El Salvador: the new home of crypto surfing | Photo: ElSalvador.Travel

Back in 2019, when I was working in Dubai selling initial coin offerings (ICO) and custom blockchain software, I would have never thought that Bitcoin would complement surfing.

Instead, I would have thought the relationship would be like water and oil that don't mix at all.

Or - like surfing the internet - being a totally different experience from surfing waves.

In 2011, so-called comedian Charlie Sheen said he'd rather move to El Salvador and sell shoes than head to court with his estranged wife.

In 2018, former US President Donald Trump described Haiti, El Salvador, and parts of Africa as "shithole countries."

But when President Nayib Bukele announced in September 2021 that Bitcoin was officially legal tender in El Salvador, few people laughed about the country anymore.

El Salvador: the Latin American nation has plenty of world-class waves | Photo: ISA

El Salvador: A Bitcoin Haven

El Salvador was the first country in the whole world to dare to make Bitcoin legal tender. The decision caught the world by surprise because Bitcoin was perceived as too high-tech for poor countries.

The Bitcoin project started in the poor communities of El Zonte and Punta Mango instead of the affluent neighborhoods of the capital city of San Salvador.

Credit for starting the Bitcoin project in El Salvador should go to Michael Peterson, a San Diego surfer and entrepreneur who opted to work on a grassroots level to create a circular economy around cryptocurrencies.

At the end of 2021, the Salvadoran government announced that it would pave a little more than ten kilometers of the road leading to the Punta Mango and declared this surf spot Phase Two of the national project Surf City.

A few months later, in 2022, President Bukele announced that La Union had been designated to become an oceanside Bitcoin City at the base of the Conchagua volcano.

President Bukele said his new urban center was inspired by the legendary cities built by Alexander the Great, except El Salvador's would be fueled by cryptocurrency.

In addition, Bukele said that renewable geothermal energy from the volcano would power Bitcoin mining and the city's needs.

So, what do Punta Mango and Bitcoin City in La Union have in common?

Both places are in the eastern region of El Salvador, and the government plan is to connect them by building new roads in the 59 kilometers that separate them.

El Salvador is divided into three main zones: central, eastern, and western.

Since memorial times, all governments have invested heavily in the capital city of San Salvador, which lies in the central zone, and the eastern zone has been the most neglected.

To finance the construction of Bitcoin City, El Salvador intends to issue the world's first sovereign Bitcoin bonds of $1 billion in tokenized US dollar-denominated 10-year bonds to pay 6.5 percent.

Punta Mango: El Salvador plans to build new roads to connect the surf spot to Bitcoin City | Photo: ElSalvador.Trave

₿old and ₿eautiful?

The audacity of El Salvador to finance projects bypassing the traditional means dictated by world monetary authorities has raised the alarm in the US government, the Federal Reserve, and the International Monetary Fund (IMF).

These are entities that fully support the supremacy of the US dollar as the preferred form of payment worldwide.

Decentralized cryptocurrencies like Bitcoin are now perceived as an existential threat not just to the US dollar but all the other fiat currencies.

Before Bitcoin was made legal tender in El Salvador, most of the world population had been "opium sedated" to believe that the US dollar was on a solid foundation.

Only a few knew the ugly truth that the US dollar is just a promissory note, not backed by anything like gold, oil, or water.

In the long term, the days of the US dollar are numbered, and it will collapse from its own weight.

The US Federal Reserve has been printing dollars at will for decades, the sky being the limit.

By doing so, a few bankers in the US are getting awfully rich while most taxpayers are inheriting a huge debt that will never be repaid.

On the other hand, Bitcoin has a finite supply of 21 million bitcoins, and 19 million have already been mined.

As the world reaches the last Bitcoin to be mined, it becomes more expensive to mine and, therefore, less prone to be price-manipulated and volatile.

Bitcoin is the perfect hedge against inflation - it is easy to store and move around. It's also divisible up to eight decimal places and can be used in transactions.

The apostles of the US dollar do not fear Bitcoin becoming legal tender in El Salvador by itself; the country's gross domestic product (GDP) is an insignificant percentage of the world GDP.

But they fear the domino effect where the Bitcoin fire will spread to the bigger economies and the rest of the world.

Ukraine has made Bitcoin legal tender in the middle of a war.

Municipalities in Switzerland, Honduras, Costa Rica, Mexico, and Guatemala have also followed suit.

Bitcoin: is it the future of money? | Photo: Creative Commons

Cryptocurrency Is Unstoppable

What is self-evident to me is that Bitcoin around the world cannot be shut down, and the forces working against it can only hope to slow it down.

Even banks who hate cryptocurrency have not-so-secret labs where they are trying to develop apps by which they can control bitcoins.

However, not all Bitcoin projects in El Salvador are a slam dunk for not being that sustainable or carrying a massive risk for the country.

The $1 billion volcanic bond to finance Bitcoin City is still on the drawing board. Most Salvadorans - I will say 95 percent - do not have a clue if it benefits them or not.

Supporters of Bukele from his party Nueva Ideas (Spanish for New Ideas) will say it is a great project.

The opposition parties Arena and Farabundo Martí National Liberation Front (FMLN) will say it is a terrible project.

But all these people supporting or against it are basing their opinions on political ideology.

You ask them what a Bitcoin bond, a hedge fund, or derivatives is, and they have no clue.

I believe this volcanic bond has a very good chance of being successful if, by the end of 2022, Bitcoin hits $100,000, as Goldman Sachs is predicting.

