Understand the implications of Bitcoin's downfall in El Salvador. Learn about the failed economic bet and its impact on the country's financial stability.
  • मुक्त@lemmy.ml
    0·
    2 days ago

    I generally keep out of crypto discussions as I do not sufficiently understand it. But this event is very easy to understand. In the beginning of the article itself:

    … approved last Wednesday a confusing reform to the Bitcoin Law at the request of Bukele’s government, which had no other option to receive the $1.4 billion credit agreed in December with the International Monetary Fund (IMF).

    Thus, this move was forced on El Salvador by the IMF.

    • FolknForage@lemm.eeEnglish
      0·
      2 days ago

      “Forced” is doing a lot of work here. I think it was El Salvador that decided it was worth to ditch btc in favor of getting actual rescue money.

      Edit: it makes sense that Bukele just told Rubio they’d be happy to be the US’ offshore prison system. Seems they really need the money.

  • alekwithak@lemmy.world
    0·
    2 days ago

    Bitcoin has gone up by at least 40k in the last three months, surely that must have made El Salvador a few pretty pennies.

  • Cowbee [he/they]@lemmy.ml
    0·
    2 days ago

    I had a Libertarian try to tell me that this was going to revitalize El Salvador just a couple of weeks ago, lmao.

  • jagged_circle@feddit.nlEnglish
    0·
    2 days ago

    The government, she assured, will continue buying bitcoin and having reserves in this cryptocurrency. According to the National Bitcoin Office, El Salvador has 6,050 bitcoins worth $634.8 million. “President Bukele continues buying bitcoin, we have a Bitcoin Office, we have the Bitcoin Law, bitcoin can be used in El Salvador.

    They’re going to have the US by the balls like Saudi Arabia when bitcoin crosses $1mm/coin

  • spooky2092@lemmy.blahaj.zoneEnglish
    0·
    2 days ago

    BUT I WAS TOLD THERE’S NO DIFFERENCE BETWEEN BUTTCOIN AND REAL MONEY, WHAT THE HELL?!?11?!

    Who could have ever seen this coming other than anyone who thought about it for the briefest amount of time?

  • panchobarnes@lemm.ee
    0·
    3 days ago

    ‘’’ officials ensure that the government will continue betting on this cryptocurrency, whose price currently exceeds $100,000. ‘’’

    • FuckyWucky [none/use name]@hexbear.netEnglish
      0·
      3 days ago

      I think that’s why El Salvador is doing it. They never really forced people to use Bitcoin, US Dollar was also the legal tender and unlike Bitcoin, also the money of account.

      But really though, can you call for IMF to stop lending to countries which buy Bitcoin when the issuer of Dollars, the U.S. has a President who has run multiple crypto/NFT scams and wants to use Government money to pump up crypto prices?

      • technocrit@lemmy.dbzer0.com
        0·
        2 days ago

        They wouldn’t be able to do all that evil stuff with the petrol-dollar if there were a valid alternative… Thus the IMF ban on bitcoin.

  • workerONE@lemmy.world
    0·
    3 days ago

    Bitcoin isn’t good for making little purchases, firstly because it takes so long to get confirmations, if each block is 10 minutes and you need like 3 blocks to consider it confirmed that’s 30 minutes. But that ties into the second issue which is that you probably don’t want millions of tiny transactions on the Blockchain, you want them processed off-chain and then settled in bulk (to the Blockchain) periodically as a single transaction.

    • AHemlocksLie@lemmy.zip
      0·
      3 days ago

      Bitcoin is great for little transactions if you use the lightning network. Sending on the lightning network means instant payments with no confirmation required and absolutely tiny fees. And the only thing that shows up on the blockchain is the transactions to initially start using lightning network and to take your coins back off the lightning network. Transactions made over the lightning network aren’t recorded anywhere other than maybe by the people transacting.

      • PrettyFlyForAFatGuy@feddit.uk
        0·
        2 days ago

        i got back into bitcoin recently and decided to move the contents of my old wallet to a new SegWit one and look into using lightning.

