By Doug Morton, Director, South Carolina Emerging Tech Association @brewsbitcoin
As part of several hats I wear, including Administrator of the Charleston Bitcoin Meetup, and a Director of the South Carolina Emerging Tech Association, I was invited to go to El Salvador to participate in the final exam and diploma ceremony of the initial Bitcoin Diploma given out after completing the Mi Primer Bitcoin course. Mi Primer Bitcoin, https://miprimerbitcoin.io/en/my-first-bitcoin/, is an education initiative in El Salvador teaching financial literacy and Bitcoin usage. It is believed to be the first public school course in the world teaching Bitcoin basics including usage and securing Bitcoin. This is a paramount goal to teach Bitcoin basics in a country where 85% of the population is unbanked but most have access to cellphones where Bitcoin can be utilized as a method of payment.
One of the problems with making Bitcoin legal tender so quickly is that the infrastructure for the Chivo wallet (the state provided Bitcoin wallet) was created very fast (less than three months) and rolled out to a population that, in large numbers, does not understand Bitcoin, nor did the government create a plan to teach its citizens how to use it. They basically gave the citizens $30 in Bitcoin and said Good Luck. By and large, it was left up to the private sector to take on this task. Tremendous inroads have been made regarding education and adoption with the Bitcoin Beach project in El Zonte (along with GaloyMoney’s Bitcoin Beach Wallet), and their program laid the groundwork of the Bitcoin Law in El Salvador in the very first place. But without a widespread education plan, this endeavor could fail.
Mi Primer Bitcoin, a non-profit NGO, runs on donations. Its founder, John Dennehy, was able to get funding from a few companies, notably IBEX Mercado, https://ibexmercado.com . IBEX provides Bitcoin lightning liquidity and conversion services from Bitcoin to cash and provides a simple point of sale invoice system as well. It made sense for IBEX to invest in Bitcoin education in El Salvador for Bitcoin adoption to grow. I learned of IBEX when I was looking for Bitcoin lightning liquidity providers at the Bitcoin Conference 2022 in Miami this past Spring for integration into my own company’s point of sale, BTCRetailX, https://btcretailx..com . I attended a Bitcoin event in Charlotte and heard the story of IBEX and Mi Primer Bitcoin and they asked for Bitcoiners to come to El Salvador and participate in the first Bitcoin Diploma ceremony.
It is hard to admit that I actually hesitated, even for the briefest moment. It would be expensive as it was a short notice request. That negative thought was quickly extinguished and I made immediate plans to travel. I mean how often do you get invited to witness a potentially historic event – one that could be a notable moment in Bitcoin’s history? You might get asked on the regular, but I don’t, I’m no OG, I’m just a pleb doing my thing, orange-pilling anyone who will listen because I believe in Bitcoin’s properties for sound money and the ability to create generational wealth, and empower those who have been marginalized by the banking system.
Flying into El Salvador is very dramatic – volcanoes, clouds, farmland and forests. I was able to get a window seat and was treated to a lot of beauty. Once we landed, we got our bags and found our driver in the crowds of people at the airport’s transportation center. Our drive through the countryside was pretty and the streets were busy as we made our way to San Salvador. I noticed a lot of Mayan influence in the art work.
We arrived at the hotel in the early afternoon. It is attached to La Futura, a mixed-use business center and shopping complex with a food court. I had read that we had to try the pupusas – it’s the local food that is present everywhere in El Salvador. Not sure why I thought a local food court would be a good start on my Salvadoran pupusa eating tour but I got a couple of them along with a local brewed ‘Pilsener’ beer for $3 total (which I find is overpriced later on when you can get 2 good pupusas and a beer for $2.00 in the streets of some of the smaller mountain tourist towns). The beer was fine, but I later learned the locals think of it as their Budweiser, but I thought it was better than that. The food court pupusa left a lot to be desired though. This place basically gave me a flattened hot pocket with some cheese in it. I later found that the cooks make better pupusa’s in the local markets (and they are everywhere to be found). I kind of relate the food court pupusa to something you’d get a McDonald’s – edible but you could do better elsewhere. The rest of the day was spent networking with some early arrivals and getting dinner at the hotel.
Before going to El Salvador, I wanted to see the prevalence of Bitcoin adoption in the country. I also wanted to visit Bitcoin Beach (El Zonte) where the El Salvador Bitcoin movement all started. I was also aware of some of the problems that are ongoing in El Salvador.
For the past few months, if you follow Bitcoin news and El Salvador, you are aware of the gang presence in the country – so much so that the U.S. State Department issued a travel warning, a Level 3: Reconsider Travel, solely based on the prevalence of violent crime. I was aware of this and also aware of special powers given to the government via a ‘State of Exception’. This was a law pushed through by the President and approved by a super majority of the Legislative Assembly. This story will not cover any of the politics of that Assembly nor much of the supposed “authoritarian” leanings of its President. As in life everywhere, the truth lies somewhere in the middle. You can make plenty of “authoritarian” arguments in how the United States conducts its business both domestic and foreign. And I hope, in my way, I can refute much of what Nelson Rauda Zablah wrote in an opinion piece, https://nyti.ms/3und8nI in the NY Times this week. Some of what he says has truth in it, but much of the piece is overly dramatic and does not dig deep enough into what is actually going on in the country from an organic grassroots level to further financial literacy and Bitcoin adoption. With the State of Exception implemented, the state began arresting gang members in bulk with apparently little regard to Due Process. This opened the floodgates of criticism against President Nayib Bukele and his government about human rights violations. Is it fair? Maybe, the jury is still out on it. The word on the street is that if you have a gang tattoo, you may get arrested. Even former gang members who may have gone down the straight and narrow path apparently have been arrested and thrown into the cells with current gang members potentially creating a bad situation for the former gang member. That is a problem that needs to be addressed. But when you drive around the streets of San Salvador and see the armed guards with shotguns at the ready at many businesses, who are you to judge that this Special Action is too much in order to protect the safety of the everyday Salvadoran?
