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.
What doesn’t work? I’ve only skimmed some LN search results, and it looks like there are a bunch of services using it, including strike [0] which was mentioned in a comment of the big thread here [1]. This would have the same problem (proprietary network) you mentioned, but it seems to be working still?
The paper linked is called "Understanding the Lightning Network capability to route payments" which cannot be found in any reputable or peer-reviewed journal. How is that suppose to be a reliable study?
This does not show that the lightning network doesn't work. It shows that lightning has less locked value than Ethereum's layer 2. Incentivize yield farming is likely the cause.
In terms of lightning being usable now, I've been using it for years with no real problems, both as a merchant and as a consumer.
This is some shit poster that wouldn shill some currency like nano or Bitcoin cash I guess.
Lightning works fine. I've been using it for past year with zero problems.
Check blue wallet, phoenix wallet, bottle pay, strike, opennode, lnmarkets, kollider, sphinx chat
If you're highly motivated and technically expert, you might be able to get non custodial payments to work on lightning. Even then, your experience may be something like this - https://threadreaderapp.com/thread/1376286470256873475.html
What a bald statement, claiming lightning does not work without anything backing up your statement.
For reference I'd like to refer to https://1ml.com/
There is currently > 1450 BTC network capacity on the lightning network, if it wouldn't work why would people provide network capacity exceeding 45 million USD.
> doesn't have the capacity to support El Salvador's economy
It's easier for San Salvador to disappear Bitcoin into cronies' pockets than U.S. dollars. For this purpose, Bitcoin's deeper liquidity makes it the best choice. Less cynically, Bitcoin has brand recognition. That makes it politically palatable in a unique way.
Bitcoin isn't a great currency. But it is a competitive store of value. El Salvador doesn't have a trusted domestic market of financial assets. This is an experiment in replacing a domestic market for assets with Bitcoin.
Bitcoin transactions are more transparent and publicly traceable than cash, Bitcoin sucks for illicit transactions. Monero should be the crypto of choice for criminals because it is untraceable.
Forget Lightning— Did you know you can transfer Bitcoin from one user to another on Coinbase with zero transaction fees instantly? Any exchange can do the same. Centralized layer two scales just fine for many use cases and is working today.
Isn't that exactly what FreeTrade meant by "Salvadorians will end up forced to use proprietary payment networks denominated in BTC."? Coinbase might do it for free, but that doesn't mean the eventual winner will be free, nor does it mean that users couldn't be banned, or tracked, or forced to use 'supported' services, etc.
As long as BTC transfers between custodians are possible, that should be quite small problem. There might be winner in terms of liquidity and volume, but because anyone can quite easily fire up custodian service, there should be also plenty of competition.
With Bitcoin, I don't have to keep my savings in the bank even if I choose to use a bank for other services. As someone whose had their bank account frozen before, this is of great value to me.
I could use banks or Lightning like a checking account, while keeping the majority of my savings under my control.
Yeah but you are most probably using a centralized exchange to execute BC transactions for free which might froze your account as well in the future because $REASON. Also thinking that in the long-run, in a future where BC is accepted almost universally this is not going to be heavily regulated by governments it's being naïve IMO.
This is the dumbest thing I've ever read. So you designed a system that sacrifices everything to achieve trustlessness, and then you immediately reintroduce a centralised trusted entity. You can't make this shit up. I'm so glad I left the crypto community in 2014, it's become completely deranged.
It is not dumb. Custodians are useful, very useful actually. With Bitcoin you can use custodians, but you can also host your bitcoins yourself if you want. The opportunity to do latter is the most important and makes Bitcoin valuable. However majority people in majority of cases prefer to use custodians, and there is nothign wrong with that.
I am coming to believe a large contingent don't actually care about trustlessness. They care about the deflationary aspect because it's supposed to make them rich.
I think the parent poster was being somewhat self-aware and tongue-in-cheek. They're not saying centralization is the ideal; just that it exists and works well.
Not just a bank but an unregulated bank tied to all sorts of shady currencies like USDC, Doge etc which has regular outages. That's also ignoring the wild volatility in the value of bitcoin.
€0.01 coins have a volume of ~0.346ml, gold has a density of 19.3g/ml and a current price of 60.89 USD/g, so a eurocent-sized gold coin would be worth 407.02 USD :)
Yeah, but you're still having to pass through Coinbase or any other exchange, and they can remove it from you there. That's the point, if Bitcoin needs an exchange to be functional you're losing all the differential features that Bitcoin has.
