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Bitcoin The Almighty Buck

What Happened When an Entire Town Went Full Crypto (bloomberg.com) 79

Posted by EditorDavid from the buying-with-bitcoin dept.
Bloomberg Businessweek describes what happened when an anonymous donor started "seeding" the tiny El Salvadoran surfing village of El Zonte (population: 3,000) with Bitcoin, turning it into the world's biggest Bitcoin experiment. Workers now receive their salaries and pay bills in Bitcoin, tourists can buy pupusas with a special Bitcoin payment app, and community projects are financed with Bitcoin donations. According to Jorge Valenzuela, an upbeat 32-year-old surfing aficionado who leads the volunteers, "it has changed my town...." [T]he most striking thing these days is the orange "B" — the international symbol for Bitcoin — splashed on garbage cans, near the entrance of the dirt-floor pizza joint, and hanging on the wall near the surf shack at the beachfront hotel. The town has never had a bank. Now the lone ATM buys and sells Bitcoin... In El Zonte, Bitcoin is a possible solution to an actual problem, as opposed to a solution in search of a problem, which is how critics describe its role in, say, the U.S...

But it was the pandemic that ultimately jump-started the project. When El Salvador's tourism industry and El Zonte's economy collapsed, Michael Peterson started making monthly transfers of about $35 in Bitcoin to 500 families around town [on behalf of an anonymous donor]. He used Wallet of Satoshi, one of the many existing smartphone apps created for small transactions using Bitcoin, which is notoriously impractical — expensive and slow — for everyday purchases. As more stores began asking how they could accept Bitcoin, Peterson decided El Zonte needed its own app. The Bitcoin Beach Wallet, which launched in September, similarly uses technology that allows for small transactions. It shows users how much they hold in Bitcoin and greenbacks and where they can spend it. Shops in town price everything in dollars, whether the underlying transaction is in Bitcoin or not. A cappuccino always costs $3.50, even if Bitcoin's value has just jumped or dropped. In this way, it behaves more like a token than a currency...

He says that 18 months after the project launched, roughly 90% of El Zonte's households are interacting with the currency regularly. "It's crazy how fast Bitcoin has caught on," he says. Businesses are using it on their own to pay bills and accept payments. Residents use transfers to the Strike app, the ATM, and peer-to-peer transactions to move money back and forth between Bitcoin and cash... Many business owners say it makes up just a small fraction of sales. Although some 85% of families have access to smartphones, many still live in cramped houses with dirt floors and tin roofs. But for others, it's clearly been life-altering. A construction crew chief pays his dozen or so employees in Bitcoin. He was sick of losing them for a half-day every month so they could travel to the nearest bank, an hourlong bus ride away, on payday...

El Zonte is among the longest-running experiments of its kind, but it's still largely untested. "I'd be very interested in seeing what happens if we enter a bear market," says McCormack, the British podcaster. "If you're a shop owner and you have $50 a day in Bitcoin sales and all the sudden that goes up to $60, that's cool. But what happens when it starts going down to $40 or $30?"
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What Happened When an Entire Town Went Full Crypto More

What Happened When an Entire Town Went Full Crypto

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  • This doesn't make sense (Score:5, Funny)

    by 93 Escort Wagon ( 326346 ) on Sunday June 20, 2021 @02:23PM (#61504576)

    "A construction crew chief pays his dozen or so employees in Bitcoin. He was sick of losing them for a half-day every month so they could travel to the nearest bank, an hourlong bus ride away, on payday..."

    So he can manage to pay them in bitcoin, but somehow direct deposit was beyond his capabilities?

    • Agreed. Paying for a coffee with Bitcoin makes no sense either. The current BTC transaction fee is more than the coffee costs, and has recently been as high as $60. It's not a currency and doesn't try to be.

      Regularly updating the Bitcoin prices on all those labels must be fun, too. If the article had said some stablecoin like Tether or a coin designed to be a currency, it'd be more believable.

      • It makes no sense, yet they're using it. IMO if it gives under served communities the ability to bank and do financial transactions, it's great for them.

