El Salvador’s bold and groundbreaking move to declare bitcoin legal tender on June 8, 2021 has caught the attention of the world and the imagination of their Latin American neighbors.
As the 14th most populated country in Latin America and with a past filled with decades of corrupt leadership and violence, it is unlikely that El Salvador has been the object of envy for any Latin American countries in the past 30 years. However, that has suddenly changed with the success and innovation of their Ley Bitcoin (Bitcoin Law). The refreshing open mindedness of El Salvador’s President Nayib Bukele combined with the hard work and huge hearts of Mike Peterson (Bitcoin Beach), Jack Mallers (Strike) and Miles Suter (Square Crypto) has created some much needed hope for not only his people, but for millions in other Spanish-speaking nations.
In the wake of El Salvador’s historic bill, politicians from eight Latin American countries have publicly expressed their desire to pass similar laws in their respective countries. These policy makers are eager to act now for the benefit of their people and fearful that inaction will leave them behind in a world unkind to countries with slow-moving governments. One of the deciding factors of a nation’s world standing is the soundness of their money. Bitcoin, which is showing itself to be the soundest money in existence, will unlock countless benefits for the countries who become its earliest adopters on this scale. However, it remains to be seen which countries will benefit from joining El Salvador as the next nation to pass a bill recognizing bitcoin as legal tender.
Panama is one of these prospective countries and is being led by the efforts of congressman Gabriel Silva. To create support for this effort, he started a Telegram chat room to hear directly from his constituents about their thoughts on the following questions regarding El Salvador’s Bitcoin Law:
What did it do well?
What is it missing?
What applies to Panama?
What does not apply?
What should be changed?
In the 5 days since opening this chat room, over 1,000 messages have poured in from 330 members with various thoughts on the best way to proceed on Panama’s behalf. The main debate that has emerged is whether the prospective bill should only recognize bitcoin as legal tender or if it should be wider in scope and legalize the use of other cryptocurrencies as money. The negative implications of the latter argument are too numerous to list here. This case study is a microcosm of the conversations that are likely taking place behind closed doors in the government offices of the other nations mentioned above.
It is important to note that the El Salvador Bitcoin Law is not merely favorable legislation regarding bitcoin, but rather a clear message that bitcoin is the only cryptocurrency worth integrating into the economy as money. Any law that is watered down by elevating other cryptos as equal to bitcoin will not have the desired effect due to their inherent lack of fundamental soundness and integrity as money. One can only hope that these countries consult El Salvador for guidance in crafting a bill that has the same conviction of their Ley Bitcoin. Imitation in this case is not flattery, but rather it is essential for the benefit of their people.
Latin American countries are not the only ones feeling pressure to move forward with bitcoin legislation. NFL offensive lineman, Russell Okung, published a compelling open letter to the president of Nigeria yesterday imploring him to adopt a bitcoin standard. The list of nations being urged to adopt bitcoin as legal tender by influential voices is growing by the day and it is only a matter of time before another country becomes the second to do so after El Salvador.
This is a guest post by Josh Doña. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
I believe that the Founding Fathers of the United States inscribed the idea that liberty is inherent to life in the Declaration of Independence. While they made an astounding first step in declaring this, there has been, since the uprising of technology, a necessity of this in monetary form.
I believe that bitcoin is the codification of monetary liberty. Like the Declaration of Independence, Bitcoin was set into existence from the very moment it was realized;
“The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime.” – Satoshi Nakamoto
The mere existence of the idea now facilitated a reality in which liberty was to be demanded. Having had the taste of freedom, man had realized the fullest potential of life, in that of sovereignty.
Financial freedom is achieved the moment you begin acquiring bitcoin. Immediately, you obtain digital value — verifiably scarce and unstoppably mobile. There are no outside entities who can lay claim to your property; there are no boundaries on the transfer of your money. Each individual reclaims their inherent right to liberty, as expressed in the Declaration of Independence, and now too expressed in the form of Bitcoin’s code.
While the Declaration of Independence proclaimed the idea and theory of self sovereignty, Bitcoin created the physical implementation of such property rights, allowing the manifestation of such liberty to proliferate in reality. What the Declaration did on a theoretical level, Bitcoin achieves on a material level via monetary property rights.