Ease of access to and exchange with global marketplaces. I can transfer/trade directly from/to El Salvador without any bank being involved in that transaction.
A bank by any other name is still a bank. Sure there is definitely a legal difference such as deposit insurance and access to their lender of last resort. For the customer however it doesn't matter they still need KYC, the cops can still see their transactions, they still have to ask where the money is from, they can still knock on your door and put your hands in handcuffs. Many of the advantages to people in El Salvador with BTC is avoiding extreme inflation in the national currency. However one does well to note that inflation woes in the Atlantic world actually correlated with a partial deflation of the Bitcoin bubble, so if you're in the EU/US bitcoin is an investment when money is cheap, not a hedge for your money becoming cheap.
If you need to keep your money on an exchange to be able to do transactions, you'll probably still need to go through a bank or exchange or the same thing by any other name.
The only other legal tender in El Salvador is the US Dollar. If, for any reason, you have qualms about the US financial system, especially as someone foreign to the US with little priority in its decision making processes, it might be desirable to opt for a different currency. Is BTC the right currency for their government to bend to that purpose? I guess we'll find out.
This. People just assume onchain txes and LN are the only way to scale. In practice centralized scaling via custodials has been there from the very early days.
I think for smaller day to day transactions people are using Lightning or an app like Strike that is really using lightning underneath. For years now the problems of TX per second, fee, and speed have been worked on. https://strike.me/ is a Paypal like app that's built totally on Lightning and they just got setup in El Salvador recently. I think Jack Mallers and Strike are probably one of the main reasons were seeing this BTC law happen there now.
I always hoped that Bitcoin would become "the people's currency" but currently it does not work as cash anymore. Lightning might become great, but the engineering needed just to send to offline nodes makes me sceptical, not to mention that the cost of funding channels is always handwaved away.
I wonder, does HN hate the "Bitcoin Cash" fork as much as BTC? It's the closest to the technical specification that made me interested in BTC in the first place.
The other issues with channels is that only the entry and exit transactions are validated - every transaction in the channel is not secured by any network.
Meaning you can open a channel, but if you want to sell real-world goods in exchange for anything that happens in that channel, then you'd better trust the other parties in the channel to close it properly.
tldr; Lightning is indeed super fast, but it's not as secure.
This is not true. Lightening network is trustless just like the bitcoin base layer unless for very very small transactions (like few cents). Channels are constructed in such a way that any counterparty that attempts to cheat can be punished by the honest partner. Of course the honest partner has to be actively monitoring the base bitcoin network but this can also be outsourced to a third-party (tehcnically called a watchtower).
That's not the only issue. Channels cost a blockchain transaction to open and close, so you would never open-close a channel for an individual small transaction.
The point is essentially to setup an off-chain chain maintained by a 3rd party. If you are selling non BTC into that channel, you are TRUSTING the other party to close the channel.
If they never close it, you cannot unilaterally close the channel, which means you might never get your BTC because they simple leave the channel open forever and get to keep whatever you sent them (ie other crypto or real-world or digital assets).
The space of lightning network is quite new and I think not yet totally proven but to simply say it doesn't work is a bit misleading considering the kinds of people that are working on it and the amount of code that has been worked on https://dev.lightning.community/overview/
Sigh. A reserve asset doesn't need every transaction for coffee and candy bars to reside in its ledger. It's a foundation that other layers can build upon. The layers can be tailored to different use cases, each with different tradeoffs of security, speed and decentralization.
This is some shit poster that wouldn shill some currency like nano or Bitcoin cash I guess.
Lightning works fine. I've been using it for past year with zero problems.
Check blue wallet, phoenix wallet, bottle pay, strike, opennode, lnmarkets, kollider, sphinx chat
Yes. Unfortunately Bitcoin is not the ideal solution here. What would be the ideal solution is something like nano.org,
fast transaction settlement, no fees and good UX through their community wallets.
Alternatives like XLM, SOL, ATOM could also be an option.
Perhaps El Salvador has a different definition of legal tender, but if not, this is sucky. Legal Tender is generally a means you cannot refuse for debt repayment. For buying etc. you can accept or refuse just about anything, in most/many places, but for settling debt, legal tender cannot be refused.
So I'm just some guy. Someone owes me money and says, nah I'll repay it with Bitcoin. Not only is that mega-volatile, most people have no idea how to use it. Also it's easy to fall for a scam if you don't know how it works.