        • Re: (Score:3)

          by AuMatar ( 183847 )

          Except they're not. They're using off chain transactions. They could do the same thing with a bank account and transferring money between them, or PayPal, CashApp, or a dozen other things. The story here isn't Bitcoin enabling anything, its that mobile banking is helpful in isolated communities. Which, yeah, anyone could have told you that. Adding in the Bitcoin bit just overcomplicates it and makes it more difficult to trade with the outside world.

          • Re: (Score:2)

            by tlhIngan ( 30335 )

            Except they're not. They're using off chain transactions. They could do the same thing with a bank account and transferring money between them, or PayPal, CashApp, or a dozen other things. The story here isn't Bitcoin enabling anything, its that mobile banking is helpful in isolated communities. Which, yeah, anyone could have told you that. Adding in the Bitcoin bit just overcomplicates it and makes it more difficult to trade with the outside world.

            In other words, what people in Africa and India have known

        • The dude basically setup a small bank with his own invented currency and infrastructure. It makes sense if your into data harvesting and money laundering.

      • They do not employ the bitcoin network for transactions. They employ the lightning network [wikipedia.org], which has lower fees [medium.com], but it is no longer completely decentralized and requires both endpoints of the transaction to be online simultaneously.

      • The Bitcoin Beach Wallet, which launched in September, similarly uses technology that allows for small transactions.

        Whatever that "technology" is, it's not Bitcoin, but something operating off-chain, methinks. What could go wrong?

      • Regularly updating the Bitcoin prices on all those labels must be fun, too.

        From the fucking summary:

        Shops in town price everything in dollars, whether the underlying transaction is in Bitcoin or not. A cappuccino always costs $3.50, even if Bitcoin's value has just jumped or dropped.

        I know Slashdot tradition now forbids reading the article, but come the fuck on. The summary is not ambiguous.

      • as the guys in China who've been using subsidized electricity to process those transactions are kicked out by the local gov't (who are none too keen to be subsidizing this stuff while the power plants belch smoke into their already unbreathable air).
    • their economy is a mess and their government looks to be a Kleptocracy. Their per capital income is around $4k/yr but that's probably a bad indicator of how the average citizen is actually doing.

      Given the extreme poverty it's not surprising that direct deposit isn't an option. Most banks here, in the US, won't allow it unless there's a kickback from the employer in the form of fees (if you ever wondered why you can't split your check between more than 2 or 3 banks that's why).

      This is also not really

    • I'm assuming the workers can't get, or don't want to pay for internet banking. Or possibly they could but they still need cash to pay for things.

    • You missed the basic premise which is that the people in that town all have smartphones, and none of them have bank accounts.

      • I missed that too and feel pretty foolish for missing it.

        That said, my fiancee's kids all have smart phones and the only bank account they have, she set up for them. They don't do direct deposit and the one that is a waitress keeps all her cash in a folder sorted into envelopes for bills. They give me money once a month to pay their bills. I find the whole thing insane but quit caring a while ago.

    • "A construction crew chief pays his dozen or so employees in Bitcoin. He was sick of losing them for a half-day every month so they could travel to the nearest bank, an hourlong bus ride away, on payday..."

      So he can manage to pay them in bitcoin, but somehow direct deposit was beyond his capabilities?

      Likely the manager had to make a trip to the nearest bank to make a deposit, and transportation in many parts of LATAM is really shitty. In some areas in my country of origin, a 20-mile road trip can take you 2 hours (4 hours both ways), and that's if you own a car or can afford a taxi. Need to take a bus? Fuggedaboutit.

      You need an entire end-to-end B2B and C2B infrastructure to make online transactions, and that is lacking in many poor regions (even if/when they are equipped with wireless communication.)

    • "A construction crew chief pays his dozen or so employees in Bitcoin. He was sick of losing them for a half-day every month so they could travel to the nearest bank, an hourlong bus ride away, on payday..."
      So he can manage to pay them in bitcoin, but somehow direct deposit was beyond his capabilities?

      This assumes the workers actually have bank accounts instead of just cashing their checks at the first place they can. That is a bad assumption to make just on the wording of the quote, nearest bank could mean nearest check casher, or their employers bank, or however cashing checks works in their country. But the fact is we have the same problem in America, and direct deposit is not the answer here either.

