8 months after rolling out a brand new method of doing payments, ~70% of the country has tried it and ~11% of those are using it for remittances (3% in Bitcoin, 8% in dollars).
For a government program rolling out new technology, that actually seems quite impressive.
They gave people $30 for opening up the app in a country where the per capita GDP is $3800. So I'd be surprised if 70% didn't at least try to get their free money.
The formal GDP per capita is $3800. You have to be loony toons to believe that comes anywhere near the entire value of what happens inside the country, both for activity that simply isn't recorded and taxed and for activity that is explicitly illegal such as drug and gang activity.
Lol, sure, everyone's secretly a millionaire because of drug dealing.
You vastly over-estimate the extent and value of illegal activities in a country. It may be huge for an individual but it is always a small fraction of (what you call) "formal" GDP.
You made the assumption I'm implying they're all drug dealers. Try to be more creative. I'm not making that assertion at all. Most of the economy is informal, it's estimated to exceed 60% of their economy. That includes things like sewing a blanket and selling it on the street unrecorded -- likely illegal (tax evasion), definitely 'informal', but not drug dealing.
60+% is not a 'small fraction'. You're factually incorrect.
it only means that really rich people are hiding their wealth and all the others are slightly less poor than they declare.
remember that GDP per capita is an average, meaning that a good amount of people in the country earn much less than that.
People in Salvador are actually quite poor, regardless of how much "informal" economy is going on in the country.
edit: I woould actually argue that an high volume of unofficial economy is a strong indicator that the country has a very weak economy in general. You can find the same conditions in all the poorer countries in the world, except maybe dictatorships such as North Korea ( we actually can't tell, because we don't have access to their economic indicators)
I don't think anyone argued there aren't poor people in El Salvador. I'm sure remittances and guest working out of country make up for some of the things not included in GDP, and average 'income' can definitely exceed average GDP if you add in remittances (for which El Salvador is known), but you're right that there are poor people in El Salvador. Has anyone ever disputed that?
Bringing up GDP as it pertains to the $30 wasn't even introduced by me, it was introduced by the person I responded to. I think you're replying to the wrong person if you have some issue with the GDP as it pertains to this topic. In fact I was on your side, explaining the issues with going off of the official GDP.
This is a national currency, the foundation of the economy.
The project a giant expression of corruption, and also a complete disaster.
The impetus for this was about as legit as the WeWork leadership wanting to 'end world hunger' etc. - and doing so at a very high cost and risk to the wellbeing of the nation.
And of course, there's no upside.
Digital banking would have been a great idea, Estonia is leading the way with some really cool government digitization etc..
But even then, it would not have changed material fundamentals.
This is just economic chaos, it's sad, it's why they will remain poor.
Edit:
Burkele [1]
It's odd how people do not recognize how institutional and foundational a sound financial system is, and how there are a lot of moving parts to it.
One lesson from Web 2.0 that needs to be heeded here: MAU matters. If you give someone in a poor country $30 just for signing up, of course they’re gonna take it. But the value in the bitcoin network is continued use. If every one claims their $30 and bolts (which seems to be what’s happening), it’s not impressive at all really.
The idea that bitcoin is useless as a currency should not be controversial these days. It's a speculative investment whose value varies wildly every day. That makes it impossible to price a good or service in BTC.
Add in transaction fees of several dollars each and the idea of buying a pizza with bitcoin becomes pure fantasy.
Ironically, BTC has been very successful at scaring some government officials into thinking that people may abandon their fiat money if fiat printing doesn't get under control.
Because of this threat fiat printing will be never get to the point that BTC is a good store of value. It has been a huge success at what Satoshi was railing against, but will be a huge failure for the Michael Saylors of the world.
If Bitcoin was inconsequential all the worst people wouldn't be coming out against it and governments across the globe wouldn't be actively trying to stop it.
I have no idea if Bitcoin will ultimately be successful, but it is telling to look at the powerful people who are the most vocal against it.
Except in this case it was enforced in a top down manner by an extremely corrupt president. No doubt he himself holds a huge bag and intends to funnel the wealth of his nation into pumping it.
You ignore the obvious for some farfetch conspiracy
Both things can be true. This politician can be corrupt and looking to enrich himself, and other politicians can see Bitcoin success as a threat to power.
The first step is realizing that the central bank fiat systems are designed to be corrupted for the benefit of the people issuing the currency and their associates. Bitcoin may or may not successfully counter that, and Bitcoin may not necessarily be less corrupt.
> Ironically, BTC has been very successful at scaring some government officials into thinking that people may abandon their fiat money if fiat printing doesn't get under control.
Weren't much the same things said about gold pre-Bitcoin?
This is something I can't fully understand. Why didn't Salvador choose Bitcoin instead of one of proof-of-stake currencies? Choosing BTC is one of the worst if not the worst choice: (1) enormous transaction fees make it completely useless for everyday payments, (2) proof-of-work has a negative influence on our environment that we can no longer ignore- you'd think that a state player would know that and chose to be a bit more responsible.
1. It’s one of the cheapest coins to spend. Usually <$0.15
Only litecoin and Dogecoin are cheaper in the top 25. Yeah ok polygon is the cheapest ($<0.01) if you include EVM chains but the rest of them are much more expensive ($1tx+).
2. PoW is security. Rather than crusade against “work”, maybe we should be crusading against fossil fuels?
Are you advocating to use renewable for Bitcoin mining instead?
Because that will only work as soon as we reached full saturation of renewable energy production and consumption.
Otherwise it will always be more lucrative to consume the renewable through Bitcoin than using it for everything else.
A EV car fuel consumption would need to cost more than what Bitcoin can make. A very unhealthy relationship Bitcoin has on consuming energy.
The only real possibility is creating a Bitcoin heater system but most of the time I see Bitcoin mines I'm seeing also AC's which increases the energy consumption even further.
And no, the demand for renewable from Bitcoin will not mean we will create and invest more money into renewable energy overall with a net positive it will only add to more Bitcoin mining.
My take on what you are saying is that you deem other uses of energy more appropriate — “you can’t use it that way! You must use it in this way”.
Ultimately it is market forces that determine if using energy for a particular purpose.
If there are no pollution externalities to add complexity, it is up to whomever is paying the bill on what they want to spend it on.