It is interesting to think that such an achievement was only possible given the creation of the internet. As much as the printing press led to the proliferation of education, writing and reading — which were necessary for such a thing as the Declaration of Independence to occur — the internet enabled Bitcoin. The printing press, being the origin of worldwide mediums of content absorption, interconnected people across space and time. The internet accomplishes this feat even more so, more quickly and exponentially more effective.
And so, it is with this realization that we understand; Bitcoin, being enabled by a present global interconnectedness, is a physical manifestation of liberty.
Bitcoin will experience three halvings this decade, the first in 2020, the second in 2024 and the third in 2028. Counting the 2020 halving that already occurred last year, Bitcoin has experienced a total of 3 halvings since its launch in 2009. Historically, in the year following each halving, the bitcoin price shoots up exponentially due to an increase in demand and decrease in supply in the market.
But there is a new type of demand in the market, one that weighs far heavier than the original demand by retail investors who have been buying for the past 12+ years. This demand mixed with the decrease in supply issuance andBTC being taken off the market is the perfect formula for wild price swings. I’ll get into what that new demand is later in this article, but for now let’s look at the past performance of halvings to see what we’re dealing with.
On Nov. 28, 2012, the first ever halving occurred, dropping the mining reward from the base start of 50 to 25 BTC. 365 days before the halving, the price of bitcoin was $2.54. Over the following year, as the supply shock took place, bitcoin rose all the way to $1,007 before cooling off a little, for an increase of over 8,000%.
On July 16, 2016, the second halving occurred, dropping the mining reward from 25 to 12.5 BTC. 365 days before the halving, the price of bitcoin was $269.68. Over the following year, as the supply shock took place, bitcoin rose all the way to $2,506 before cooling off a little, for an increase of 284%.
On May 18, 2020, the third Bitcoin halving occurred, dropping the mining reward from 12.5 to 6.25 BTC. 365 days before the halving the price of bitcoin was $7,300. Over the following year as the supply shock took place, bitcoin rose all the way to $64,840 for an increase of 788%.
At the time of writing, it is estimated that on May 8, 2024, Bitcoin will undergo its fourth halving, dropping the mining reward from 6.25 to 3.125 BTC. And sometime in the spring of 2028, Bitcoin will undergo its fifth halving, dropping the mining reward from 3.125 to 1.5625 BTC.
It is impossible to predict the exact amount of demand for bitcoin. Therefore, how much it will increase in price after these halvings is difficult to predict, but it’s safe to assume that price outlook is mega bullish and that the next nine years could look something like this (or better):
“B-b-b-but Nik, past performance does not guarantee future price gains!”
While this is true, it’s ignoring all the factors that lead into why bitcoin will keep skyrocketing up. The world has a store of value problem, and the free market has determined bitcoin as the solution to this problem. Wealth is now flooding into Bitcoin, with it poised to be the best-performing asset of the decade for the second decade in a row.
Bitcoin’s limited supply of 21 million combined with rising demand assures its price will continue to go up.
As I mentioned earlier, it is no longer just ordinary people buying and HODLing, who in the past have caused big price swings. Now billionaires and companies are putting it on their balance sheets and countries are making it legal tender. This is a global race to accumulate as much BTC as possible. They’re not making any more than 21 million, and everyone wants their piece of the pie.
The first domino has fallen and game theory is in play even harder than before since El Salvador became the first country to make bitcoin legal tender. Ready, set, go — all countries are now in a race to make bitcoin legal tender and put it on their balance sheet. In the bill that was passed in El Salvador, merchants are going to have to accept bitcoin as payment. This means big businesses there have to learn about and use bitcoin on a daily basis which, after seeing the many benefits of BTC, could make them eager to use bitcoin in other countries such as the US…
Some countries are already feeling the stress of not having adopted bitcoin, and the more that adopt it will only cause others to want it more. Gabriel Silva, member of Panama’s Parliament, said on the matter: “This is important. And Panama cannot be left behind. If we want to be a true technology and entrepreneurship hub, we have to support cryptocurrencies. We will be preparing a proposal to present at the Assembly. If you are interested in building it, you can contact me.”
