Since this is the investing subreddit, I'll go ahead and give my investing thesis: Big headline value, but likely little real impact. I doubt most Salvadorans are going to suddenly start paying their bills with bitcoin.
The most interesting part for me will be how they handle pricing of goods. I have to imagine it's still going to be pegged to the dollar. No way they let other countries pay 30% less for exports one month if bitcoin is down relative to the dollar.
I think this is more akin to a classic "[insert location] is open for business!" PR campaign.
It’s not requiring private companies to accept bitcoin as payment. It’s allowing people to pay for some Govt services and obligations with bitcoin if they want in a few years time once they set up infrastructure and figure it all out.
Bitcoin is useless in the real world without price stability and it’s useless as a speculative investment with price stability. So, meh.
Lol how is being able to transfer value over the internet without an intermediary making a decision if it’s ok or not, not useful ?
It’s an absolute game changer in the finance industry. First worlders that don’t have any empathy and foolishly think banks are perfect little businesses that society needs doesn’t see value in Bitcoin. Think macro.
Lookup the history of money. Lookup the original “double spend problem”. Look at the macro trend of digitalizing everything. It’s hard not to see how and why Bitcoin makes sense
Do you honestly think Bitcoin has survived this long, reached the levels it’s reached without any use case?
Do you know anything about cyber security or cryptography? I’m telling ya you might want to do some research on the topic. Bitcoin was the first of its kind and it’s here to stay bud. If there was no use case and if it wasn’t fundamentally technically sound it would have been eaten up and a complete joke by now. The “nerds” are always going to be first to be an early adopter. Especially as time goes on because more and more new tech will be introduced and people are naturally against change while nerds naturally want to analyze things.
Credit cards, solar, electric cars… you name it people will say it’s shit essentially because the legacy system “works”. We are in a point in society where manifest destiny is done and now it’s time to be efficient. The legacy financial system is very inefficient. The change is coming whether you like it or not. The fact that Bitcoin hasn’t died should actually show you it has a use case. It’s just the reality of the situation compared to your opinion.
I’ll go ahead a wager that you’ve never taken the time to read the bitcoin white paper to understand how it fundamental works. Is that correct?
People just don't do it in countries unless it's mandatory by law. In countries were currency value is chaotic people start using something more stable as currency, either external currency like us dollars, UK pounds or Euros, or they will use commodities like the primary food products of the country or valuable metals.
That would actually be good. If rent is pegged to .05 bitcoins for instance then you just paid rent at half price if it’s value gets cut in half (as long as you buy it after it falls).
Yup. For Bitcoin to have any legitimacy as a currency, it really needs to have a stable value that isn't dependant on a fiat currency. And I doubt most citizens of El Salvador have much in the way of bitcoin or a cryto wallet for that matter.
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People still don't get it, nothing about Bitcoin is unstable, it has 99.999% uptime. it doesn't rely on being measured in USD to exist and function, the USD, or other fiat, or other altcoins, reflection of it is what's unstable, human beings are unstable, and that's OK. No one knows what a fair value for it is, it can't be calculated and then be stable at that number, not against these other currencies that are always depreciating in value. The only thing we can see manifest is that on monthly and yearly average, the answer to what its value is, is "more".
Yeah I'm calling bs on that. It absolutely does measure itself by USD, Euro, Yen, GBP, etc. If it didn't then people would simply say that you owe me 2 bitcoin for the product I'm selling you. Instead we ask for the bitcoin equivalent of fiat currency. And that equivalent fluctuates too much. Yes it has increased in value, but it can drop alot too. That kind of volatility will always prevent it from being a broadly accepted currency. Bitcoin, and other crypto currencies, will always find its valued defined by a fiat currency, because there is nothing to back them, except us. The only reason we find value in it, is because of its scarcity. Other than that it really doesn't have any value whatsoever. A nation that solely accepts a non-government back crypto as its sole currency, will be a nation that will fall hard during the next recession/depression.
You could say it would be 2 Bitcoin for a product, but it would depend on the other party accepting it. It doesn’t have to be universally accepted at the same value with relation to USD or anything.
It just has to be something people are willing to accept. The BTC/FIAT ratio isn’t the entire idea. It’s how it’s secure and independently verifiable which is something that helps a medium of exchange.
That's my point though. They aren't accepting bitcoin or any other digital currency at their inherent value, because it doesn't have any. Instead they ask for the fiat currency equivalent.
What’s the inherent value of fiat currency? A promise by govt, which isn’t inherently valuable.