        To open a lightning channel i have to stake £170 up front though which is crazy, how are people in poorer countries supposed to do that?

        or even here. poverty is on the rise, a lot of people are living hand to mouth and just having that kind of money lying around isnt a thing.

        i like the idea of bitcoin but i worry it doesn’t scale well.

        Add to that that virtually nowhere accepts it. The value of bitcoin comes from its use as a currency. if it doesn’t have that then it’s entirely speculation.

        oh well, i have £2k in there and i’m not turning it back into fiat. I’ll spend it if i can or ride it all the way to 0 if that’s the way it goes

        • AHemlocksLie@lemmy.zip
          0·
          2 days ago

          There are no hard coded minimums. Some providers may demand a minimum commitment, but there’s nothing to stop people in poorer regions from opening smaller channels, especially between individuals. Any business attempting to operate in the region will have to work with that.

          There is also a lot of work being done on… I think they call them channel factories? Might be off on the name, but basically create as many channels as possible in as little space as possible to keep it efficient and minimize costs for individuals.

        • Preflight_Tomato@lemm.ee
          0·
          2 days ago

          An infinitely growing blockchain will inevitably fail by centralizing. Crypto-currencies as they exist today are doomed, but the protocols and tech created now may hopefully inform the design of something that is useful as a currency.

          Also, high transaction fees make it useless for small (normal, everyday) amounts, so it can only be used as a store of value. It’s really more analogous to gold or a stock, with the one significant benefit that it’s harder to steal than gold and can’t be lost stolen institutionally.

      • fishos@lemmy.worldEnglish
        0·
        2 days ago

        “Bitcoin is great if you don’t use the block chain”

        That’s what you just said. So why even use it in the first place?

        • AHemlocksLie@lemmy.zip
          0·
          2 days ago

          You still use it as a settlement and security layer. The lightning network is made up of pairs of people that both lock money in a new account with a transaction. Both people get a fully signed copy of a second transaction to reclaim the money, but they don’t publish it immediately. If they need to make a new transaction between each other, they just replace the second fully signed transaction with a new one that divides the money according to the new balance. They can do this as many times as they want for as long as they want, and they only have to make two transactions: one to start and one to stop. If anyone tries to cheat, the only thing they can do is publish an older version of that second transaction that favors them, but you have… I think a day or three, I forget, to publish a newer version that proves they cheated, and if you do, you get ALL the money even if some was owed to them, so cheating won’t go well. The down side is you need a node that’s always online or connects to the network frequently so you can be ready to catch a cheater.

          To make a network, they use some fancy cryptography to send money to someone if and only if they send it (minus very, very, very small fees) to the next person in line towards the destination. If anyone in the chain refuses or fails to commit, the transaction fails and no money moves at all. Because it’s all secured by the blockchain, you can trust that everyone both can and will complete the transaction exactly as requested, or the whole thing fails and nothing happens.

          • fishos@lemmy.worldEnglish
            0·
            2 days ago

            You realize “it’s so energy and time consuming that we had to create a secondary layer to try and make it actually usable” isn’t the defense you think it is, right?

            • AHemlocksLie@lemmy.zip
              0·
              2 days ago

              Sure glad that’s not why they did it because you’re right, that’d be kinda stupid. That’s not why they made a secondary layer, though. They made a secondary layer so transaction throughput can grow exponentially while maintaining the security of the blockchain without significantly impacting fees or requiring the blockchain itself to become proportionally larger.

              That last part is the real motivation. The goal is to above all else, remain decentralized. That means the average user needs to be able to run a full node capable of verifying any transaction it needs to. To do that, the blockchain can’t grow too quickly, or people will get forced out. If it grew exponentially faster as transactions grew likewise, nodes would eventually centralize in fewer and fewer hands until someone could exert control over the network.

              The blockchain is currently something like 650-700 GB, which is a lot, but most people can manage it, even if it might be pushing it for poorer regions. Without the lightning network and with substantial user growth, the only option is to increase the block size, and to achieve an actually usable capacity of strictly on-chain transactions, you’d be looking at sizes on the order of hundreds of TB or pushing into PB territory. Nobody would be able to store the blockchain without a dedicated server rack. Not a single server, a whole rack. It’d costs thousands and thousands of dollars to run a node. Instead, we acknowledge that you purchasing a pack of gum at the convenience store doesn’t need to be immortalized on the blockchain and use the lightning network to secure your transaction without having to create a permanent record.