I appreciate that some miners will find it rational to use their entire renewable power to mine Bitcoin; and that is ok. Not everyone wants to mine. For some, the utility of an EV is greater than that of mining, and so just looking at a energy/cost ratio ignores demand and utility.
Additionally, the PoW paradigm was invented, and exists today, and there is not a lot one can do to stop it.
From 2009 onwards, humanity has decided to dedicate some percentage of global energy output and to the purposes of maintaining ledger security.
I have always said this is a good thing, and if you have a problem with this, complaining about it achieves nothing.
We can do plenty against it. We can advocate for laws etc.
And it's not just me who thinks 'other' uses are more critical: even you prefer light over bitcoins. You probably prefer goods and services also higher than Bitcoin hashes.
And in a world hurt by co2, everyone who has to suffer the consequences from climate change would also tell you what they think if they knew and could tell you.
You better not own a clothes drier or a set of Christmas tree lights (2 things that use more energy globally than Bitcoin) because in a world hurt by co2, everyone has to suffer the consequence from climate change.
What you are currently doing is called a strawman argument.
I have not mentioned IF I think those use cases are less or more bad than Bitcoin. Your argument becomes irrelevant when I say 'yes! Good point let us also stop doing Christmas lights etc.
Independent of this, I even have the feeling that I read the exact example before on hn.
But just for the fun of it: yes we need to do much much more. It would be a good way to list the biggest energy consumers and rank them based on alhow helpful they are for the whole world and how critical.
Bitcoin would be below plenty of things.
Anyway I can and will continue to advocate against Bitcoin as it consumes terrawatts of energy, has very little benefit to the rest of the world and people try to play this issue down by putting weird renewable arguments out there which are just lie's.
We need to push back. Most of us are getting hurt by Bitcoin. Either to additional climate change, speculation/gambling or by hardware supply issues.
I bet 99% people here paid for Bitcoin more than they made through it. The higher GPU price, higher taxes through climate changehigher utility costs.
Average transaction fee on bitcoin is about $1.50 USD which is low for bitcoin. If you use a second layer you can only transact on some tiny channel, you still have to sync with the main chain. A second layer is very good for sending one person 10,000 small payments, which is not a real use case.
That site is overestimating the costs, people bring that report up frequently.
https://mempool.space is a better indication of cost.
I only ever pay 1sat/vbyte (min cost) myself, and have for years. I am able to wait a few hours to get such low fees if required. Real time payments are to be done via Lightning network.
The network is reasonable congested today so the high priority tx is 12sat/vbyte or 67 cents.
That “dial up modem” seems fine. We can look at incremental changes if the need arises. It doesn’t today.
It isn't an estimate, it is taking data directly from the chain.
Real time payments are to be done via Lightning network
Real time between two people on the exact same tiny side chain with no one else on it. This is not the same as people sending a transaction to each other on the actual bitcoin chain.
The network is reasonable congested today
You can see in the chart I linked that it is not.
That “dial up modem” seems fine. We can look at incremental changes if the need arises. It doesn’t today.
It is not fine. That's why transaction fees have spiked in the past, that's cheap transactions no longer exist, that's why there is an awkward second layer that few use and no one wants.
It has been 12 years and every other currency has proved that restricting a chain to a few kilobytes per second is ridiculous.
Ja, people are overpaying. I’m telling you what the deal is, the minimum fees, and what I pay. I don’t care what other people are doing, I can only tell you my experience and the metrics that speak to it.
What are you advocating? 10MB Bitcoin blocks?
When did you last use Bitcoin?
LN is the fastest growing cryptocurrency network by nodes. Lots of people are using it. I know it doesn’t fit the big block Bcasher story, but we stopped listening to those fools in 2017.
I'm showing you what people are paying. It's the truth, nothing more.
10MB Bitcoin blocks
That would be about 16KB/s
LN is the fastest growing cryptocurrency network by nodes. Lots of people are using it.
The difference is that I backed up what I said with real information.
I know it doesn’t fit the big block Bcasher story, but we stopped listening to those fools in 2017.
Every cryptocurrency has more throughput than bitcoin. There is no reason not to. You can throw around labels and propaganda nonsense, but there is no technical reason to restrict a cryptocurrency to the throughput of a 28.8 modem. It destroys all the reasons for a cryptocurrency to exist in the first place.
The real question is why someone would use an awkward second layer that completely fragments who you can send and receive from when every other cryptocurrency works without it because they aren't limited to 1 KB/s. An office laser printer can print characters on paper at a higher throughput than 1 KB/s.
It is a bizarre and absurd world where a currency that is supposed to work for everyone pragmatically allows everyone in the world a single transaction for their entire lifetime.
Because it doesn’t matter. It works. Sometimes you don’t need to be the most cutting edge technology solution to work as intended. One may argue that Bitcoin has taken too conservative an approach, and while this argument can have merit, I would suggest this is all part of the value proposition of the protocol and by design.
There are many technical reasons for constraints like block size, block time, tx complexity, etc. most of these are for an availability or reliability metric. It is really important that low powered hardware can run a node if it is to be universal.
So far unbounded solutions have presented fragile constructions on unproven math; low reliability with multiple hours long outages; very high compute and storage requirements for node hosting.
We use a so called awkward second layer because we have realized that maybe not every tx needs to be recorded for all eternity for all to see in a data structure.
Lightning provides a similar value exchange of satoshi like BTC mainnet txs, with better privacy and lower fees.
There are many technical reasons for constraints like block size, block time, tx complexity, etc. most of these are for an availability or reliability metric. It is really important that low powered hardware can run a node if it is to be universal.
Why would nodes need to be low powered and how lower powered do you think they need to be? A $35 raspberry pi with an SD card or a $10/month VPS can run a node, even though these nodes don't really matter. This is propaganda that has no technical merit. You are repeating the same nonsense that gets repeated for the last 8 years, but never with any technical details, reasoning or explanation. This assertion is as deep as it goes.
So far unbounded solutions have presented fragile constructions on unproven math; low reliability with multiple hours long outages; very high compute and storage requirements for node hosting.
I have no idea what you are talking about here since you gave no examples, details, numbers or real information of any kind. Every cryptocurrency besides bitcoin has more throughput. Ethereum, doge coin, lite coin, bitcoin cash and many others. Bitcoin is the only one that is artificially constrained to a pathetic trickle of data. Who would attach themselves to something that can't scale? If I give you an address, you can't send to it through the lightning network. Why use a side chain when you can just use a chain that actually works?
