the future holds) but that was certainly the vision May had (his .sig ended with "collapse of governments"), and it may be the vision that Bitcoin was written to promote.
Certainly a shift to a land-value tax and a pollution tax will be at least a very large dislocation. I hope it's less traumatic than the Thirty Years' War.
> I’ve been using Bitcoin to get paid for a couple of years at this point where I live here in Argentina
Can you explain how this is better than e.g. Wise (formerly Transferwise), PayPal, or some other international money transmitter?
And in the case of El Salvador, I think Western Union is popular for remittance because people without a bank account can get cash. Bitcoin does not solve the “cash to people without a bank account”. If the idea is, that people should instead transfer money to each other via the Strike app, when they pay for things, I fail to see how this is different from e.g. sending money to each other with PayPal.
> Can you explain how this is better than e.g. Wise (formerly Transferwise), PayPal, or some other international money transmitter?
The short answer is that Bitcoin works and TransferWise and PayPal don't. I looked into TransferWise a couple of months ago when someone else asked about it: https://news.ycombinator.com/item?id=26657391
I can't get an Argentine bank account, and you need a bank account to use either TransferWise or PayPal. It's probably also the case—though I don't know for sure—that such transactions would happen at the "official rate", which is to say, you get 62% of your money, and the other 38% gets taken by the Central Bank to subsidize imports into Argentina and vacations abroad by Argentine tourists. I know that sounds too crazy to be true, but that's really what happens with bank transfers. Western Union doesn't do this, and if they did people wouldn't use them.
> Bitcoin does not solve the “cash to people without a bank account”.
This is not correct. It does. I can't access a bank account and I get paid in Bitcoin. It's true that I pay Bitcoin transaction fees in order to do so, but they are generally tolerable.
> If the idea is, that people should instead transfer money to each other via the Strike app, when they pay for things, I fail to see how this is different from e.g. sending money to each other with PayPal.
PayPal is exposed to a lot of risk of fraud because of being connected to the banking system, and it passes that risk along to its users.
A friend of mine had his laptop stolen via PayPal (in the US). He received the payment on PayPal, a woman came to pick up the laptop, and after she left the payment was reversed. He disputed the reversal, but because he couldn't produce a shipping tracking number, PayPal automatically rejected his dispute.
There are several cases of conferences that have done conference registrations through PayPal and then had all their revenues confiscated because PayPal decided that their pattern of transactions looked like a high risk for fraud (new account, lots of incoming money, no shipping tracking numbers). Linking your bank account to your PayPal account means that PayPal can, at any time and at their discretion, take all the money in your bank account, and this is also a thing that happens.
And of course it's widely known that PayPal discriminates against prostitutes and porn models and people associated with them, closing their accounts without notice when it discovers them, and sometimes confiscating their money.
These risks don't get smaller when your customers are the unbanked; they get larger. And passing those risks along to people who are living hand to mouth is unacceptable: temporarily losing access to your money is a much bigger deal when you can't afford to fill the gas tank more than halfway full because you don't have savings to cover gas for your car. Or food for your kids.
I don't know anything about Strike as such, but using Bitcoin itself eliminates those risks, although while you're holding Bitcoin, it does create cash-like risks of its own—exchange-rate volatility, seed phrase loss, and theft by trojans. Good people tell me the Lightning Network design has a similar risk profile to Bitcoin itself, but I don't understand it well enough to make such assertions on my own.
> The short answer is that Bitcoin works and TransferWise and PayPal don't.
The comment you link to say that you cannot get money out of Argentina (due to capital controls).
Fair enough, but in the comment I replied to, you said that you were living in Argentina, and got paid in bitcoin.
Am I to infer that you want to get your salary out of Argentina? And those who pay you are within Argentina?
Otherwise, I do not see the problem.
If you are paid by someone outside Argentina, they can deposit the money (as USD or whatever) into your PayPal or Wise account, and you can send them to whoever you want, get a debit card associated with the account, and spend/withdraw within Argentina (without needing a local bank account).
I do understand that bitcoin is a means to get money out of a country with capital controls, but normally money flows into these countries, as has been mentioned earlier, 20% of El Salvador’s BNP is remittance, i.e. people are sending money into the country.
>> Bitcoin does not solve the “cash to people without a bank account”.> This is not correct. It does
Bitcoin itself does not solve it. But I assume that you have found people in Argentina, who are willing to pay you cash for bitcoins?