Every single country on planet Earth that has not adopted a Bitcoin standard is falling behind the ones who do. Bitcoiners have all the wealth, and countries will want our business. The countries will provide tax benefits, citizenship to the country, open up government owned land to the public for new housing developments, bitcoin mining incentives, etc.
“We want Bitcoiners to move here.” said El Salvadoran President, Nayib Bukele. Soon, the leader of every single country will say these words. The ones who say it first will be the biggest winners.
This is going to cause a massive inflow of wealth into Bitcoin the likes of which we’ve never seen. The world is being repriced in bitcoin. You and I already know this, but the rest of the world has yet to figure it out.
This is a guest post by Nik Hoffman. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Africa is large, young and dynamic. What happens when a country like Ethiopia puts Bitcoin to the ultimate stress test?
I. Little Brother Bitcoin
Ethiopia, like most countries, is bound to have a Central Bank Digital Currency (CBDC), in the flavor of a U.S. dollar backed Ethiopian birr. This new CBDC will allow the State to continue printing currency in the digital age.
As reasoned by Alex Gladstein in Cato Journal’s recent essay, “Financial Freedom and Privacy in the Post-Cash World”, “Society is currently undergoing a historic shift away from paper‐based, bearer asset daily money toward completely electronic, corporate ledger daily money. This change is part of a long trend of disuse of all bearer instruments, like stock certificates and bearer bonds.”
This strategic removal of cash (and some might argue privacy) from the economy will allow the State to go on spending, which will add to the inflation and debt cycle via its new digital currency. Some actors, including bureaucrats and self-serving organizations, will enjoy this increased State spending. Viewed from the perspective that petroleum production backs the USD, it’s fair to conclude that many of the actors in this inflationary-debt bubble have been acting in bad faith. More toxically, it may be commented that these “fiduciary” leaders of money and policy are intellectually dishonest and morally bankrupt. Henry Kissinger, for example, might add that “It is not a matter of what is true that counts, but a matter of what is perceived to be true.” And any honest dissenters to this hegemony, with the late Jamal Khashoggi coming to mind, are often met with a deadly response.
Ethio Telecom (the State-owned monopoly provider) introducing TeleBirr is a decades-late step in the right direction toward digital money. Integration and application building, as well as hardware and infrastructure challenges still remain, but new capital will allow for a larger customer base. At present, only 20-25% of Ethiopians have access to telecom services.
In the next few months we will likely continue to see a rise in bitcoin price. Value will continue to be created by a decentralized pool of miners and node operators and stored in bitcoin. As solutions on the Lightning Network and Layer 2 offer daily users near zero fees and under one second transaction times, adoption in young countries like Ethiopia will happen sooner than we think. And given its finite supply and 130 year marathon of increasing computational difficulty, bitcoin, with its decentralized ambition for a new money, may just very well be the new standard as proclaimed by Saifedean Ammous.
This new standard, unresponsive to regulation or influence, will upset the Ethiopian government, much as a little brother might unnerve a powerful big brother. Both will coexist, but because only the former will heed the lessons of the past, the little brother will provide more value. In contrast with fiat currency bitcoin is non-inflationary, incorruptible and immutably secured by precious (and increasingly renewable) energy. It’s worth noting that not a single “alternative” coin has improved on this protocol. Even more important, this enviable separation of state and money will lead to drastic shifts in global allegiances. After reading Befekadu Degefe in the Journal of Ethiopian Studies, “The Making of the Ethiopian National Currency 1941-45”, we can see that the history of the Ethiopian Birr is one of Italian brutality and British interest. The Emperor Haile Selassie, cautious to accept any proposal from foreign interest, instead proposed that the national currency be provided by the State Bank of Ethiopia and his trusted advisors as to ensure a convertibility to silver and gold bullion through the then Maria Theresa dollar. This standard, of course, fell once Richard Nixon took the USD off the gold standard in 1971.
II. Bitcoin for Billions
Most Ethiopian’s will always remember where they were at the time of artist and activist Hachalu Hundessa’s assassination. Between the hours of nightfall on June 29, 2020 and the following Tuesday morning, tragic news of Hundessa’s death worked its way through informal channels. As Telegram groups grew frantic and fearful as to what would happen next, Addis Ababa turned frigid. 2020 was about to get even more fragile. Ethiopia lost internet as quickly as most neighborhoods lost electricity that morning. And there would be no more connections made through the state-owned monopoly telecom provider for the next three weeks.
