The ‘Bitcoinification of El Salvador’, as it is popularly known, has been an ongoing process for a long time. President Nayib Bukele has been advocating the adoption and use of Bitcoin since 2017, when he was the mayor of capital San Salvador. At the time he had famously tweeted “we will use bitcoin.”
Fast forward 2 years - President Nayib Bukele assumed office in 2019 and in 2021 El Salvador became the first country in the world to adopt Bitcoin as legal tender. This meant that the country had 2 payment currency options instead of one, i.e. the US Dollar and Bitcoin. Since then, Bukele has purchased about 2,301 BTC and has been buying the dips consistently by using public funds despite mounting losses.
Underneath the EL Salvadorean Bitcoin salvo, there is a lesser-known place in the country that is referred to as Bitcoin Beach, which was Bukele’s pilot project before he formally announced Bitcoin as his country’s legal tender.
What is the Bitcoin Beach?
On the El Salvadorean coast, roughly an hour from its capital, is a small town of 3,000 strong called EL Zonte. Apart from the black volcanic sand that lines its beaches, there’s something else that is all over the place. That is the famous uppercase B in orange, the symbol of Bitcoin.
Very few people in EL Salvador have access to modern banking systems. But EL Zonte fares worse than the parent nation; here even bank accounts are a rare find. Local businesses have no means to hold verified merchant accounts that are required to host basic credit card swiping services. We arrive at the classic problem described by aliased Bitcoin creator Satoshi Nakamoto in his whitepaper – the dependence on a trusted third party for transacting.
“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust-based model,” writes Nakamoto.
In 2015, Mike Peterson, an ex-financial planner who moved to EL Zonte, created a charity which funded scholarships locally and also helped create jobs. In 2019, Peterson crossed paths with an anonymous Bitcoin donor who had amassed enough of it and wanted to deploy it for the betterment of the town.
But the donor had a condition – none of the Bitcoin could be converted to USD, which means that a circular economy would have to be created. It would entail the Bitcoin transfers between payers and payees without it ever being exchanged for another currency. And thus, was born the Bitcoin Beach Initiative. Peterson reveals how this project was made to work in an April 2022 interview with CBS News.
How did the Bitcoin Beach Initiative work?
Bitcoin is a digital currency and unlike fiat currency, it cannot be held, touched, or felt. So, the obvious problem with its introduction was the puzzled faces of locals who were told that they’d be paid in something they could not see or touch. However, the anonymous donation was helpful in creating jobs in the sparsely populated town. But how?
The only people familiar with tech-talk are teenagers and it’s them who were the first few movers of the Bitcoin Beach Project. Peterson and his group hired teenagers to take up small jobs like cleaning beaches and moving trash and paid them in Bitcoin. They now needed a place to spend this Bitcoin. Other businesses were set up and owners were taught to use the Bitcoin Beach app which involved a simple scanning of the QR code to transfer the BTC.
In this manner, although the locals who did not trust Bitcoin as a currency due to its invisible nature, were still able to spend it to buy some things themselves. The BTC that came in for their service, also went out and bought them useful items or services. The success of this circular Bitcoin economy eventually led to President Bukele taking it to the national scale in 2021.
Moreover, in August 2022, the EL Salvadorean government announced $203 million in infrastructure upgrades for the region such that tourists can better enjoy the location. "This year we will expand 21 kilometres of the Litoral highway to four lanes. And we will also do it with hydraulic concrete, which is more expensive than asphalt, but lasts much longer," said President Bukele.
Other such projects:
Brazil: Inspired by the development led by an anonymous Bitcoin donation in EL Zonte, a similar initiative has been taken up in the city of Jericoacoara, Brazil. Led by Fernando Motolese, it was kickstarted in September 2021, right after Bitcoin became a national tender for El Salvador. As a part of the project, 0.1 BTC was distributed among students and teachers translating into 408 wallets with 1,000 satoshis each.
Costa Rica: Towards the end of 2021, 71-year-old Josef Dvoracek commenced the Bitcoin Jungle project in Costa Ballena (Whale Coast), which is the southern part of Costa Rica. By April 2022, this project had enabled 50 vendors and 20 other businesses to successfully run their operations.
Vanuatu: Vanuatu is tropical paradise consisting of roughly 80 islands that stretch 1,300 kilometres. In the coming years, the country could be home to one of the most endearing crypto project yet: Satoshi Island. This is a Bitcoin-based tourist destination that is looking to host crypto investors from all across the world.
Everything on the island will be blockchain and crypto focused. For instance, those buying real estate here would receive digital non-fungible tokens (NFTs) instead of traditional deeds. Moreover, everything from your coffee to your rent could be paid for with digital currencies such as Bitcoin and Ethereum. However, unlike the other 3 Bitcoin-based circular economies listed in this article, Satoshi island is still under development and could take a while to complete.
Conclusion
As crypto adoption grows, we could see more and more project like these crop up around the world. These destinations tend to attract a good amount of visitors, especially crypto proponents. They also help the local economy grow, creating revenue and jobs for residents of the area. A win-win for all.