I wonder if people are willing to buy your bitcoins (with cash) because they see it as an investment, or because they need to transfer their cash out of Argentina and cannot go through the regular system (due to capital controls).
> Fair enough, but in the comment I replied to, you said that you were living in Argentina, and got paid in bitcoin.
Right, two separate problems. The reason I think I can't use TransferWise to get paid is that I don't have access to a bank account. Maybe it's possible to open a TransferWise account without a bank account or credit card? Maybe someone in Argentina with a bank account could get paid that way, although they'd never know if their next paycheck was going to arrive or get cut off by a regulatory change.
Actually it looks like this has already happened. https://pirlutravel.com/transferwise/ says TransferWise doesn't work with Argentine bank accounts since January 02020. "Lo único que sigue funcionando por ahora para enviar y recibir dinero afuera es Western Union, AirTM y algunas plataformas de criptomoneda." Maybe this AirTM thing is something I should try.
> Bitcoin itself does not solve it. But I assume that you have found people in Argentina, who are willing to pay you cash for bitcoins?
Oh, sorry! I didn't realize you intended to exclude Bitcoin when you said "cash". Yes, there are people here in Argentina who will buy Bitcoin for dollars or pesos. Many of them are Venezuelan, so presumably a lot of those Bitcoins go to Venezuela next.
>The short answer is that Bitcoin works and TransferWise and PayPal don't. I looked into TransferWise a couple of months ago when someone else asked about it: https://news.ycombinator.com/item?id=26657391
Dude, just call a spade a spade and say what you really mean: You are using bitcoin to perform tax evasion in your country because you think taxes and the economy there are unfair.
Nope, although the fake currency transfer rates that are the big obstacle here are structurally similar in their economic impact to prohibitively-high export tariffs, they aren't actually taxes; they don't go to the Treasury but to the Central Bank, and so they don't pay for social services but rather to subsidize imports, further hollowing out the Argentine economy and destroying our competitiveness. But the evidence suggests that, even if I'm willing to take the 38% haircut, TransferWise and PayPal simply don't work. They just don't have service here.
Argentina does have a little bit of income tax, which I'm not allowed to pay (I tried, but the tax office turned me away because they don't accept income taxes from illegal immigrants), but most of the tax revenue here comes from the VAT, which I pay just like everyone else, because it's included in the price of everything. Exports of information technology services, which is what I do, are exempt from VAT. In fact, when I had a company here, before I was an illegal immigrant, I had to pay a lot of extra VAT that was supposed to get refunded, but it never was, because following that aspect of the law is too inconvenient to the government. (Because all my revenue came from exports, you see.) One accountant suggested that I bill a friend's domestic company for fake services in order to get the refund. I refused.
(This may throw some light on why TransferWise and PayPal have opted out of doing business here.)
I understand that if you've lived in a country all your life with a more or less reasonable government, all of this sounds ridiculously implausible. Government economic policy optimized to destroy domestic industry at the expense of imports? Tax offices refusing to accept taxes? Tax offices breaking the law by refusing to refund VAT? Accountants recommending fraudulent invoices as standard business practice in order to work around the tax office breaking the law? And before I moved to Argentina, it would have sounded ridiculously implausible to me too. Maybe I would have assumed that people were only interested in Bitcoin for tax evasion, if it had existed then! Hopefully I wouldn't have been such a fool as to accuse random people on the internet of crimes as a result of my misconceptions, but I probably would have done that, too.
If I understand your situation correctly, you are working in Argentina, but not paying income tax because you are a non-resident, and the source of your income is outside Argentina.
In that situation, I would look into setting up an offshore corporation with a bank account to hold the income, and then get a debit card that could be used in Argentina.
This would be a hedge against the volatility of bitcoin (but maybe you see that as an advantage) and it would not require you to get cash from strangers, which I personally would be a little hesitant about, since there is a non-zero chance you are accepting dirty money and/or helping people circumvent currency controls, but I do not know the laws of Argentina, and whether or not you are violating any laws here.
> If I understand your situation correctly, you are working in Argentina, but not paying income tax because you are a non-resident, and the source of your income is outside Argentina.
Very nearly—I'm working in Argentina, and the source of my income is outside Argentina, but I am not paying income tax because AFIP refused to issue me a CUIT without a work visa, but I'm not a non-resident; I'm an illegal immigrant.
> In that situation, I would look into setting up an offshore corporation with a bank account to hold the income, and then get a debit card that could be used in Argentina.