Much like USD, Bitcoin is not legal tender in Ethiopia. And because of telecom limitations, more than 70 million Ethiopians are currently incapable of opening a digital wallet. Those are the only two challenges I can find in Ethiopia for widespread adoption of bitcoin as both a store of value and as a currency to be used for daily transactions.
Given the volatility of bitcoin, it may be the case that, for practical reasons, the United States dollar will be used as a temporary unit of account. But over time, with revisions in law and global alliances, and with it furiously increasing velocity of use, bitcoin will become a standard countries like Ethiopia cannot escape.
Aside from a Telegram group and an Amharic language translation of “The Little Bitcoin Book”, little itcoin educational material exists in Ethiopia. Aside from a Telegram group and an Amharic language translation of “The Little Bitcoin Book,” little bitcoin educational materials exist in the native tongue of Ethiopians. In addition, activity that involves USD is by law reserved for foreign investors or Ethiopian diaspora. And given the strong penalties incurred if an Ethiopian evades the foreign currency laws, Bitcoiners stand firmly in the closet.
What makes the question of adoption interesting is the seemingly laggard position held by Ethiopians in Africa. Kenya, Nigeria and South Africa lead the continent in bitcoin ownership. These countries have built several legitimate businesses using bitcoin as a better money. Even as regulators and lawmen use sticks of persuasion, citizens boldly send and stack sats. If you thought laser-eyed fund managers in the West were bullish, you haven’t met 23 year-old Ethiopian freelancers who run completely digitized projects (from procurement to contracting and invoicing) using applications and Layer 2 open-source Lightning wallets. Humble as these transactions may be, these kids are taking a large risk to fulfill their basic rights of untampered money and sovereign value.
III. The Oracle Problem
Ethiopians love marathons. Like many populations with high-fiber diets, high altitudes and scenic countrysides, we are very good at it too. And similar to our love of marathons, we have also made sport of running around in circles on the topics of money and technology. As a good friend in the diplomatic community commented, “While the whole world is sprinting towards quarterly reporting calendars, Ethiopians think and act in centuries and millennia.” Because of these cultural and institutional bureaucracies and inefficiencies, Ethiopia and similar countries will continue a faulty trend of debasing money and inflation.
For example “smart contract” is a term used to describe code that automatically executes all or parts of an agreement stored on a blockchain-based platform. These smart contracts often rely on receiving information from resources that are not on the blockchain itself, thus needing to use “oracles” or trusted third parties for this information. These oracles become a “point of failure” and can be functions of garbage data, simple malfunction or deliberate tampering. The oracle problem is that third parties can’t be trusted.
This fault is fundamentally tied to a lack of understanding of one basic and often conflated point. We, as mere humans in the technology era, have not solved the oracle problem. The term comes from Greek mythology and refers to someone able to communicate directly with God and see the future. In programming, it refers to a similar concept that the confirmation of data (often as information is coming from the real world and into information systems or blockchains) is entrusted to decision makers or man-made “oracles”. Within the noise of smart contracts and innovation, these decisive oracles can be (and often are) functions of garbage data, simple malfunction or deliberate tampering.
The oracle problem, short of divine miracle or Hollywood magic, has not yet been solved for.
It is within this environment I plead with Ethiopians to capitalize on what is the most important innovation to money that they will see within our lifetimes. As a country and people we should be looking to escape the inflationary ills of the petrodollar (and its wicked derivatives) and instead mine, save and budget in bitcoin.
If we are to have any chance of real development out of poverty and into sustainable growth, serious consideration of a sovereign wealth fund in bitcoin, with full State custody along with transparency in accounting, should be taken. As of this writing, Norway, via its Norwegian Government Pension Fund, is the only country to think beyond oil and the United States dollar. According to Arcane Research, as of September 2020, the fund owns almost 600 BTC through its investment holdings. Echoing my conclusions, in “The Humanitarian and Environmental Case for Bitcoin,” published by Bitcoin Magazine, Alex Gladstein poses a brave new future: “Could Sudan and Ethiopia, with massive wind and solar resources powering Bitcoin mining and a growing electric grid, be Norways of the future?”