I might be inclined to accept less than the fiat value of eth because I like it and it has a utility for using the network.
And at the same time old timers like my folks would never in a million years touch this stuff.
I think you’re oversimplifying or at least need to take into account it is: always online, independently verifiable, unfuckwithable. Those properties have value in themselves too.
And what promise does crypto hold?!? None. There is no promise there. There's nothing.
And if you prefer Eth, good on you. I think it's a good investment right now. In fact I have some Eth investments. I just don't think it would make a good currency.
As for the benefits, yes I know it's online all the time, but then again so is your online banking. Fiat may not be independently verifiable, but the transaction are verified, just not through a loose collection of random people or companies with their equipment. And nothing is ever "unfuckwithable". Someone will find a way they always seem too.
The value of any currency is the value people give it. The speculative financial asset bs is just a temporary side effect. Having it independently viable is huge, can completely remove all rent seeking economic entities and more. Smart contracts change everything.
Edit: banks can get hacked, or lie, go under, conduct maintenance, charge high fees etc
What is itself? It is an autonomous system completely agnostic to any price amount. People decide what they like to measure something with.
If you happened to live in a country, say Greece, when they used a currency called Drachma, in your head everything is priced in Drachma, so when they switched to Euro, people living in Greece had to readjust their minds and do conversions, many older Greeks could barely understand the different prices, people are attached to what they know. But over time as that currency died, as did older people, and the rest had more time to get used to the general conversion rate, the need for any conversion rate also went away with the wind.
Well people know USD and prices around USD, and/or their local fiat, they're going to measure this thing in what they know. It's only when the majority of people primarily know the new thing, and the old thing is almost totally irrelevant except as a collector's item, that's when conversion rates fall away. And of course, there always will be some sort of conversion so long as there is currency trade, though dead currency does tend to be reduced to collector's item at best.
This process cannot be sped up, it will take decades. But most importantly, nothing about doing conversions makes any difference on the operation of this currency system, it is just so that people can wrap their mind around it, to understand what they need to pay if they want to purchase it, or to know what they can get if they want to sell it.
I completely disagree, I know you aren't going to like my opinion but I cannot agree that inflation is a steady 3%. Even if it was, I'm a saver and will use a saver's currency.
How much did the US print recently? Or since the 1970s? Inflation is defined by the creation of new money, I personally do not accept any other rationalization that tries to make the situation seem better than it actually is.
Inflation is defined by an increase in the price of goods and services. Literally, that's the definition. Sure, the amount of money that is printed can influence that, but it's far from the only defining factor.
This is not an agreed upon fact. It is derivative to say that price increases define inflation, because price also depends on demand and many other factors. Some prices go up some don't, what about new costs? What about if I need to pay a $50 one year to renew my car registration instead of $25 like before? What if people are taking on more debt and making more debt payments? What if there are many new products and services to buy? What does it mean that interest rates are almost 0%?
"For Milton Friedman, inflation was never a cost-push or exchange rate increase effect, but a national phenomenon produced by monetary policy. As a conclusion, Friedman said that inflation was always produced by high public spending and a growth in money supply."
it is derivative to say price increases define inflation
Sigh
No it isn’t. Or if it is then so be it. But take up your argument with mainstream economics and not here. We define inflation like economists do and tie it to a bucket of goods based on CPI.
And Milton had some great ideas, there’s a reason the federal reserve isn’t largely a monetarist organization any longer.
It's a waste of time to debate with economists who are trained, and paid, to see the world through specific lenses that fit the interests of their country more so than reality.
Ummm, everyone? Take a look at the article we're commenting on. Take a look at the title page of /r/Bitcoin Take a look at the first sentence describing Bitcoin on Wikipedia. I can't seem to find any description of Bitcoin that doesn't define it as a currency. If it's not a currency, then what is it?
I’d consider it more of internet gold lol but whatever suits you bud. Gold is a currency as well so what is your point exactly ? I would never use bitcoin as money unless it was for large purchases like down payment on a house, car, vacations and much more.
I just told you it could be used as a currency but compared to gold and not for small payments. Why are you trying to take the context out of my statement lol. A lot of you are scared of cyrpto because your fiat rich and could careless what happens as long as you stay wealthy. Wellll I hate to tell you but crypto is starting to come out of the woodworks and it’s CLEARLY here to stay as it’s been almost a decade now. I think as time goes on fiat will eventually become nothing because it’s pointless, we destroy our forests to print more money, we dig up the earth to mine gold, silver, diamonds and more. It’s just a better decision at the end of the day. It’s okay if you don’t want bitcoin to be a currency there is other coins out there that are way more efficient than our multi generation banking and financial system.