I have no idea how to do this, particularly without being able to leave Argentina. Also I don't think it's really a practical solution for the vast majority of people in either Argentina or El Salvador. (Also, most people bridle at taking the 38% haircut from the fake exchange rate, which at times has gone as high as 50%. In Venezuela it's sometimes been over 90%.)
> get cash from strangers, which I personally would be a little hesitant about, since there is a non-zero chance you are accepting dirty money and/or helping people circumvent currency controls
Any time you handle money, whether from a bank or anywhere else, you are accepting dirty money and/or helping people circumvent currency controls. The nature of money is that it is dirty and circumvents currency controls. That's the advantage money has over a gift economy: I don't have to worry whether the person I'm selling my car to, writing software for, or selling Bitcoin to is a good person or a bad person, whether when they return the favor it will be in spades or stintingly, or whether they will die or leave town before returning the favor. Of course I would like my money to fund good activities like education, family remittances to Venezuela, and abortion rights†, rather than bad activities like factory farming of livestock, constructing nuclear weapons, or exploitative garment sweatshop labor; but the nature of money is that it grants each individual the autonomy to make their own moral choices about how to direct their resources, rather than submitting each innovation for community assent. Sometimes they make the wrong choices, but that is better than not having the choice at all.
Similarly, the ice cream shop down the street has no duty to inquire whether the young woman buying ice cream earned that money from masturbating in front of a webcam for strangers on the internet, which I think is an occupation in which bitcoin is now very popular. Indeed, it would be unacceptable for them to make such inquiries.
I'm hesitant about getting cash from strangers for a different reason, which is what I thought you were going to say: they might shoot me or rob my house and take the cash back. With banks and Western Union this is a much larger risk.
______
† Abortion was illegal in Argentina until December. One of the things I did with my money in the past was to buy abortion manuals and give them away in the park. (It turns out there were legal drugs in Argentina which could produce safe first-trimester abortions.) Probably many people considered that money "dirty", but because we live in a money economy, the people who printed the books didn't have to worry about being turned out of their homes or going hungry as a result. Free abortion took a really long time to gain community assent.
> [offshore corporation] I have no idea how to do this, particularly without being able to leave Argentina. Also I don't think it's really a practical solution for the vast majority of people in either Argentina or El Salvador
It’s fairly easy, but agree, it is not a practical solution for most people.
But then, most people do not get their income from abroad, so bitcoin isn’t practical either, for example you yourself exchange the bitcoins for cash, to use them locally (rather than use bitcoins to pay for your ice cream).
There is a market for “cash for bitcoin” (I think) because Argentina has capital controls, i.e. people making money in Argentina, that they want to get out of the country, and can’t go through the regulated system, are willing to buy your bitcoins, possible below market rate.
So bitcoin primarily solves the problem of getting money out of a country with capital controls, but most people living in a country with capital controls do not regularly face this problem.
You can say that for you, it solves the problem of getting money into the country, but there are plenty of alternatives, sure, some may have downsides, but bitcoin is not without downsides.
For spending money day-to-day, bitcoin does not solve that problem, the bitcoins have to be exchanged to cash first, as no-one wants to pay a 4 dollar fee to buy an ice cream, or have to wait up to an hour for reasonable assurance that the transaction is final.
> Any time you handle money, whether from a bank or anywhere else, you are accepting dirty money
While this may be true, I was alluding to specific anti-money laundering laws. For example, in the U.S. you have to report cash payments of $10,000 or above. So your ice cream shop, accepting a few dollars in cash, do not have to report this, and would not be liable if it turns out that these money were from selling drugs or what have you.
But if a car dealership accepts $25,000 in cash for a car, and they do not report it, then they are complicit in laundering money (to the best of my knowledge).
I don’t know if such laws exist in Argentina, but they exist in the U.S. and Europa, and I believe they would also apply to accepting cash for bitcoin (although the U.S. reporting threshold is quite high, in Denmark the reporting threshold was around $500, last I checked).
> I'm hesitant about getting cash from strangers for a different reason, which is what I thought you were going to say: they might shoot me or rob my house and take the cash back
My concern was twofold, the regulatory issue, as mentioned, but certainly also, that the people showing up to give you money for bitcoin may indeed be “gagsters”, but I was afraid that this would come off as prejudiced, as I don’t know Argentina, so I shouldn’t make assumptions, but I do know another developing country fairly well, where there is drug trafficking with foreigners involved, and capital controls makes it hard for them to take their profit out of the country, so they have turned to bitcoin, and I really would not want to get involved with these people (i.e. show up and accept their dirty cash for bitcoins).