      In the US, lots of people don't have bank accounts for many reasons, and there are multiple check cas

  • Check it out. Dustin Hoffman, 'Rain Man,' look retarded, act retarded, not retarded. Counted toothpicks, cheated cards. Autistic, sho'. Not retarded. You know Tom Hanks, 'Forrest Gump.' Slow, yes. Retarded, maybe. Braces on his legs. But he charmed the pants off Nixon and he won a ping-pong competition. That ain't retarded. He was a goddamn war hero. You know any retarded war heroes? You went full retard, man. Never go full retard. You don't buy that? Ask Sean Penn, 2001, "I Am Sam." Remember? Went full ret

  • Fees (Score:5, Informative)

    by vadim_t ( 324782 ) on Sunday June 20, 2021 @02:31PM (#61504586) Homepage

    The current average fee for a BTC payment is $4.7. It doesn't make sense to pay for a $3.5 coffee that way, it'll cost you more than double.

    The only way this may work is if it's not really Bitcoin. It's just some website that holds a balance for you, and at some point eventually settles things out. But that's not really bitcoin, it's just a clone of Paypal.

    Also, eventually you need to transact with the outside world, and at that point you need to interact with an exchange service at some point.

    Overall this sounds a lot like using Paypal or another similar payment service, except the fees are a lot higher and it works slower.

    • The only way this may work is if it's not really Bitcoin. It's just some website that holds a balance for you, and at some point eventually settles things out. But that's not really bitcoin...

      Sir! This is a casino, not some kind of shady back alley brokerage.

    • Bingo (Score:2, Informative)

      by Firethorn ( 177587 )

      You're right. What happens is that you deposit your bitcoin into what amounts to a very lightly(compared to actual) regulated bank. Think "there's more accountability when you store your money with the mafia" levels of protection and regulation.

      They then allow you to "transfer" "your" bitcoin between people within that bank/network with lower fees at higher speed, but it's as cryptographically secured as ordinary cash - IE not at all. They debit the payer balance the amount, credit the payee, without tou

    • Yea all the offchain solutions are kinda like this.

      Their advantages over bank-like things are mostly that they are handling things that are not cash, so they can, at least temporarily, cloak themselves in that. Ultimately there are two paths for blockchains: either we keep making new blockchains, or we have side chains for just the few we care about.

      Neither are very compelling, but the benefits of cryptocurrencies are too real to give up just because blockchain cannot scale to literally every human transac

    • Or use a lightning channel.

  • This whole article smells like BS. The usual recent bitcoin propaganda, pushed by those who have financial interest in it.
    Curiously, these are the same people that post longreads about Dogecoin "having no fundamentals".
    Look who benefits.

  • Bitcoin has almost lost its original function. It is no longer a method for micro-transactions or even day-to-day purchses.
    How can people in El Salvador pay for a $4 meal when a BitCoin transaction is $8? Even $50 in groceries would carry a 16% transaction fee.

    • I think they are running losses, but Breez makes lightning temporarily usable. With it apps like Strike.

    • Re: (Score:2)

      by jythie ( 914043 )
      Since it is operating as designed, kinda makes you wonder about the motivations of proponents. Even in the early days it was known that the more people used it, the less it would be usable. The whole 'this will be good for small purchases' was little more than marketing.
  • We will know what happens when the central wallet for the city gets hacked and stolen. Until then they think they found a new form of currency...
  • This happened [wikipedia.org] years ago, and it didn't end well...

  • If the influx of fool would just stop, we could be free of these moronic stories in a year or so!

  • If they fear the volatility of Bitcoin, that's no reason not to use cryptocurrency (I'd more worry about the questionable economics of Lightning, even by the standards of cryptocurrency).

    It probably won't last, but for now you can use dollar reserve coins very cheaply on a couple of chains (USDT on Bitcoin Cash, BUSD on Binance, USDC on Solana and a couple others). The lifeblood keeping the entire infrastructure going is a continuing supply of greater fools, but for the moment it's an usable payment network

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