El Salvador has made Bitcoin official legal tender today.
Like most innovations; this transition happened slowly, then all at once.
El Salvador has been economically chaotic for quite some time. Without a lot of work opportunities, many Salvadorans immigrate to other countries to find work and send the earnings back home to their families.
Since 2001, El Salvador had been using the US Dollar exclusively as their legal tender which makes it rather easy for immigrants abroad in the States to wire dollars back to their families.
But corruption can found anywhere. Banks that are needed to accept these remittance payments take nearly 50% of the payment in “fees”.
This type of corruption from middlemen is exactly what Bitcoin was designed to route around.
In 2019, a group of Salvadoran volunteers led by an American expat began to lay a foundation to integrate Bitcoin into the beach town of El Zonte called “Bitcoin Beach“.
After a generous anonymous donation, the team bootstrapped the project by giving every El Zonte resident $35 worth of bitcoin to start.
Once the residents had bitcoin, the businesses in the beach town wanted part of the action.
This drew a lot of attention in the Bitcoin community and brought Bitcoin entrepreneurs, like Jack Mallers of Strike, to El Salvador to help with adoption.
Salvadorans at Bitcoin Beach were now able to save money and grow their wealth through the rapidly appreciating asset while also receiving 100% of their remittance payments directly, without a bank involved.
After watching this adoption, President Nayib Bukele reached out to Jack Mallers and the other Bitcoin entrepreneurs to help him come up with a bill to make Bitcoin legal tender throughout El Salvador.
President Bukele announced the bill at this year’s Bitcoin Conference in Miami.
In a 62-19 vote, Salvadoran legislators approved the bill and paved the way for Bitcoin adoption.
The El Salvador has built a small treasury of bitcoin, 550 coins to be exact (150 of them purchased today), and rolled out a Bitcoin app for the citizens called “Chivo”, along with Chivo ATMs that help people convert dollars and bitcoin.
Each resident that signs up with Chivo will receive $30 worth of Bitcoin to start, about a week’s worth of wages for the average Salvadoran.
In the long term President Bukele has planned on building a Bitcoin mining facility in El Salvador using carbon-free volcanic geothermal energy.
So far the adoption has gone smoothly.
McDonalds, Starbucks, and Pizza Hut are just three multinational companies in El Salvador who now accept Bitcoin.
All of this seems to follow a standard adoption curve for fundamentally new technology: Start with a market of people who are under-served by existing incumbents, and work its way up-market.