They chose Bitcoin because of an accident and because of brand recognition. Now everyone points to El Salvador as the failure or success of Bitcoin or cryptocurrency. Depending on who and how you ask the question, of course.
Once again, The Lightning Network is not Bitcoin, and defeats the point of on-chain peer-to-peer electronic cash systems and payments using Bitcoin. It has been shown to be a centralized by design creation where the biggest nodes (The exchanges) can censor the payments. [0]
Bitcoin has failed for on-chain payments as described in this article, this paper [0] and it's own white-paper.
A week ago I would have down voted you as a run if the mill bitcoin naysayers. Someone we see often who looked superficially at what the crypto market is doing and scoffed. There's a lot to scoff at, but the core proposition that is slowly rolling out is world changing.
But over the past few weeks I've become really unsettled as I've dug into the history of bitcoin that I missed - the 2013-2017 Era say, when bitcoin really did fail at its core goal of being a currency. It has undeniably failed. That isn't to say it isn't finding a new use - but the whole ecosystem is missing that core currency use case. We're sort of seeing attempts at it with lightning network and stablecoins - but these are toys.
All this to say, I agree with you, and I'm horrified that people will ignore and write off the experience and history offered by people who were there so they can jump on the latest fad - in this case a polarized bitcoin good/bad opinion.
Nah rvz doesn’t know what he is talking about. I’ve made several Lightning network payments that have bought real world food for folks around the world. He keeps echoing failure, but I have seen nothing but success. If he used any of this tech instead of just complaining, he might actually learn something.
The only thing that has failed is the detractors complaints, meanwhile actual things have happened in the world.
I believe you haven't read what rvz is talking about. He didn't say payments with lightning wouldn't work. He said that lightning nodes are a centralized system which open the doors to censorship and manipulation, which was the motivation for btc in the first place.
And he is completely utterly off base with that. It just doesn’t match reality.
Anyone can run a LN node; you are free to open channels and interact with the network without any centralized controller. For any definition of centralized I know (say, 1 big api provider, or a collection of PoS stake nodes), this does not apply to LN.
There is no censorship possible in this construction — indeed the peers routing the payments don’t even know the originator, just liquidity levels between their channels. Analogous to onion routing — how can a peer censor a circuit if they don’t know the originating and destination endpoints?
Calling Lightning centralized is something an ignorant precoiner would say. Really, rvz doesn’t know what they are talking about.
> Calling Lightning centralized is something an ignorant precoiner would say. Really, rvz doesn’t know what they are talking about.
And somehow you do? Assuming you have read both the paper I linked to and this article? I know it's difficult to read the cold hard truth and evidence on what the Lightning Network has become and will tend towards to in the future via the analysis and inspection. But of course, why would anyone expect someone who calls themselves 'randomhodler' or a Bitcoin maximalist to understand that? Since to them, anyone critiquing anything related to 'Bitcoin' will be like attacking their identity, investment and the technology all in one?
So somehow according to you, it is not 'centralized by design' as the paper has clearly demonstrated, and Bitcoin has somehow 'succeeded' in on-chain peer-to-peer electronic payments as described in the white-paper, due to the Lightning Network which that is an off-chain L2 solution and doesn't directly use the blockchain?
The problem with using anecdotes is that it is not evidence or a concrete refutation against the paper. "I can run one myself" isn't the point. The actual reality has been outlined by the paper on what happens when the Lightning Network grows and it leads towards inevitable centralization of these hubs with the most liquidity (take a guess who runs those hubs) - creating a worse version of the current traditional system without directly using the blockchain for on-chain payments with a volatile ' store of value' as a 'currency' and altogether contradicting the point of Bitcoin.
The whole point of it is to be used for on-chain payments, a digital currency and a P2P electronic cash system and it is evident that in El Salvador, the paper I linked and the inevitability of the LN have clearly demonstrated that this experiment has failed in all of that.
If that's not a failure, then I don't know what is.
Physics paper that defines a model demonstrating centralization of value topology in a network of about 2 years production age with data from 2018-2019. Looking at channel balances and emergent channel topology.
I don’t disagree with their conclusions, however I don’t think it follows with your conclusions. Nor do they really matter today. For one, they don’t actually have the visibility into the transaction volumes, just aggregate channels, so their analysis is limited to distribution of value — analogous to blockchain analysis that only looks at output balances and their associated other outputs.
Additionally, this space moves fast and any cryptocurrency data from 2018 is of less value post 2020.
If we are arguing that decentralization of value is removed from peer to peer cryptocurrencies, I think this technology cannot deliver, indeed this is a socioeconomic issue rather than the technology. Of course the Gini coefficient is going to model the society that produces this tech, especially today.
What is your criteria of failure here? You absolutely love saying “Bitcoin has failed” or “Lightning network has failed”, but at what? For some socioeconomic centralization of value metric? Ok cool but that’s not what Bitcoiners are getting at.
I think you believe that the technology did not live up to its promises. I don’t agree, but I can see how one could feel that way. Now, I ask you, what is the alternative? It’s all well and good to deny existing technology as achieving its goal, but what should we do instead? If you think blockchain as a construction cannot remain decentralized in the face of spam bots and worldwide tx load, what are our alternatives that could possibly lead to this optimistic decentralized solutions?
My personal belief is that PoW assets need to go away, and fast. That being said, the top five assets (based on market cap) are all PoW - most laymen (read: statespersons) are probably only aware of the top two, and Dogecoin.
> the top five assets (based on market cap) are all PoW
That's because "pure" PoS is a pipe dream. For PoS to work the network needs to start with PoW or a pre-sale (ETH did both). Staking 0 value tokens doesn't work. PoW is the most efficient method to convert raw energy to a digital and secure token. The value off all BTC in existence === all energy spent since the genesis block
It’s cute that you have that belief, however PoW is not going away. PoW is not some evil monster that is eating the world — however there are enemies of Bitcoin that would sell it to you as such.
All PoW miners are rational actors that choose to spend energy to secure the network.
We can and should push that the energy is generated cleanly and renewably, thus pushing clean energy further as there is a clear incentive for use, regardless of external load or demand.
You keep talking about El Salvador but I am talking about the general problem with using deflationary currencies, especially when you cannot buy enough of the currency as a nation to compete with the rest of the world. Besides printing currency, nations can raise BTC by many other finite means.