At the same time, it will be a better way of financing than whatever the IMF and World Bank recommend, which most of the time recommend selling national sovereignty.

However, these volcanic bonds are not risk-free.

If influential movers like Elon Musk and George Soros play the market to force a short and temporary drastic drop in Bitcoin price, most likely, these volcanic bonds will crash.

In other words, the volcanic bonds' fate is not in the hands of Salvadorans but in the hands of foreign investors.

These billion-dollar investments and fancy 5-star hotels backed by NFTs will undoubtedly help to "bitcoinize" the whole Salvadoran economy in a few strokes if they do not fail.

But they are not a must or essential for the Bitcoin project to succeed in El Salvador. Having lived and worked in Dubai, I know that everything that glitters is not gold.

El Salvador cannot follow the Dubai model, where they undertake mega projects that cost billions of dollars but end up being not profitable and just marketing stunts to impress the rest of the world.

Dubai went bankrupt in 2007, and the real estate and tourism sectors had to be bailed by Abu Dhabi's vast oil reserves.

Dubai: non-profitable mega investments led to bankruptcy in 2007 | Photo: Creative Commons

Focusing on Grassroots Solutions and Learning 

There are much cheaper and less risky alternatives by focusing on grassroots solutions to bring most of the Salvadoran population on board.

The Bitcoin project in El Salvador has stalled because there has been a failure to acknowledge that despite more than four million Salvadorans downloading the Chivo Wallet, only about 20 percent of the economy is "bitcoinized," and the rest is US dollars.

Contrary to some government officials' claims that the Chivo Wallet has reduced the cost of remittances from abroad, the reality is that most Salvadorans living in the US have to pay more than four percent commission fees to the Visa/Mastercard network to recharge the Chivo app.

Alternatively, they have to drive or take the bus for more than half an hour to get to the closest Chivo ATM.

After Bitcoin became legal tender in September 2021, hotels in the capital city of San Salvador have seen exponential growth in new kinds of tourists - bitcoiners from all over the world in search of crypto jobs or looking to invest in a Bitcoin-related business in the country.

After visiting Bitcoin Beach, many have become interested in learning to surf, which was not part of their original plan before coming to the country.

The preferred form of payment for them is Bitcoin, but most hotels and restaurants do not accept other foreign digital wallets except the national Chivo app.

At the surf spots, most foreign surfers, for security reasons, like to carry very little cash in their pockets and instead pay with a credit card.

On the other hand, small and medium-size hostels prefer to stay away from credit cards and demand cash instead.

El Tunco: one of the most iconic surf spots in El Salvador | Photo: ElSalvador.Travel

The Power of Visa and Mastercard Commission Fees

The reason is that only the larger hotels and chain restaurants enjoy 2-3 percent fees from Visa and Mastercard.

But small businesses in El Salvador get extorted by Visa and Mastercard with up to eight percent commission fees.

The solution to the two cases above lies in the original premise of how the Bitcoin project got started in El Salvador.

Keep working on the circular economy to make every transaction in Bitcoin, and avoid any transaction going through banks and the Visa/Mastercard network to avoid the high fees.

Instead of investing in bringing more Chivo ATMs to every corner of El Salvador, the Chivo app would be better off by being compatible and synchronizing with other foreign digital wallets that can send Bitcoin payments, like Binance's Trust Wallet, Coinbase, and many others.

Any small merchant can learn how to do it in a few hours as long as someone is willing to teach.

Another grassroots effort that will lead to a more rapid bitcoinization of the whole economy is for both government and private enterprises to offer their employees Bitcoin Payroll and Bitcoin IRA.

To this date, this is taboo in El Salvador, and very likely, it will be opposed by dinosaur politicians who are completely out of touch with the reality that the younger generations below 30 feel very comfortable with cryptocurrencies.

It should not be mandatory at all but optional. In El Salvador, the pension system has been crippled for more than 20 years.

Almost three-quarters of the Salvadoran working population has no pension fund at all and, therefore, are condemned to work until the very last day of their lives.

And for the other quarter of the population who have some kind of pension, it is a subsistence pension.

Older people receive an average of $300 per month, which has never been adjusted for inflation since the economy was dollarized in 2001.

With a dollarized pension system that has already failed, El Salvador does not have much to lose in introducing Bitcoin IRAs.

In 1995, there was no faith that the internet would be what it is today.

In 2022, most people worldwide still doubt that Bitcoin will be a standard form of payment.

The day is close when paying for everything to surf in El Salvador will be done in Bitcoin satoshis instead of US dollars - the plane ticket, the hotel, the car rental, the food, the surfboard rental.

Final Words

My article is not neutral - it's very opinionated. I generally support the Bitcoin project in El Salvador, but with reservations.

I am skeptical about the Bitcoin mega projects and instead prefer the grassroots efforts that are not really about bringing foreign investors and speculators.

And the Bitcoin project is not yet a big success as the El Salvador government claims.

But you can't help becoming opinionated when you see that the Bitcoin project is about empowerment.

Before, most foreign surfers that came to the country were just using me and my friend's tourist guides to look for good waves and be safe from gang members.

I guess it has to do with the perception in El Salvador that surfers are pothead bums that don't like to work and instead take it easy.

But now, every month, we are getting clients who are executives and developers of multinational software companies.

They tell us that what they want from us is the street Bitcoin experience to develop Bitcoin apps that the dumbest person can use.

And some of them even want to quit working in Silicon Valley and live in the surf spots of El Salvador.

Words by Jorge Dominguez | Spokesman at Adescomar

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