        • workerONE@lemmy.world
          0·
          2 days ago

          Bitcoin is a great alternative to something like Western Union that charges high transaction fees. It’s time to transmit is comparable to a traditional back wire, but days faster than an EFT.

          Everybody knows Bitcoin is too slow to process point of sale transactions on-chain but there are other Blockchain solutions that can do it. Another user mentioned the lightning network which still actually is Bitcoin but it’s another layer.

          Also, I’ve just ignored the environmental impact of Bitcoin, which probably needs to move away from proof of work, or some other solution is required to lower the every requirements.

          • fishos@lemmy.worldEnglish
            0·
            2 days ago

            Yeah, and Zelle, Cashapp, venmo, PayPal all do the same and don’t have that environmental impact you so easily dismissed.

            It’s been great watching Bitcoin grow from this digital currency for buying drugs online to having all these layers added on to almost sort of make it comparable to the systems we already have. By the time you guys actually make something that isn’t just stocks with no backing but faith, we’ll have moved on to a post-money society(probably not but I have more faith in that than blockchain ever being a useful currency.

            • workerONE@lemmy.world
              0·
              2 days ago

              The fact that one anonymous person could create a solution that “almost sort of make(s) it comparable to the systems we already have” is fucking amazing since all of humanity worked for like 70 years since the invention of the computer to create those systems.

              • fishos@lemmy.worldEnglish
                0·
                2 days ago

                Remind me again where Bitcoin is actually used vs actual databases. It didn’t solve anything and did it in an energy hungry way. It’s not “almost sort of comparable”. All of the scams that immediately came about because it doesn’t have the numerous regulations regular financial instruments have is proof. For the last decade Bitcoin has been struggling to reach parity with financial regulations. Ffs, the US PRESIDENT JUST PULLED A RUG PULL.

                Blockchain is just digital speculation.

                • workerONE@lemmy.world
                  0·
                  2 days ago

                  You’re the one who said it was “almost sort of comparable” to the systems we already have, I was literally quoting you. Then you disagree with yourself? Argue with yourself then, you don’t need me.

        • PrettyFlyForAFatGuy@feddit.uk
          0·
          2 days ago

          the lightning network still uses the blockchain, just less. it’s acts like an immutable public bar tab you can’t default on. once you have spent enough with another person that it is worth them conducting the transaction on chain then it does it. usually when fees are low too.

          That is an extremely simplified explanation of how it works though, it is more complex than that.

          • anomnom@sh.itjust.worksEnglish
            0·
            1 day ago

            Stil though, how well does that work with a rapidly fluctuating value of the bitcoin? Prices would have to be superfluid for external good to have known value of some sort.

            Stability of the value of savings and currency seems crucial to using it for trade.

              • anomnom@sh.itjust.worksEnglish
                0·
                9 hours ago

                Won’t the economy have to go flat (stop growing) since the supply of bitcoin is fixed? Otherwise the value of bitcoin will always be going up. Which leads to hoarding and speculating, which was part of the reason for dropping the gold standard.

                Unrelated note: part of why humanity stopped making our money out of precious metals was because the metal was worth more and more while the dollar held steady. So people started shaving the edges off silver coins, and then recievers had to start weighing money at the time of transaction (which slowed it all down). Making money fungible was a huge advantage for commerce.

                Bitcoin transactions feel a lot like having to double check that the coins you’re receiving are actually “real” and that you’ll be able to trade them later. The lighting network feels like a tab at the hardware store where anyone can skip town anytime they want.

        • 31337@sh.itjust.works
          0·
          2 days ago

          IIRC, a deposit is made by two parties to create a lightning network channel that’s enough to cover all transactions (kinda like a multi-sig escrow), and both parties have to sign-off on their balances after every transaction (the last balance signed by both parties is the only valid state). I think most people would use a custodial wallet where the custodian already has channels set up, and this would require trust in the custodian. Lightning networks didn’t exist, and wasn’t fully spec’d out the last time I looked into it though.