The program started less than a year ago. I think it's way too early to say that. So far, it seems like people prefer still transacting in dollars, but that may change over time.
I'm just impressed that a small, developing country could roll out a new technology so fast.
>>> 8 months after rolling out a brand new method of doing payments, ~70% of the country has tried it and ~11% of those are using it for remittances (3% in Bitcoin, 8% in dollars).
>> Not if the technology is a currency. I think this finally ends the idea that bitcoin can be used for day-to-day transactions.
> The program started less than a year ago. I think it's way too early to say that. So far, it seems like people prefer still transacting in dollars, but that may change over time.
Isn't that a lot like saying "give Google+ time, it may catch on eventually"? Most users tried and rejected it.
That's like saying if the government had created its own version of PayPal in 1995 and it had failed, it would finally end the idea that dollars can be used for day-to-day transactions.
It's not the same thing as long as people have to pay US taxes and court judgments. There's nobody I meet regularly who won't need to pay taxes eventually, so they'll take my dollars.
None of the rights enjoyed by citizens of liberal democracies matter without the right to transact. You can’t exercise your right to speech if you can’t buy posters or domain names for your cause. You can’t go to a protest outside of walking distance if you can’t pay for gas in your car, or a bus or train ticket. Governments gaining such control of currency would be a backslide into authoritarianism.
Your comment is based on unfounded assumptions --- that the current banking system will be subverted and cash will no longer be accepted and due process under the law will become null and void.
None of these are being proposed. Implementing all of these would require changing the constitution.
In other words, your comment is an example of the paranoia I referred to.
> Implementing all of these would require changing the constitution.
A statement like this requires being explicit about the country or set of countries in question, narrowing down the set of constitutions that would require amendments.
If the legal system of a country does not explicitly require merchants to accept cash (some places do, some don't - just like in some places a merchant may refuse a customer and in some they can't), it is technically possible to create a practically cashless environment without having to explicitly lock anything down explicitly, but merely by creating an incentive to not accept cash. There's barely any practical difference between no one (save a few die-hards acting on a principle) accepting cash because it's inconvenient to deal with (or simply unfashionable, hah) and actually blocking cash acceptance - the model is indeed different but outcome is ultimately the same.
For an imaginary extremely powerful and nefarious adversary the former model is even preferential, as it provides a plausible deniability. Whenever there's such and adversary with a will and power to do so is a separate question which I'll intentionally avoid.
Cashless society is indeed being proposed in the US. During the time when I was in college (at a public university), all university-run businesses switched to cashless. As in, you literally could not pay with cash. They wouldn’t accept it.
> Implementing all of these would require changing the constitution
This is naïve. Many countries, the US included, have variations of an emergency powers act, where the executive can get around the constitution in some ways. Even without that, though, you still can have things like Operation Choke Point [1], where the government merely makes suggestions/threats to private banks and payment processors to close the accounts associated with things they don’t like. So no, this has precedent. It’s not paranoia.
Well, if we'd step out of "citizens of liberal democracies" scope defined by a parent comment... Then, there's also another story of "freezing of bank accounts of political dissidents" - Mr. Navalny and FBK. Obviously, the government position is that they're criminals who impeded and infringed on the rights of other citizens.
It's not that I agree or disagree with your example - honestly, I've no idea, I haven't really tracked that story I presume you're talking about. What I suspect, though, is that ultimately, it's all a matter of trust. Which is a highly subjective matter.
What I wanted to say is that it might not exactly be a good idea, tone-wise, to call it a "paranoia", when it's just a matter of disagreement about subjective things.
So you admit there is now recent precedent for people allegedly committing crimes having their bank accounts frozen, without even a public hearing or trial?
Dr. King and Gandhi were also committing crimes by "impeding and infringing on the rights of other citizens"
I'm pretty sure Snowden or the schihub founder would be candidates to freezing. Cryptos are really useful for specific edge cases where the law become too retrograde. That is not a huge market, but that is a meaningful one.
> You can’t exercise your right to speech if you can’t buy posters or domain names for your cause. You can’t go to a protest outside of walking distance if you can’t pay for gas in your car, or a bus or train ticket.
I think this aught to make us consider the antidemocratic effects of poverty and inequality too.
Deflation is the worst possible state for a currency.
An economy is defined as the flow of goods and services. Currency is the medium through which goods and services flow. Deflation encourages people to not spend their money. Not spending money means goods and services don't flow, means an economy collapses.
That bitcoin / crypto people keep harping that deflation is a good thing proves to me that these people know nothing about economics and should never be trusted as such.
> That bitcoin / crypto people keep harping that deflation is a good thing proves to me that these people know nothing about economics and should never be trusted as such.
They're desperately seeking a store of value (which isn’t wealth; it’s only wealth if productive or others need it and will trade something for it) that can't be devalued by humans, with expected results (value is constantly changing and subjective). As you mention, it shows a lack of economic understanding.
The argument that with deflationary currency nobody will spend is ridiculous. Everybody still needs to spend to buy whatever they need for daily life. Money will still be spent into the economy. The difference between moderate inflation and moderate deflation is what people do with their excess money. With inflation people will buy stuff just because stuff holds its value and money doesn't. With deflation people save their excess. The higher the inflation/deflation level the more pronounced the behavior of spending/saving.
People having savings is a sign of a healthy economy. With savings there are more people that have an opportunity to invest. Investment provides real growth.
Deflationary being bad has nothing to do with essential spending and everything to do with discretionary spending. I (and many people I know) don't buy games that we want to play right away because we know they will be on sale in a month or so, and can wait. If I expect houses to go down in price I will not put a lot of effort into buying a house, and instead rent for now. Used car prices right now are extraordinarily high, so I will not be upgrading my car until prices start coming down. I'm not buying a new graphics card because I think prices are inflated and I believe they will come down sometime in the next yea. Etc...
A significant portion of our economy is reliant on discretionary spending, and when discretionary spending drops we usually end up in recessions, as companies that rely on that spending start layoffs.
> Deflation encourages people to not spend their money
Oh the horrors! Maybe people will not spend their money on stupid shit, they might conserve instead of destroy the environment. Maybe the middle class wont be forced into participating in the casino-for-privileged-mbas that is the stock market. Maybe we will stop having a siphon that steals the labor value from the lower class and drops it on the doorstep of the rich.