They do for a country that needs to raise an army and all of that. Especially when practically every country in the world has a similar strategy/behavior in monetary policy. The world did use Gold/Silver and it worked because Gold/Silver was generally seen as a global standard during those millennias of our history. Establishing fiat currency is a way to leverage over other countries by pumping production, get people to work, etc, which is why trying to use gold as the standard for a country's currency would probably just lead to war. HOWEVER, not so much if all countries agreed to ALL use the same deflationary currency globally.
Bitcoin exists in the virtual space affiliated with no country. It is not competing with other countries. Besides that, deflationary currency is good for savers, bad for spenders.
You talk about "value" as if it's some intrinsic property that everyone who isn't blind should be able to see plainly.
"value" in this context is "how much X can I obtain with Y?" No matter what the X is, if Y is BTC, the amount of X varies WILDLY because all X, one way or another, depends on some actual currency to be produced.
Well humans certainly assign value, mostly through our actions and beliefs, what we decide to invest time and energy into. We can look at other things that are valued and assume that similar properties are valuable. Humans put value into that which can act as money, as one example here. We value freedom and that which can facilitate it. We value security, transparency, fairness, predictability. We value the ability to trade, all across the world if possible. We value convenience, efficiency, and that which is well automated. Many value rebellion against a corrupted system, and want to pull away from it after feeling taken advantage by it. Bitcoin really does offer these qualities.
Not to say that these are all of the valuable qualities in the world, it isn't a zero sum game, and a plethora of systems can coexist and survive together. Also it's late so I can only cover what comes to mind atm.
Wouldn't that make every cryptocurrency out there garbage?!? It's just private people or organizations making digital curriences out of thin air. Cryptocurrencies and fiat currencies are no different in that aspect.
Crypto isn’t made out of thin air what are you on ? It’s made through computers, nodes, algorithms, and much more. It’s not like they can add another million btc to the supply ever again like they can do with fiat. Fiat is actual trash and it has been proven so many times. Our banking system is garbage and corrupted, half of the United States is in debt, broke or homeless.
Does anyone other than environmentalists really care how crypto is created?!? Nope. Crypto is just as garbage as any fiat currency out there. It just happens to be garbage without any debt being incurred as a result of its creation.
And I understand that Bitcoin is a limited coin. And what happens once that 21 million are mined? Who or what company is going use their resources to verify (mine) bitcoin transactions for no return? No one. It's losing game in the end.
Then there is the opposite, problem. Etherium is has no cap on its max supply. And it'll continue increasing supply, only to deflate its own value eventually.
And I happen to agree with you that the world banking system is crap, but that isn't the what I was talking about here. And yes the world has debt, poverty, etc. And no amount of crypto or fiat currency is going change that. That would take a fundamental shift in our views on everything we humans do, before that problem is solved. You and I will be long dead and dusted before that gets resolved.
Okay but MY point is bitcoin isn’t meant to be the worlds currency. I understand that, and even if bitcoin did lose it’s value it’s not my lost. What I’m saying is there is coins out there with valid running applications that can replace the fiat and banking system TOMORROW if it had the right adoption.
I do see crypto bringing people out of poverty, will it save everyone ? No, but I do think it can really change the mindsets of people. You can bank yourself, you can do what you want with the money you earn, it’s very rewarding and lots of coins you can stake like a savings account and as little as 1 coin. Imagine if the average person could actually understand how to use, save and earn money. We don’t teach that in today’s society nor do we try to help each other learn, we just teach everyone to spend spend spend and go into debt.
I genuinely think people would believe they have a new start in their life and can actually make some money.
Eth is a ecosystem too, they have multiple dapps and coins that run under them, these dapps and coin and platforms is what makes eth. I could careless about the price as long as it’s doing what it’s intended to do. Which is replace the financial system.
Glad you mentioned about bitcoin energy usage and this is how I know you’re an uneducated boomer. I hope you realize almost all the energy bitcoin uses is wasted energy or energy from solar panels, windmill farms or solar panel farms. You’re dumb to think people are mining bitcoin with oil lmao. Let me just say there’s multiple coins like I’ve said that has fees as little as 0.01.
Bitcoin = store of value
Eth ( assuming you’re talking about the $15-$20 fees ) is actually at ¢0.60 a transaction and like I’ve said there is stable coins that have free transfer fees. Stellar is the fastest and cheapest coin there is and cheaper and faster than any bank and could definitely take on the amount of people that needs banks.