And further, you can typically accept anything as debt repayment if you so like. Cash, art, pretty shells, or indeed, Bitcoin. Making it legal tender actually funnels people into having to accept Bitcoin.
The strictly limited amount of BTC makes this into a land grab. First comers are entitled to the services of the real economy due to their virtue of being first(or lucky to be on the right place at the right tweet).
Isn't this the case for nearly all money-like assets? E.g. stock has very similar 'land grab' properties. This is almost entirely the businessmodel of VC and AI.
Yes, it's very problematic. The last time those screwed up, something called Bitcoin was created by someone who really hated the idea of bailing out that corrupt enterprise.
People play along when they benefit too. When they no longer benefit, they take action to take it down.
Not really because investors are committing resources to the business which, it is hoped, will deliver value greater than the amount put in. Merely owning land doesn't help the land improve and deliver any value.
The problem with BTC is not the accounting aspect. Some parts of the financial system (like option traders) have learned to do accounting in highly volatile situations.
The problem is that BTC gained it's intangible value differently from a normal fiat currency and it can loose it again. See https://bitcoin.isnot.money
That's how all money-esque things work. First mover advantage is pretty extreme in anything money related.
> I’m very curious to see an elite class whose core virtue is based on being an early adopter.
How do you think the elite class became elite? How do queens and kings get their power? By having some ancestor in the right place at the right time take advantage of an opportunity before other people tried.
They fought and murdered the competition. Their offsprings continue doing that until they no longer had the intelligence or power and got exterminated and their wealth redistributed.
This is very, very different than stumbling upon something.
>This is very, very different than stumbling upon something.
a) Accumulating capital & power (e.g bitcoin, land, property, influence) has always had a 'stumble upon' component.
There's no inherent 'fight and murder' evil to it...
b) Early Bitcoin acquisition required some level of computer/security/independent thinking competence.
Early land acquisition required some level of legal/defence/homesteading competence.
Aside:
Writing 'very, very' made me take a closer look at this comment. Comments stating something like like 'very, very' pretty reliably tend to be flawed & indeed not 'very, very'.
>Accumulating capital & power (e.g bitcoin, land, property, influence) has always had a 'stumble upon' component.
I'm sure that inventing the Internet had a component of drinking coffee.
Anyways, the BTC is a power transfer by virtue of being early and demanding all the goods and services to be provided in exchange of transferring some amount of it.
If that is deemed unfair by the stakeholders it is very likely that there will be fight and murder phase. Can you imagine if it turns out that Satoshi is a mathematician from El Salvador and secretly holds half of the reserves once BTC is established as a world currency?
Do you think that El Salvador will instantly become world's richest country and everyone will provide them with food, wine, weapons, iPhones, software in exchange of some of the coins?
Stumbling upon the right person to murder is still stumbling upon something. Lots of people fought and murdered, only a few became the rich and powerful.
The intrinsic value argument is a funny one. What's the idea behind it? Assume you have asset X but then one key assmption fails. Now, is asset X still valuable considering the failed assumption?
For land, you can say that even in the case that society collapses it is still valuable. Or is it?
What exactly is the assumption that deems BTC's intrinsic value zero and land's value more than zero?
OK but then considering your definition, I'd disagree. Bitcoin but more importantly general purpose blockchains (e.g. ETH) give rise to digital economies where real people can participate and earn money through work. Since 2019, I've now - for multiple months - been able to make an income by coding for various DAOs. Surely, BTC/ETH was used for accounting. But the social structures that formed and enabled me to have an income I can pay my rent with are of value to me and only existed because of the blockchain's technological capabilities (e.g. smart contracts). Ergo, there's intrinsic value beyond accounting.
Not really true, the only reason it is not used much more widely in electronic components, despite being superior to copper, is the high price it has, because of its function as value storage.
Gold is not superior to copper for everything - incl. the most important one feature: conductivity. Gold (22.14 nΩ⋅m) is, of course, a lot less chemically active which makes it ideal for terminals, contacts, etc. (and mostly as plating agent), however as a sole conductor it's worse than copper (16.78 nΩ⋅m). Gold has worse thermal conductivity as well... and it's a lot heavier.
That being said, it's still a very valuable material for electronics.
Gold is simply one of the metals in the universe and has different strength and weaknesses depending on the application.