In a deflationary economy, it's not just consumers who stop spending, it's everyone: companies stop investing, employers stop hiring. This leads to a vicious cycle. History shows us that deflationary economies can be more damaging that inflationary.
This is repeated all the time, but nobody seems to provide evidence besides some offhanded comment about Japan. You realize this is an opinion or ideology not something like physics laws right?
> nobody seems to provide evidence besides some offhanded comment about Japan...this is an opinion or ideology"
That's because "since WWII, one country has come close to having both a depression and a deflation: Japan in the late 1990s" [1]. The source of policymakers' hesitance with deflation "seems to stem from the experience of the Great Depression, in which deflation and depression appear to have been tightly linked."
We have limited data suggesting moderate deflation is any more damaging than moderate inflation. We have better-tested tools for fighting inflation. But with negative interest rates and QE (implying the existence of its inverse, i.e. the central bank selling short), deflation is less scary.
The problem with Bitcoin is its fixed supply. Bitcoin would not produce steady deflation. It is inherently volatile, as the bullwhip effect of the credit system is left unmoderated. The failures of fixed-supply currencies are documented beyond the domain of "opinion or ideology," e.g. in studies around currency substitution [2].
> We have limited data suggesting moderate deflation is any more damaging than moderate inflation
You don't need data to understand how people would simply stop working and wait for their cash to appreciate as they do nothing.
Except you can't consume or eat cash and also life is short and tomorrow is not guaranteed so when you decide that it's time want to spend it you'd not be better off in any way even after deflationary appreciation because everybody had the same brilliant idea and the huge mass of people stopping working caused a collapse in raw output of products and services.
Part of me wishes this actually happens, because those who operate countercyclically and keep working when everybody stops to sit on their couch hoping for deflation to make them rich, would eventually make a fortune when sanity comes back and people realize they can't eat the zeros and ones in their bank account.
An individual frame of reference is so deeply embedded in opinionated commentary about monetary topics. I find that lazy people argue that everyone is lazy; intelligent people speak as if everyone is intelligent; and selfish people accuse others of being selfish. No one is completely, absolutely any of those things, nor their opposite, yet those are part of the human condition.
> don't need data to understand how people would simply stop working and wait for their cash to appreciate as they do nothing
You do need data to confirm how these people affect the economy in aggregate. Based on our current evidence, when there is a steep supply curve, deflation is fine [1]. (People hoarding money and delaying consumption and production doesn't change output because (a) there is excess demand and (b) production is constrained by non-price factors.)
Where is this excess supply at? Have you seen gas prices? Are you aware that the US had to use oil reserves from the strategic reservoir for the first time in decades?
Europe is looking at legal measures to shrink its energy consumption such as regulating thermostats in public offices, schools and universities!
OPEC is also using this as an opportunity to shore up its state balance sheets after COVID, they will come through but not before they waste even more time to make sure they milk the West up to the very last politically acceptable petrodollar
This isn’t what a steep supply curve means. And I wasn’t claiming we are currently in a steep supply curve environment (though we are seeing evidence of it).
I don't understand your point. You seem to be saying that deflation is bad because if it happens, people will find that they can't buy goods at the price they expect. But that's the definition of inflation. So deflation is bad because it's actually inflation?
Or maybe you're saying that any period of deflation will inevitably be followed by a period of inflation, as production collapses due to the deflation? And you also think that people (other than you) won't realize that, and so behave as if the deflation is permanent, causing the problem?
It seems to me that as long as the deflation is less than the natural real interest rate (so nominal interest rates are still positive) there is no problem of this sort. It's no more a worry than thinking that anyone with a bit of money in the bank will decide to just live off the interest rather than work. There are such people, but most working-age people either don't have enough money for that, or want to work anyway.
The usual argument against deflation involves supposedly "sticky" wages that don't adjust downwards fast enough. Maybe that's the case, but it depends on particular social factors (eg, embarrassment at getting a pay cut).
>>>Deflation encourages people to not spend their money. Not spending money means goods and services don't flow, means an economy collapses.
How do we square that with the unending flow of junk that is produced with obsolescence baked in and disposed of? How do we square "economic growth uber alles!" with the constant warnings of man-made climate change and our impending doom due to wasting our resources on cheap shit from China?
I would argue that the short-term time preference should balance the effects of inflation. I don't really care that a Lamborghini might cost half as much in 10 years. If I want to drive one TODAY bad enough, I will still buy it. If my umbrella has a hole in it and it's raining, if I want to be dry RIGHT NOW, I don't care that an umbrella is cheaper tomorrow.
I would also argue that technological improvement is inherently deflationary, and that technological improvement is all about resource efficiency: accomplishing the same work with a smaller expenditure of resources. Even if rising demand were to lead to higher equilibrium prices, we should be balancing the economy in such ways that prices still fall or at worst remain static, to reflect the diminishing resource requirements for a given unit/widget produced.
Many economies have collapsed or people have been severely harmed from runaway inflation. Even now in the US, the wealthy aren’t terribly affected by inflation, especially with home and stock prices rising more than enough to offset them, while the poor are increasingly struggling with currently no end in sight.
Perhaps a Bitcoin w/ 2% inflation would have been better than a deflationary one, but I still question whether the average person in the average country is better off with the risk that their government mismanages target inflation than with an algorithmic deflationary Bitcoin.
I also question whether Bitcoin being deflationary is really a bad thing when it’s also a store of wealth and not the only means of exchange in a country.
> Many economies have collapsed or people have been severely harmed from runaway inflation
And the USA's economy was ruined in the 1930s by runaway deflation.
The poor don't like inflation _OR_ deflation. Both suck. The rich has the ability to move money around to maximize their gains in any situation, so the rich aren't really harmed by either.
> Many economies have collapsed or people have been severely harmed from runaway inflation.
False dichotomy. The last 50 years of monetary policy in developed countries show that you can have moderate inflation (yes, sometimes a bit too much, like now, but moderate overall) without hyperinflation.
Do you think 50 years is all that long in the historical context?
America showed that you could have hundreds of years of stable democracy until a simple combination of cable news, Twitter and a narcissistic president almost led to a coup.
The Roman republic was stable for hundreds of years until it collapsed.
The Turkish lira has lost more than 97 per cent of its value against the US dollar since January 2021.
I agree with you that the 1950-2010 world order and U.S. monetary system was better than Bitcoin. Where we disagree I think, is with our confidence in the stability of human institutions and the likelihood that the world necessarily remains stable in that world order for the next 1,000.