As the block height moves forward, the hash rates will grow in difficulty and the price of a single satoshi will naturally grow above that of a penny. Knowing that poverty is indeed not fun (reference to the “have fun staying poor” meme), I plead once more: this is one marathon we cannot afford to lose.
This is a guest post by Kal Kassa. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Bitcoin carnivorism is an interesting cross section of traditionality with modern technology. And yet, despite first appearances that the two are unrelated, the consumption of meat combined with the usage of cryptographically secure digital money is closely intertwined.
A Hunger For Verification
Bitcoiners have never been a particularly trusting group. At the core of the industry and network’s ethos is the idea that without verifying for oneself the nature of reality, nothing is guaranteed. The transparent and open access network which allows for anyone in the world to transact is, at its core, a central bank inflicted insecurity.
Previous sound money, gold specifically, was thought to be the greatest immutable commodity in the world. But with expansions of technology and government through this technology, the immutability of the physical world became naught, and was quickly wrangled into the sphere of ever expanding government dominance.
In such a spectacular way, it can be thought of as a collective post-traumatic response that bitcoiners necessitate the ability to verify every single transaction. And yet, such a response has been made obviously paramount to the purpose of Bitcoin. Without such verification, the entire network would be vulnerable to the same manipulation posed by the previous system.
It is this author’s opinion that much the same verification issue arises when Bitcoiners are presented with the reality that most food in grocery stores is altered beyond recognition. This is evidenced in Dr. Saifedean Ammous’ “How To Grill Steak And Beat Fiat Food,” in which he states, “Instead of wasting your life reading press release ‘science’ sponsored by industrial sludge food manufacturers trying to manipulate you into eating their poisons, consider trying to eat more and better meat, the world’s most complete food.”
I personally agree with this take, and believe that industrial processes have made most foods bad for consumption nutritionally. But I think the key thing to focus on is the lack of trust in scientific journal publishings, and the idea that processed food is both industrial sludge and poison.
With many scientific journals being funded by the very industries they research, it is not without reason that Dr. Ammous is suspicious of these publications. The very fiat tomfoolery which enables non-productive academia to proliferate is responsible for such encouragement of processed food consumption. In an industry that values transparency and consensus, the idea of peer-reviewed (i.e. within the same industry, and therefore often funded by the same people) journals being the determination of health is an obvious contradiction.
Indeed, on a physical level, processed food itself is entirely unlike anything found in nature. Often sugar encrusted, carbohydrate covered or otherwise unhealthily clad, processed foods are the cause of major health problems within the United States. The food does not resemble nature. Often, recipes call for raw vegetables to be processed in some form or another, whether it be by covering in vegetable oils, breading, or other forms of mixing.
What that leaves verification-hungry bitcoiners with, is food that has been obviously non-tampered. Food that, for thousands of years, has served as humanity’s treasure. When cavemen danced around the fire, it was not after collecting berries. It was after their hunt, an accumulative action that required great dedication and triumph over nature. This celebration of meat resonates within those who still perceive the value of such nutritionally dense food.
Meat is food that tastes fantastic with very little modification. In fact, one could entirely subsist off of untampered meat. Salt and fire are extremely effective, however, at making meat consumable for the vast majority of humanity, effectively providing the nutrients needed for sustenance.
Meat is recognizable, organically treasured, and verifiably nutritious.
Bitcoin is recognizable, organically treasured, and verifiably sound money.
While a stretch, the connection between Bitcoin and carnivory, is, at least in part, due to a desire for food as verifiably un-altered as bitcoin. When one finds themselves in a world of fiat, it quickly becomes apparent that the anthropogenic creations of modernity are often horrendous for the long term health and wealth of society. This is applied to food, and what is emitted is bitcoin carnivory.
Of course, such a thing as diet is extremely dynamic and difficult to summate in such a simplified way, but I believe there is an innate connection that has resulted in the cultural phenomenon, and it is extremely interesting to hypothesize on what that connection may be.