It's not true that gold is naturally superior, in fact Gold is often mixed with other metals to create alloys to overcome certain issues. Pure gold is too soft for most of the practical uses like jewellery for example, so they add copper to it.
> What exactly is the assumption that deems BTC's intrinsic value zero and land's value more than zero?
For me the easiest way to determine if something has intrinsic value is ask yourself what would happen if you owned all of it (and couldn't be forced to give it up).
If you owned all the Bitcoin in the world, we wouldn't accept its use, and would just create another currency with identical properties.
If you owned all the land in the world, people would come to you to buy or rent it. You can't build a house or a factory unless someone is willing to sell or lease you the land. That's what makes it valuable.
In many ways, this is why we have the word "priceless". Things become priceless when, in certain contexts (for certain people at certain times), they will not be sold for any price. Land can be priceless because I can have a sentimental attachment to a particular place. Its value isn't derived from how many $'s people will pay for it.
That's a rather theoretical argument. If you were the sole owner of the world's land, then people would probably resort to kill or capture you to redistribute the land.
Again, I think this is a rather theorerical argument.
Retirement is not solely coupled to the amount of money you have. I personally have aspirations and enough money to not having to work for a few years. And still I work lots of hours to achieve certain goals that have nothing to do with increasing my money.
The point is that the process of bitcoin adoption is in fact a massive huge wealth-redistribution mechanism between adopters. Making people extraordinarily rich just because they were the first to buy a new currency and other people extraordinarily poor just because they were the last isn't probably something most people would agree with.
> just because they were the last isn't probably something most people would agree with.
Most people also don't agree on huge salaries and bonuses for CEO's, in practice the people with money are willing to pay those perks. When people vote with their wallets, does it really matter what the people not voting are going to say?
It certainly matters if you don't want to live in fear for the rest of your life. Because if you think for a minute that the level of violence that would ensue would not be monumental you're kidding yourself.
I think you are kidding yourself. Throughout history, cleptocracy has been the norm. Uprisings, especially successful ones, have been the exception.
The "you have nothing to lose but your chains"-argument just doesn't work on people who have more than enough junk to fill their stomachs (and brains) with.
Ownership is abstract, there are communities where the concept is rejected but the land has intrinsic value regardless of the claims of those who use it.
Capitalist, Communist or Anarchist - the land doesn’t care, it grows the tomatoes the same way.
Surely if you look via godmode on earth, you can even ascribe intrinsic value to it in the case of complet societal collapse where there's only tribes fighting for tomatoes. But is that a useful view?
Coins in WoW have a value, anything can have a value. The problem is that these are in abstractions many levels over the biological processes that the life is based on.
The core of the human life is based on people processing materials to sustain biological processes and the rest of the humanity is built on top of it.
Intrinsic value comes from the ability to support that structure. At the top of the structure there are the higher ideals, like art and happiness and people who produce these are often rewarded with the goods from the bottom of the pyramid.
The problem with the BTC's "early adopters get rewarded extremely well and are entitled to all the goods for a liftime and generations to come" nature makes an extremely top heavy structure.
If that becomes a reality I suspect that a rubber hose cryptography breakthrough event will occur. After all, whoever has the private key, has the coins and the private key is transferable by force.
I'm annoyed that the intrinsic value argument is constantly being brought up even by economists against crypto currencies. I have a similar understanding of the concept as you have, in that the value derives from the material eventually - land being most valuable.
However, what many that say BTC has no intrinsic value neglect is the opportunistic value of the traditional banking sector. German Wirecard e.g. went broke and now its stock is worth nothing anymore. Seems there was no intrinsic value either except for a few office chairs I guess.
Nobody warned investors of that. But for Bitcoin, where corruption is less likely given its transparent structure, people keep talking about intrinsic value and how it apparently has none.
Fair enough. I think it's also worth considering that in terms of technological progress, BTC has been rather shit such that this thesis of "earlier adopters" becoming the new overlords is a quite speculative argument.
Sure, in this hype cycle Bitcoin has once again had a huge inflow of capital. But if you look at Bitcoin dominance charts, you can see that it is at an all-time low, and IMO will continue to be if its community stays so conservative.
Societies with no concept of private land ownership wage war. Nomadic tribes with no private or even communal land ownership structures wage war at the scales they can. Tying warmongering to private ownership or money is oversimplifying.