The question is not whether it's possible for a central bank to maintain a policy that leads to only moderate inflation, but whether your central bank will maintain such a policy. You seem to think that being a "developed" country will guarantee that. Like the highly developed country of Germany in the 1920s perhaps?
>but I still question whether the average person in the average country is better off with the risk that their government mismanages target inflation
In recent history (say the past 50 years), how many countries have experienced serious inflation problems that were caused by orthodox, well-founded attempts to manage target inflation?
As far as I know, the answer is none. If you have a country where the leadership (usually dictatorial, autocratic, one-party or some variation thereon) has adopted policies that are already leading to economic disaster, then hyperinflation is something you tend to get along with - it's a symptom, not a cause.
Most people who bought Bitcoin within the last year are underwater with their investment. Some have lost 45%. They'd have done better to keep cash and take the 8% inflation hit.
Since you're clearly using "spending" in a more economic sense, but most people will read it from the perspective of household finances and therefore interpret spending as morally wrong, I'll add that the spending you're discussing includes, and primarily is, investment.
Both your run of the mill, deposit money in the bank which loans it out so all sorts of businesses can be built, and people can buy houses, cars, etc., and your more exotic VC and hedge fund investments.
I think there are people who understand economics who think that inflation is often a good thing. Here for example is a quote from Investopedia’s article on Inflation:
“Most of the time, deflation is unambiguously a positive trend for the economy, but it can also under certain conditions occur along with a contraction in the economy.”
Now deflation caused by a deflationary currency is probably not unambiguously good in the same way as deflation caused by increased production.
But are there not any respectable economists who would argue that a deflationary currency might not be so bad?
The gold standard isn't a fixed-supply currency. Gold was mined throughout the nineteenth century, coïncidentally, at about the rate of economic growth. When growth kept going while mining stalled, a series of economic crises pushed developing nations away from the standard.
> Bitcoin is deflationary, a CBDC would not be. This is the biggest pro-Bitcoin argument
Except Bitcoin is not deflationary. It's fixed supply. Those are separate, if related, characteristics. In the last year it's been roughly flat, with the word "roughly" doing a lot of work, given its volatility that would make a Zimbabwean central banker blush.
> Fixed supply is deflationary in a world where population increases
This assumes the whole world uses the currency, which is untrue for every currency in the history of humanity, and that per capita output per person using the currency is at least flat, which is also questionable.
Demographics are an input into monetary policy. But the effect is way fuzzier than you imply [1].
Fixed supply -> almost certainly inflationary. It is only not inflationary if nobody ever makes a coin burn and nobody ever leaves less money in a that is worth less than a transaction to move it will cost.
This is a claim made repeatedly by Bitcoin proponents and opponents, based on various ideological differences.
But the statement is nonsensical. The statement "Bitcoin is deflationary" is exactly equivalent to the statement "Bitcoin will always increase in value".
> Bitcoin is deflationary, a CBDC would not be. This is the biggest pro-Bitcoin argument.
That's not actually a pro-Bitcoin argument. It's just an artifact the peculiar ideologies that influenced Bitcoin's creator. Deflation hurts economic activity, but benefits hoarders.
Bitcoin may not be inflationary but it is certainly depressionary.
As in those who paid nearly $70k per Bitcoin after El Salvador declared it an official currency 7 months ago are probably feeling kinda depressed right now.
Calling what they were doing simply "disagreeing" is a little insulting to common sense.
You have every right to disagree and protest --- but you don't have a right to illegally blockade bridges and prevent others from traveling to work or to the hospital if need be.
There’s a bit of sleight of hand going on with this article, which conflates use of the Chivo wallet software with bitcoin.
But then later the article says:
“Meanwhile, many living in tourist hot spots on the Pacific coast, where Bitcoin usage is highest, have transitioned to other crypto wallets, such as the privately developed Bitcoin Beach.”
So they’re using the currency, just not the government developed software.
And a weird phrasing here “[many] are using it to hold and transfer dollars, El Salvador’s official currency”, implying dollars are the only ‘official’ currency — when by definition, Bitcoin is too.
I don't know how you can call this a slight of hand the title of the article is "Most Salvadorans have already ditched their national Bitcoin wallets", I don't know how you could make this more clear in an article title without making it too long.
So (a) it's not a sleight of hand by the article, and (b) Welcome to HN (and almost every other discussion forum), where the commentary almost always has nothing to do with the article and has everything to do with pet peeves of the commenters related to the topic of the article.
Just the headline is tough, but "Salvadorans try out bitcoin[0], but shy away from government's Chivo software." The issue is that it's two different stories that are related, but not that strongly.
[0] Assuming it's true, as a sibling comment says, that 70% of people have done something with it and 11% are using it for something.
A bitcoin wallet is generally meant to denote a wallet that contains bitcoin. Chivo is not a wallet for bitcoin. It is a 'wallet' that gives you proper authentication to trade on a lightning network. The actual bitcoin, and as is my understanding even the lightning wallet, is in custody of a more centralized location.
Calling Chivo app a 'bitcoin wallet' is an intentionally misrepresentation, if not by the confused writer of the article then of the government that confused the person writing it.
These people didn't 'ditch' a bitcoin wallet, or at least not the one mentioned, because Chivo never was one.
Noncustodial bitcoin wallets are still wallets. The function of a wallet is to keep your money secure and facilitate sending it to others. Having a bank be a proxy to this is both absurd and normal.
Users should be aware and make a conscious decision about where their keys are kept, however this is usually something that doesn't matter until they either lose their phone or law enforcement freezes/seizes their money. It's pretty high up on Maslow's hierarchy of financial freedom.
>The function of a wallet is to keep your money secure
Do you have evidence that the money secured by Chivo is actually 'secure.' If not then it fails to meet your own definition of a wallet. It's the constant HN semantic argument ("well it lets you log into something to trade something that isn't actually bitcoin but you could get bitcoin eventually so therefore it's a bitcoin wallet!!!") Yes if you want to play semantic games my work computer (sans bitcoin software) is also a bitcoin wallet because I can access my online banking which in turn allows me to, eventually, get bitcoin after a number of operations.
Having credentials that in turn allow you to trade on the lightning network that in turn allows you to get bitcoin does not a bitcoin wallet make.