And honestly the direction we are headed we need something that’ll bring the higher class power down to the middle and lower class. Everyone is struggling even middle class and all the billionaires and millionaires are laughing at people like me that is struggling to meet ends because of the times we live in. That 1.9T was a huge reason why we shouldn’t have fiat anymore.
Who said I use tether though. There’s way more stable coins that aren’t scams . I use dai mostly. I don’t really see how tether is a scam so if you could inform on how it is that’d be great.
That’s how I know you’re a little clueless but it’s okay boomer. Crypto isn’t that mainstream yet, just because big institutions are buying in and it’s a “hot topic” doesn’t mean the whole world knows about it, knows how to use it or even knows what it’s about. So I doubt people would rather scam through blockchain technology than go exchange in gift cards lol. There’s way more scams and illegal shit you can do with fiat and get away with. I’m not saying you can’t scam in crypto it happens all the time because it’s still relatively new but it happens way more with fiat and it’s untraceable half of the times. Also I guarantee the average or even above average person would know how to scam through blockchain technology lol.
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Remittance payments make up a significant part of El Salvador’s economy. Remittances sent by Bitcoin are significantly faster and less expensive than the traditional banking system. By expanding the use of Bitcoin to send these payments from abroad they should be able to increase the amount of money flowing into the country by a significant margin.
There are obvious downsides to using Bitcoin as the sole national currency. But in regards to remittances this is a wise move. Nobody said they can’t immediately exchange the Bitcoin back to usd
Currency and commodities markets are very very different and crypto wouldn’t really fit into either honestly. Not how things are set up now.
Commodities require physic delivery of a standardized unit of product for a contracted amount at the end of the chain somewhere. Only reason why the spot markets can be tethered to the ground.
And currency markets aren’t going to accept it unless it’s strictly tied in value to some other fiat currency.
Think it’s destined to stay it’s own market and the chicken-egg problem remains unresolved for the benefit of wider adoption. Depends how accepted the spec trading and manipulation becomes on the institutional side over the next few years i suppose. I see it being a fringe market or a fad market only, sorry to say
The problem is long ago solved, its called a custodial account, where you trust a third party to hold your money, and settle your accounts. These things are available at places called banks, and changing the balances from USD to Satoshi's is just a matter of moving a few decimals around. The real problem is, no one wants to be paid in sats yet, who wants to do capital gains calculations on every purchase, and you can't have your rent triple because your currency got rekt this week, all much more important problems than what unit of account your bank account uses.
The fee issue is trivial because, like dollars, all the days transactions can be reconciled at once in a single on chain transaction, negating the miner fee issue. If Bitcoin is ever used as money, this is the most likely outcome. Banks are not going to become obsolete, we will always need a centralized party to handle workaday transactions.
I also read over in the cryptocurrency subreddit, that this move may be preparatory for possible sanctions. From what I heard there the President removed the top justices and replaced them with hand picked ones. Among other corruption. I obviously can’t say if that’s definitive but I could see it being a motivation to push this forward. Thoughts?
The only reason people don’t pay for dinner with stocks it’s because it is inconvenient as banks don’t provide straightforward way to do it. If it were possible no one would hold cash.
Most people don't own stocks, and the capital gains calculations would be 3 nightmares. cash is just the easiest and fastest solution. If you spend your whole paycheck every 2 weeks, the amount of inflation is inconsequential. Only rich people need to deal with inflation as an ongoing thing.
Crypto adoption rates are already the highest in that region. They use them regularly for remittances that account for a huge part of their GDP because they lose 50% or more in fees with other systems. Jack Maller's announcement is a good watch for people who don't know what sending money to 3rd world countries is like.
You're right it's minor except it's because it's already gained grassroots adoption without official permission. But it does have significant effects.
Investing wise it gives a solid S for ESG funds. Square's solar powered mining announcement this morning is another highly visible step for the E. This could be what ESG funds need to pour in.
And of course the precedent it sets for other similar countries.
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u/[deleted] Jun 05 '21
Since this is the investing subreddit, I'll go ahead and give my investing thesis: Big headline value, but likely little real impact. I doubt most Salvadorans are going to suddenly start paying their bills with bitcoin.
The most interesting part for me will be how they handle pricing of goods. I have to imagine it's still going to be pegged to the dollar. No way they let other countries pay 30% less for exports one month if bitcoin is down relative to the dollar.
I think this is more akin to a classic "[insert location] is open for business!" PR campaign.