>Nope, although the fake currency transfer rates that are the big obstacle here are structurally similar in their economic impact to prohibitively-high export tariffs, they aren't actually taxes; they don't go to the Treasury but to the Central Bank, and so they don't pay for social services but rather to subsidize imports, further hollowing out the Argentine economy and destroying our competitiveness. But the evidence suggests that, even if I'm willing to take the 38% haircut, TransferWise and PayPal simply don't work. They just don't have service here.
As I said on my previous post, you are circumventing local laws and taxes while living in Argentina by using Bitcoin. TransferWise and Paypal may not work in Argentina (I'm pretty sure TW works but just doesn't offer you a favorable exchange rate), but you could still receive a normal bank transaction from abroad and sell your dollars cheaper as stipulated by the laws in the country you choose to live in.
>Argentina does have a little bit of income tax, which I'm not allowed to pay (I tried, but the tax office turned me away because they don't accept income taxes from illegal immigrants), but most of the tax revenue here comes from the VAT, which I pay just like everyone else, because it's included in the price of everything. Exports of information technology services, which is what I do, are exempt from VAT. In fact, when I had a company here, before I was an illegal immigrant, I had to pay a lot of extra VAT that was supposed to get refunded, but it never was, because following that aspect of the law is too inconvenient to the government. (Because all my revenue came from exports, you see.) One accountant suggested that I bill a friend's domestic company for fake services in order to get the refund. I refused.
Not true. Illegal immigrants can be registered as autonomous workers, and since you earn in dollars you probably would fall in the 'Responsable Inscripto' category and have to pay autonomous worker fees + 35% of what you earn. You are just choosing not to. Also, the VAT is not the lion's share of tax collection in Argentina, but income taxes.
>I understand that if you've lived in a country all your life with a more or less reasonable government, all of this sounds ridiculously implausible.
I'm Argentinian. I simply chose to migrate away to a country without stupid taxes or laws rather than having an unfair advantage over my countrymen by avoiding them abusing the low-attachment-to-where-I-work-from nature of my career. The local tech scene in Argentina is filled with guys like you who avoid as many taxes as they can (except VAT, of course) using crypto or offshore accounts and then goad on the internet about it. You are lucky tax evasion is not a jail-able offence in Argentina, probably because the corrupt politicians are cut from the same cloth.
Sorry if I come across as too harsh on my opinion on tax evasion. I think it's an understandable crime in Argentina, but it somehow rubs me the wrong way when people openly discuss it like this on the internet.
> you are circumventing local laws and taxes while living in Argentina by using Bitcoin. TransferWise and Paypal may not work in Argentina (I'm pretty sure TW works but just doesn't offer you a favorable exchange rate), but you could still receive a normal bank transaction from abroad and sell your dollars cheaper as stipulated by the laws in the country you choose to live in.
I can't receive a normal bank transaction without a bank account, and my experiences trying to open an Argentine bank account have been very disappointing, though admittedly I haven't tried in many years. https://pirlutravel.com/transferwise/ claims TransferWise no longer works in Argentina, since January 02020; I haven't tried it myself.
At present there are no local laws or taxes specifically on Bitcoin, so I'm not actually breaking them by receiving Bitcoin (though I am breaking laws by working for a living), but a charitable reading of your comment is that Bitcoin, like Western Union, is a loophole in the laws. And I think that's plausible.
> Not true. Illegal immigrants can be registered as autonomous workers
That's good news! But it contradicts what the clerk at AFIP told me last time I tried to get a CUIT; they told me I needed to regularize my immigration status first. Maybe the policy has changed since then. (Or maybe the clerk made a mistake—but mistakes made by clerks at AFIP still amount to law enforcement decisions.)
> Also, the VAT is not the lion's share of tax collection in Argentina, but income taxes.
So, it turns out that this is sort of false, but also sort of true, in a way I hadn't appreciated. https://www.cronista.com/economia-politica/Presupuesto-2021-... says the estimate for 02021 is that the IVA (VAT) is 28.9% of the federal budget, while the impuesto en ganancias (including both corporate income taxes and personal income tax) is 20.1%. It also has monotributo impositivo (the "autonomous worker fees" you mention) at 0.39%. So personal income tax stricto sensu is much smaller than the VAT.
(The vast majority of Argentine workers don't make enough to be subject to the income tax; with the recent legal reforms, as I understand it, the threshold has been raised to $150000 per month, excluding 90% of the workers in Argentina. Historically I would sometimes have made that much money, but it's been a long time.)