Not a single person in the general public would even know half of the buzzwords you just used and the other half isn't interested in technicalities. The wallet is used to pay and receive bitcoin. It's a bitcoin wallet at least for 99% of people on the planet.
The headline says the customer's threw away their wallet that holds their cash.
In reality, they through away their debit card which, if everything goes right and their accounts aren't seized and their bank stays honest, they can pull out a wad of cash. They probably threw away this debit card because they already transferred their cash to a different bank.
A debit card is not a wallet of cash. Throwing away the debit card doesn't tell you anything of what you did with the cash the debit card could possibly access. Chivo is a debit card for maybe, hopefully controlling the ability to trade bitcoin held in custody somewhere else on the lightning network, not a wallet containing bitcoin. Calling it a bitcoin wallet is intentional deception, if not by the author then by the person that told them that.
Now if I told you everyone threw away the wallet that held their national cash, that would paint a very different portrait than saying they all threw away their debit cards to a particular insecure bank that they already transferred their national cash out of. The first would imply they gave up national cash (bitcoin), the second would just imply they gave up on one particular stupid bank that might give them access to their national cash (chivo).
>Not a single person in the general public would even know half of the buzzwords you just used and the other half isn't interested in technicalities. The wallet is used to pay and receive bitcoin. It's a bitcoin wallet at least for 99% of people on the planet.
And yet apparently many El Salvadorans apparently did. Because they chose to transfer their assets to 'more secure' apps and actual bitcoin wallets. The thing is, when it concerns someones money, they tend to learn very fast. The same country boy that may laugh at nerds and chemical terms and academic 'buzzwords', may actually learn and know a ton about chemistry when it comes to maintaining their crops. People in Central America are not stupid.
Still not really helping grandma or the other 45% of the population that don't have a bank account. If they don't use a bank account they most certainly won't use bitcoin to do their daily shopping especially with a mobile network coverage of only 30% with only 50% over 3G. For your conclusion we don't know if they switched they could have just stopped using bitcoin altogether we have no way of knowing so the assumption of you that they switched and learned really fast is NIL.
> we don't know if they switched they could have just stopped using bitcoin altogether we have no way of knowing so the assumption of you that they switched
Did you not read the article? It literally quoted people talking about using other apps instead. Operative words: "Have transitioned." I didn't say EVERYONE transitioned, sure some likely did ditch 'bitcoin' entirely.
"Meanwhile, many living in tourist hot spots on the Pacific coast, where Bitcoin usage is highest, have transitioned to other crypto wallets, such as the privately developed Bitcoin Beach."
>Still not really helping grandma or the other 45% of the population that don't have a bank account.
Crypto and bitcoin doesn't require a bank account. Transitioning from chivo doesn't require a bank account.
>learned really fast is NIL.
Come again? Is this supposed to be some racist dig at Salvadorans to suggest they can't learn quickly? For many people using crypto can be more accessible than signing up for a bank account.
Most of them don't even have smartphones, only 50% of the population uses the internet and you are talking about learning to use crypto when they didn't even use a normal bank or google before.
Racist my ass, you entitled first world country geek.
The majority has internet access, the super majority has social media account of some sort (at least by one survey) [0], and there are 1.5x as many mobile lines as PERSONS in El Salvador (with global market share of smartphones yearly increasing), and yet you use an acrid tone when discussing the notion of El Salvadorans having the ability to learn how to use crypto.
You paint a picture of people in El Salvador that simply isn't the case. The supermajority CAN get access to internet if they like. I have lived in the third world, including places poorer than even El Salvador, and for less than
a common days wage even in war-torn syria you can pay a shop-keep for internet access at a cafe. Those of us who have spent time in the third world understand that people often share resources there, including computers and smartphones, so seeing the proportion of people who say have a smartphone is only a slice of the picture of who can actually get access to one (as an example, if only the wife of every household had a smartphone then the whole nuclear family would still effectively have access despite a much smaller number reflected on the statistics). Even having a cousin / uncle / whatever can be enough to be good for the extended family, as that person can serve as a nexus to internet based utilities to the family. These types of relationships often aren't reflected on the statistics, but people in the first world often don't understand this.
50.5% have internet access... nice majority. For the mobile lines just check how many there are registered in the US and you see how useless this number is especially in regards that you overlooked the smartphone penetration at all. I said nothing about that the people are inept of learning. That's all coming from you! I said it neither feasible nor practical for the majority ( :D ) of people to use crypto.
Shared phones and computers... how practical instead of just using cash. Let me correct the statement of my last post: Racist my ass, you are a delusional first world country geek.
>I said nothing about that the people are inept of learning.
I'm glad you finally acknowledge this point and have walked back from your prior odd rhetoric that suggested it was improper to think that someone without a bank account could understand crypto ("you are talking about learning to use crypto when they didn't even use a normal bank or google before.") And I'm glad you've walked back from your prior rhetoric thinking the ability of the people of El Salvador to have "learned really fast is NIL."
Characterizing an El Salvadorian as someone who "didn't even use google before" sounds a bit presumptuous, by the way, and probably isn't even representative.
You finally agree people aren't inept of learning but simultaneously believe they can't learn how to use crypto? Only a bit over 50% of El Salvador are women, does that mean it's useless to teach things that pertain almost exclusively to women? The fact that only the majority and not supermajority have regular personal internet access isn't an argument against the ability or even the notion that many or even most people having knowledge of crypto if they so desire it.
The fact that only the majority have personal ready access to internet does not discount utility of what's available to them on the internet.
We all know cash is practical. Cash has disadvantages and disadvantages. Some people will choose to dip into alternatives, some will not.
>Shared phones and computers... how practical
Sorry but sharing is third world survival 101... when resources are more dear expensive items often become shared so they can provide the most utility. Very practical.
> you overlooked the smartphone penetration
Can you cite your claims regarding smartphone penetration? You really didn't provide enough information for me to comment on. Internet and crypto access comes through many forms, so it's difficult for me to comment purely based on uncited figures regarding smartphones. You stated most people don't have smartphones, which I think is probably true, but difficult for me to comment on uncited.
Dude, you have so much time on your hand to write little essays without saying anything that you probably can google it yourself (hint it's not the first hit like the last link you posted you really have to scroll this time :P). I am over kicking your shitty arguments in trash because the only thing you do is repeat yourself and throw racism and sexism acquisitions around.