I think about this through basic needs of human being. Food and shelter. Can i use land to get some of my basic needs if there is nothing else around? Probably yes. Can i use bitcoin for that. Not likely.
People have created btc2, btc3, times a thousand. Look at all the altcoins out there. Yet all the clones of bitcoin are worthless because it's a direct copy of the protocol or with minor alterations (it's akin to trying to convince people to use a different protocol than TCP for the internet, and to use your version of it instead).
Those clones have almost no one mining with it, thus limited hashing power, thus no ability to secure transactions on the network. The amount of hashing power + number of nodes makes the protocol decentralized and secure, and thus far only Bitcoin has that and none of the clones.
There's a bunch of people that have little to no knowledge about the space coming in and buying new coins believing it will make them rich, but they're usually clueless about the underlying technology.
I know you have the option to convert to USD, but haven't seen yet if there would be any fee to doing so. Also, it might be difficult to get every merchant in the country to be able to accept bitcoin. The other thought I had was if they would start accepting other crypto as well if this works out.
Agree and somehow if the Government could abstract away all the complexities involved with Storing Bitcoin, Private Keys Management, Fees and Coversion this would be a major step forward
* Wireless data can be spotty in rural areas due to many hills and mountains. We would need an MVNO for rural areas coverage, as it wouldn't be cost effective for the four mobile networks to place a tower in every rural corner.
* Wireless coverage in cities was limited/overloaded for about 5 years due to lack of new frequencies. This was a regulatory issue fixed about 2 years ago and wireless service is finally improving
* Some companies stopped providing wired service in rural areas about 15 years ago due to copper theft. Not sure if this has improved
The informal system (50% of the workforce) is mostly cash based, while those who have 'formal' jobs get paid in bank accounts which usually include debit cards.
Payment in food stalls and small businnesses is mostly cash.
If the idea fails and gets rolled back it will be seen as BTC not working as currency at a national scale, even if the nation is small. Heck, if it doesn't work for a small country then it's less likely to work for a large one.
* For those that don't know, the US Dollar was El Salvador's previous only legal tender. For a list of some other countries that use USD or are pegged to USD: https://en.wikipedia.org/wiki/List_of_countries_by_exchange_... - note of those, the Marshall Islands has previously announced plans for a CBDC (working w/ Algorand) and politicians in Ecuador has also brought up the possibility of introducing Bitcoin as legal tender. Many LatAm politicians (many that have been pegged to USD) have announced support for cryptocurrencies. Perhaps domino theory is back in play? https://twitter.com/balajis/status/1402279912623464458
* Anyway, that last detail is I believe is getting sidetracked from the main point, which is that as a (to my mind) clear direct consequence/reaction to current US monetary policy, and a shot across the bow of USD's reserve currency status. One doesn't have to look further than the numbers for foreign holding of US Treasury Bills to see how the wind has been blowing: https://ycharts.com/indicators/increase_in_foreign_holdings_... but of course, you can also listen to much smart people than me opine about this: https://youtu.be/ScAeHsXIUqI?t=528
(It appears that El Salvador plans hold $150mm USD in a fund that will slowly convert into BTC, assuming price volatility risk for merchants that want USD)
They probably should have spent that $150M reserve fund on pre-mining their own cryptocurrency (and then put it in reserve). That way at least the currency could float on its own terms with respect to the Salvadoran economy.
I think the trade-deficit between El Salvador and the rest of the world[0] will mean this is just a gimmick in the end.
It'll be interesting to see how they use BTC specifically for this use case. Looking at https://ycharts.com/indicators/bitcoin_average_transaction_f... the transaction fee for directly using BTC is $4.6 at the moment. That's obviously not workable for small transactions, so some kind of overlay where the transactions are batched before commit, would be needed.
Also the volatility piece will be hard to manage in anything other than instant transactions. If it's legal currency will people have to denominate larger assets (e.g. cars, houses) in BTC and commit to a price where there could be considerable shift before settlement? I know they mention that stability fund in the article but I could see this getting more complex than that.
What the policy will be where BTC appreciates before settlement will be interesting too, so in a bull run will a buyer have to hand over the number of coins they committed to, and will the gov. get the excess, or the merchant?
I think you’re mixing up “fiat currency” with “legal tender”. The former being “money created and backed by the power of a government” and the latter being “money which a government says courts are required to recognise when offered as payment for a debt”.
If we were on the gold standard, gold would be legal tender, even though it isn’t fiat.
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.