President of El Salvador Nayib Bukele
Here’s some unsolicited relationship advice: Get yourself a partner that loves you as much as El Salvador President Nayib Bukele loves bitcoin. That may not be physically possible, because this man really loves his blockchain money.
Depending on your point of view, his recent performance was either historic, or a thoroughly delusional and yet an entertaining plan.
Bukele last week unveiled a plan that will see El Salvador, fresh from making bitcoin legal tender, potentially issue $1 billion in “volcano bonds” that would be half used to purchase bitcoin, with the other half used to construct a Bitcoin City.
This libertarian paradise would have no taxation, except for a value-added tax, and would get completely clean thermal power from a nearby volcano.
No, this is not some B-grade Bond movie fan fiction — although it certainly might be out there on the wider internet — this is something that is meant to happen in 2022.
“This is going to make El Salvador the financial centre of the world,” Blockstream chief strategy officer Samson Mow said on stage beside Bukele, as reported by Reuters.
Mow talked up the “game theory” surrounding the bond issuance, and said bitcoin would hit the $1 million mark, allowing El Salvador to easily repay the 10-year bonds issued at 6.5%.
Before the hype takes over, it’s time for a dose of crypto-cynicism thanks to David Gerard.
“It is all but certain that if the Bitcoin City project even breaks ground, then it will be a haphazard disaster, courtesy incompetent but politically trustworthy cronies hastily pushing out the most slapdash and dysfunctional nonsense,” Gerard wrote.
“If Bitcoin hits a million dollars — as Mow is sure it will — the bond pays out handsomely. If it doesn’t, Blockstream gets the land. That’s a pretty sweet deal — though not so sweet for El Salvador.
“Note that real-world usage of Bitcoin by the populace of El Salvador doesn’t seem to matter for this plan. Just as well, given that Chivo doesn’t actually work reliably.”
Gerard concludes that Bukele and the bitcoin crowd probably think each side is the bigger sucker, and that both sides could easily lose. In the 2020s, everything turning out bad for everyone is a hard prospect to bet against.
Earlier this month, an actual economist in Australia and head of payments policy at the Reserve Bank of Australia Tony Richards issued some home truths in a speech of the kind that people only give as they approach retirement.
“Cryptocurrencies have no intrinsic value, typically do not have any issuer standing behind them, and rely on users’ trust in the software protocol that controls the system,” Richards said.
“While the term ‘cryptocurrency’ may suggest that they are a form of money, the consensus is that existing cryptocurrencies do not have the key attributes of money (which is why some people prefer the term ‘crypto-assets’). As many observers have noted, they are rarely used or accepted as a means of payment (at least in everyday life), they are not used as a unit of account, and their prices can be very volatile and so they are a poor store of value.”
Richards said distributed ledgers have a future, which may allow wise contracts to take off, but cautioned that decentralized peer-to-peer finance, such as those sold through crypto-type, is unlikely to appear that intermediaries would retain a vital role, if only for the laity to use the technology.
If regular users had less fear of missing out (FOMO) and ignored fads, combined with government clamping down on energy consumed by proof-of-work-based cryptocurrencies and the use of cryptocurrencies in laundering and cleaning money, Richards said he could envision a path where crypto price increases unwind.
Little wonder that bitcoin holders would be pleased if El Salvador did indeed lock up its volcano bitcoin for at least five years, as planned. An extra layer of scarcity from government bonds would really help keep the FOMO going.
Helping to stoke that FOMO has been Australia’s blockchain-promoting Financial Services Minister Senator Jane Hume.
“A recent Senate committee report indicated that an ordinary 17% of Australians invest in cryptocurrencies; it’s an elegance of assets that has captured hearts and minds, but beyond that, whatever you may think of personally, it’s a generation that rarely goes very well. to disappear very soon,” Hume thankfully said in a speech last week.
Unfortunately for the minister, Richards had already postponed that investigation and his claim a week earlier, such as the claim that 5% of Australians owned Dogecoin.
“I must say that I find those statistics implausible. I can’t help yet to think that the online surveys on which they are based might not be representative of the population,” he said.
“There are vital segments of the population, including the elderly, those who live in regional spaces, and those who do not have access to the Internet, that are not well perceived by online survey panels; our delight is that it takes many paintings to do a very good survey. intelligent population.
However, Hume was not discouraged and asked other people not to be like those who condemn new technologies such as email, smartphones or the Internet itself.
“Decentralized finance subsidized through blockchain generation will provide incredible opportunities – Australia won’t have to be left with the worry of the unknown,” the senator said of a country that closed its borders in 2020 to its own citizens for fear of a virus. he has had concern as the main driving force of the maximum of his despicable immigration policies from the Federation.
Contrary to Hume’s pink vision, there is the dose of truth served through those who recently hoped to be able to buy a copy of the U. S. Constitution with ether. As Vice reports, many of those who have contributed to decreasing budget grades have found that the ethereum blockchain’s pay-as-you-go design and maximum fuel levels to pay for transactions consume all the cash intended to be used for acquisition once it has been refunded. was refunded.
Vice estimates that about some of those who have contributed to ConstitutionDAO will see a large portion of their budget absorbed through gas costs.
As is the case in the crypto box, although this attempt to have an effect on the genuine global has failed, the next one will most likely be to avoid some of those pitfalls and the state of the art of cryptography continues.
It’s unclear whether this can be smart enough for the goal, however, it’s no more absurd than a low-tax economic zone fueled by a volcano in Central America and funded through bitcoin bonds.
Next year will show which will materialize first, if applicable.
Aerial view of force extraction at the La Geo geothermal force plant on October 22, 2021 in Berlin, Usultan department, El Salvador. After declaring Bitcoin legal tender with the US dollar, the Salvadoran government is mining the cryptocurrency with three hundred computers in a factory forced through the Tecapa volcano.
The Monday Morning Opener is our opening salvo for the week in tech. Since we have a global site, this editorial is on Mondays at 8:00 a. m. AEST in Sydney, Australia, which corresponds to 6:00 p. m. Eastern Time on Sundays in the United States. One member writes from ZDNet’s Global Editorial Board, which is comprised of our editors-in-chief in Asia, Australia, Europe, and North America.