It's not feasible for the majority ( ;) ) of El Salvadorians to use crypto as a cash replacement because there is simply not enough digital infrastructure for it. Maybe your boy Elon will drop some Starlinks. lmao.
PS: I really hope you are just an edgy troll and that's not your real persona ;0)
>It's not feasible for the majority ( ;) ) of El Salvadorians to use crypto as a cash replacement because there is simply not enough digital infrastructure for it
And now you've finally walked back far enough to simply say most won't use it as a cash replacement by majority at present. I think that's fair -- I've never said I expect bitcoin to completely replace cash. Cash is of course practical, and has its place.
I think you've been educated enough at this point we can stop here.
I am 100% sure it won't replace non existing bank accounts or debit cards or help the people trying to pay with their non existing smarpthones at 80% of the vendors in El Salvador that don't accept it. LOL
The thing with educating other people is that you need to have knowledge about the topic you are trying to educate people about and you just don't have it. The real world is not your high school debate club were you can just pull shit out of your head and get points for being witty. At least you didn't try to paint me as racist and sexist this time :D
Just like the "great resignation", the journalist has used a technically correct phrase, but it doesn't paint the real picture.
The headline sounds like they gave up on bitcoin altogether. They didn't. They switched their bitcoins to a different wallet.
They could instead have said that. "Most Salvadorans have switched to a different bitcoin wallet." It's just not sensational at all, so they didn't use that.
>They could instead have said that. "Most Salvadorans have switched to a different bitcoin wallet."
Is that actually true? The article only says that "many living in tourist hot spots on the Pacific coast". "Many" is not the same as "most", and even then it's only talking about people in one region of the country.
I assumed they didn't outright lie in the title, so I kept their "most salvadorans". If that's not true, then I think even worse of them for that title.
I program a computer for a living and I'm still baffled by my own array of wallets/accounts/whathaveyous that I use for crypto. It's the very definition of a technology that is not ready for prime time. Maybe their app made it accessible in ways every other crypto-related technology I have used has not?
It's a technology that is still looking for a problem to solve. I have yet to see why I would want to use Bitcoin over a credit/debit card or something like PayPal.
The Satoshi protocol is about creating a mechanism to achieve distributed, trustless consensus. Plenty of applications for such a platform.
Whether it's achieving that goal is a separate debate (so far it has managed to establish itself as a crazy high risk forex medium that's only slightly less unwieldy than FIX) and I'm not convinced anyone in the builder space has even a vague understanding of the problems crypto has to overcome to be _practical_, let alone replace _the entire global financial system_.
Call me a pessimist but it's not gonna happen without violent revolution (and let's not please).
But we can stop saying vacuous things like "cryptography doesn't have a problem to solve", it's clearly always been about replacing trust with verification. Que KGB expression.
I was talking about cryptocurrency specifically. Though I do not think any argument against blockchains can be so easily reduced to an argument against cryptography in general.
I agree with bitcoin specifically. When it started it was useful to me for cheap cross border value transfer and timestamping. Now we have alternatives. I still would prefer if a more efficient payment mechanism was widespread, that hides my transaction details from the payment processor.
When it started, you could mine Bitcoin on a laptop for fun. Now you need a faceless cartel of datacenter owners running rigs 24/7 and selling options on mined BTC to keep the lights on.
Imagine a $500 credit for opening a checking account from the local bank. And then having it debited/stolen with the bank saying "sorry, we don't know what happened, where or who it went to... there's nothing we can do about it, but don't worry, you now have a checking account you can use from us".
Graphics cards have come down in price severely, but are still well above MSRP / RRP.
But BTC never was a big deal for graphics cards particularly. IIRC, Ethereum was the most profitable GPU coin. (Even if you were paid in BTC for mining through NiceHash or whatever, most miners would immediately sell for USD anyway to pay for electricity costs).
The price of those other currencies seems to somehow always be directly related to Bitcoin, so you are right GPUs aren’t used, but the claim still stands.
I can't help but feel the article is biased. The first line is "The launch of ... Chivo, has been a flop ...". Has it? It seems like there's more nuance than this broad stroke.
Here's a snippet from section 4, "Concluding Remarks" of the original paper [0]:
"""
Despite these efforts and the incentive to use contactless payments caused by the
COVID-19 pandemic, bitcoin is not widely used as a medium of exchange. While most
citizens in El Salvador have a cell phone with internet, less than 60% of them downloaded
Chivo Wallet, and 20% continued to use the app after spending their $30 sign-up bonus.
Further, 5% of citizens have paid taxes with bitcoin, and despite its legal tender status,
only 20% of firms—mostly large ones—accept bitcoin and 11.4% report having positive
sales in bitcoin. In the first quarter of 2022, we find almost no new adopters and the
share of remittances in bitcoin is at its lowest point since Chivo Wallet’s launch. Our
results highlight the challenges that cryptocurrencies face to become widely accepted,
even after a governmental big push and under favourable circumstances, and are relevant
for countries studying their viability as currencies
"""
So, 60% adoption of Chivo, 20% (total, not of the 60%) still in current use. 20% of firms accept Bitcoin and, as far as I can tell presumably over half, 11.4%, of total firms report positive sales in Bitcoin (figure 8, page 24), with 2% (total) seeing losses and the rest, 87%, reporting no change.
It's not the large scale adoption that proponents had hoped for but 20% adoption by people and businesses still seems pretty large.
> In the first quarter of 2022, we find almost no new adopters and the share of remittances in bitcoin is at its lowest point since Chivo Wallet’s launch.
This is why it's a failure. A healthy system would be growing, its users would be singing its praise. As far as we can tell, that's absolutely not what's happening.
Hard to think of a more opposite intended use case than the one Satoshi imagined than this: a custodial, government-subsidized, completely identified (not pseudonymous) payment app which does not allow you to run verification of the network dangled by the government with a $30 carrot in front of a largely unbanked, cash-based society which trusts the dollar. Every single metric here is an extreme far cry from the tech-literate, globally privileged, privacy conscious libertarian group that cryptocurrency came from. Crypto as a whole has many interesting use cases and potential, some of which excite me personally, but this is probably the largest example of the “solution looking for a problem” criticism here. The greatest irony here being many Salvadorans don’t trust bitcoin, but do trust the dollar!
The irony of the ultimate cypherpunk dream, a stateless global currency, being forced onto largely unwilling citizens by a national government is hard to measure in words.
For a government program rolling out new technology, that actually seems quite impressive.