However, social-security contributions are 22.8% of the federal budget; in theory those contributions are not really "income taxes" in the sense that instead they fund your retirement, and when I had set up an Argentine company, we didn't have to pay them—we paid into a private retirement fund instead. But that legal option no longer exists, and unlike a private retirement fund, the government is not prudently investing those contributions in carefully managed investments that will ensure its solvency when I retire; it's just spending them. So in fact those contributions are income tax in all but name. And maybe that's what you meant. If you add social-security contributions together with the actual legal personal income tax, the sum is as big as IVA, or maybe even a little bigger.
If we're getting into real taxation versus de jure taxation, though, most of the government's budget comes from printing money, which in real terms is a tax on anyone holding pesos.
> I'm Argentinian. I simply chose to migrate away to a country without stupid taxes or laws rather than having an unfair advantage over my countrymen
I came here to help develop Argentina's economy with my skills and understand the reality of the world system. I have contributed to Argentina's human capital by teaching people my skills, by collaborating on projects, by giving talks, and most importantly through one-on-one mentorship; by exporting my services, I bring money into Argentina which is then ultimately used to pay down Argentina's foreign debt and for importation of urgently-needed goods and services. It's deeply unfortunate that Argentina's government puts obstacles in my way at every turn, but so far that hasn't stopped me, just injured me, and given me a much deeper understanding of the origins of poverty. But I am confident that every Argentine is better off, if only infinitesimally, because I am here—even if the government won't let me directly pay into the retirement fund como corresponde.
Even though I am living in poverty without access to adequate health care or banking and cannot visit my family, there are always people who will criticize me for having "unfair advantages" because they think I ought to be living in even worse straits. (It's a little unusual when the person criticizing me for those material advantages is in a much better material situation than I am, as in this case.) But I don't think worsening my situation is actually the way to improve the situation. Instead we should build civil society, human capital, and institutional infrastructure that are capable of lifting us out of the poverty trap our history has put us in.
You have probably made the best choice from a selfish perspective in leaving, but from the point of view of the Argentine project, I wish you were also here helping us out, because it's really hard to develop an intellectual community that can nurture nascent programmers when the best and brightest constantly move abroad. But who knows—even if you aren't teaching people in Argentina to program, maybe you're bringing more money into the country (via family remittances) than I am? (One of the Argentines I mentored is doing so.)
Did republicans (us) or conservatives (uk) actually succeed in making a bigger than party-typical dent to the social safety net system or popular support for it? Brexit was more aligned to defend the social safety net (from fictional threats, granted).
Now a country has BTC as legal tender, add to that the 700 B marketcap and the fact that it cannot be banned because nobody has enough political capital to piss off millions of holders.
We are in a new era. The social messaging out there is BTC vs Central Banks and maybe we'll get to that fight someday in the future, but in the meantime BTC is cannibalising Gold which was always the go to option for Libertarians, Government haters and Central Bank critics and opponents.
In my opinion Central Banks have nothing to worry, at least with regards to BTC. By the time BTC takes all of gold marketcap it won't post the outsized returns that it has up to now (regardless of the deflationary protocol) and so people will stop rushing in.
The article uses the words legal tender and says “ The new law means every business must accept Bitcoin as legal tender for goods or services, unless it is unable to provide the technology needed to do the transaction.”
Not a dupe. The earlier thread from 3 days ago is about the announcement that a bill would be proposed to make bitcoin legal tender. This thread is from the news from several hours ago that the bill officially passed into law by Salvadoran Congress.
That's not what legal tender means in all parts of the world. For instance, in England and Wales, legal tender has an extremely narrow definition - it means that a law court has to accept it for the payment of a debt. Legal tender doesn't apply to people who aren't law courts, and legal tender only applies to past debt - it doesn't apply to future payments such as a purchase at a shop.
It looks (from the news articles) that it has a broader definition in El Salvador, but unless one is an expert in that country's law, it would be best not to make claims about it. If someone is an expert, I'd love to hear what the actual facts are.
How are businesses expected to deal with the high transaction fees (>$5 last time I checked)? The minimum wage in El Salvador is $300/month. Even lightning network wallets must make periodic on-chain transactions. Also most crypto exchanges charge a minimum fee for any withdrawals. These costs seem like a significant burden to place on a developing country's small and informal businesses.
This is going to be great for drug traffickers and other shady elements operating in El Salvador. What they did was just opening the door for the worst individuals to laundry money and buy assets in El Salvador.
[0] https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-...