    • Evotech@lemmy.world
      0·
      3 days ago

      That’s the same way as the economic system works though

      Each bank and creditor keeps track of if what they owe each other and then they settle the balancebetween them periodically (depends on the country)

      If assume you could do something similar with bitcoin, but you would need an overlay

  • Allero@lemmy.today
    0·
    3 days ago

    Let’s not get astray here.

    The reason El Salvador stopped using Bitcoin as a legal tender is not because it’s some sort of failed experiment (it had issues, but still), but due to continuous pressure of IMF interested in maintaining a US dollar-centric economy.

    El Salvador is reliant on US dollars in its economy, which puts it under heavy US influence. Knowing Salvadoran currency wouldn’t be strong, Nayib Bukele suggested an alternative option - risky, volatile, but free from pressure of other countries and strongly appreciating in the long run. IMF didn’t like it, and that’s where we are.

    So, when you cheer Bitcoin not being legal tender anymore, you also cheer US and IMF projecting power over the country.

    • MolecularCactus1324@lemmy.world
      0·
      2 days ago

      Well, also, they just cut a deal with Marco Rubio to be America’s prison, so they must’ve figured that was more lucrative than Bitcoin and continuing to agitate the US by challenging the dollar was creating unnecessary friction.

    • jagged_circle@feddit.nlEnglish
      0·
      2 days ago

      Yeah the headline is insane. This would have been a wildly successful experiment, and now is a great time to cash out.

      I guess they made a deal to sell their coins to the US.

      Edit: misinformation, sorry. They’re not selling. they’re still buying. The IMF is just forcing them to strike the word legal tender

    • JimmyMcGill@lemmy.world
      0·
      2 days ago

      Exactly. The title is misleading af

      They were forced to stop using Bitcoin as legal tender by external parties. The question people should be asking is why? And the answer is not that it was a failed experiment.

      • fishos@lemmy.worldEnglish
        0·
        2 days ago

        The experiment was to move beyond external parties. They were not able to do so and returned to using external parties. Ergo “the experiment failed”.

        • JimmyMcGill@lemmy.world
          0·
          2 days ago

          They were forced to do it by the IMF and US

          Why do you think that they’d care about it if it was failing?

          • fishos@lemmy.worldEnglish
            0·
            2 days ago

            So they experimented with resisting the US and IMF and it was not successful.

            We call that an experimental failure.

            You really don’t get it. “Blockchain” was not the experiment. “Utilizing blockchain in the global economy” was the experiment.

            And it failed.

              • fishos@lemmy.worldEnglish
                0·
                2 days ago

                Again, for the people in the back:

                The experiment was whether or not they could be independent monetarily. Not whether or not blockchain works. But whether, in actual practice, if it could provide the monetary independence some people claim it has the power to do.

                Outside influences were strong enough to overwhelm Bitcoin adoption and it succumbed to those outside influences. As an experiment seeking to test whether or not Bitcoin could resist these influences it failed.

                This is how experimentation works. Now you can tweak your experiment and try again, but acting like failing at the exact thing you were trying to accomplish is somehow not an experimental failure is just delusional.

                • JimmyMcGill@lemmy.world
                  0·
                  2 days ago

                  You can argue semantics all you want

                  They were trying to break free using Bitcoin. It seemingly worked quite well so they were forced to stop doing it. The article title is misleading in the sense that the failure isn’t from Bitcoin (quite the contrary).

                  You don’t even have to be pro bitcoin to see this as something bad, but feel free to keep supporting such propaganda and external influence of politics. I’m sure it really benefits you

    • unexposedhazard@discuss.tchncs.de
      0·
      3 days ago

      Its even funnier. They just straight up promised them a billion dollar loan on the condition that they abandon bitcoin.

      In December, the government struck a $1.4 billion loan deal with the International Monetary Fund (IMF) that scaled back its bitcoin embrace after the lender urged officials to limit its exposure. The lender specifically advocated making acceptance of bitcoin voluntary for the private sector, which is spelled out in the hastily-approved law.

      https://www.reuters.com/world/americas/lawmakers-el-salvador-rush-new-bitcoin-reform-after-imf-deal-2025-01-30/