Mr. Zablah makes an argument that Bitcoin believers are promoting a product – and lining their pockets – at the expense of Salvadorans rights and livelihoods. I think this is patently false. Bitcoin is not a product. It is not being sold by any corporation. Bitcoin is a lot of things. It is a method of payment. It is a store of value. It is a mindset. It is a complicated entity. But by and large, its proponents are not ‘lining their pockets’ at the expense of El Salvador. Bitcoin Maxi’s want Bitcoin to grow in value. But that helps everyone, not just the individual. Growth in the asset by accumulating Bitcoin helps everyone from the largest OG holder of Bitcoin to the individual pupusa seller on the streets of El Salvador. I would argue that helping everyone in a country that has Bitcoin as legal tender is altruistic AND self-centered. It can be both things at once and be legitimate and valid. It’s game theory at work.
One thing I do know about El Salvador is that money is being spent to better the general population. I saw evidence throughout the country with bridges being built, roads being paved, and mountain passes being fortified with drainage and reinforcements. Progress is ongoing. And whether you agree with President Bukele buying Bitcoin or not, he is the President, and he apparently has an 85% approval rating. 85%. Wouldn’t Joe Biden or Donald Trump love to have ratings this high?
The problem as I see it in El Salvador for President Bukele is time, or lack thereof. It’s a difficult thing to look to the financial future when Bitcoin has plummeted during a bear market caused by macro economics (war in Ukraine, inflation caused by poor central bank policy), potential CEFI fraud and mismanagement, and an extremely over-leveraged speculative market in the DEFI/CEFI cryptocurrency space. This all resulted in cascading dominoes in the entire market. I imagine this event will go down as a pivotal activity in the history of Bitcoin just like Mt Gox, Quadriga, ICO’s and will be named something catchy like Deleverage Event 2022. Volatility is a known entity of Bitcoin. This round of volatility was not because of Bitcoin or its inherent qualities.
Bitcoin is sound. What is not sound is the business infrastructure built around Bitcoin and the defi cryptocurrency industry to over-leverage collateral (wrapped Bitcoin) and promise obscenely high interest rates to a population being manipulated by central bank inflationary policies. People are being forced to gamble on high risk moves in order to offset inflationary devaluation of their money. And it bit everybody in the backside. I would argue that the rise in Bitcoin from 20K to 69K was a product of this overleveraged market and that it was bound to pop back down to its current valuation, and will now grow at a better sustainable growth rate. Circling back to my initial thesis of ‘time’, President Bukele needs Bitcoin to grow in value to show/teach his constituents that Bitcoin’s sound money properties are valid and will help the country. This is not a short term game, but a five or ten year outlook. This concept needs to be taught to the masses. It is being taught to the kids of El Salvador in Bitcoin class. Be patient.
The Bitcoin circular economy of Bitcoin Beach, and the classes of Mi Primer Bitcoin, are doing just this. Bitcoin Beach found unexpectedly that the use of Bitcoin promoted savings by the individual. Savings that were unobtainable prior to bitcoin adoption in a cash economy. I have learned this in my own way as a Bitcoin hodler. You begin to appreciate what you have and choose not to spend it in our disposable goods economy. Same thing is happening in El Zonte and by extension to those users throughout El Salvador. This is part of the Bitcoin philosophy of lowering your time preference. Stop striving for instant gratification.
A lot of naysayers want to harp on about the initial El Salvador Bitcoin rollout being a bumpy mess with the Chivo wallet. I had several people send me articles or videos from the U.S. national news talking about it. People have expectations that are unwarranted, and clearly uneducated or misguided. These expectations are that things need to be perfect. It is a false expectation. Life is messy. Life is hard sometimes. And trying to do something that has never been done in the history of the world – rolling out a new monetary system in three months to six million people that may help them in the long run deserves some credit. President Bukele has rolled the dice to better his population. A dice roll that is built upon a smart bet. I would take those odds every day.
Above: Entrance to Hope House in El Zonte (Bitcoin Beach), El Salvador
We traveled the next day to El Zonte. Bitcoin Beach. We arrived at Hope House and were greeted by several local students as well as Roman Martinez, a leader/teacher in the Bitcoin Beach project. Roman grew up in El Zonte and knows full well that the options for jobs are slim, you might get a job as a farmer, a fisherman, or you leave for a better life, or you join the local gangs.
Roman, along with Mike Peterson and Jorge Valenzuela teach area youth about Bitcoin through classes on financial literacy and Bitcoin concepts (usage and security).
They offer a safe place for students to come work on laptops, do their homework, learn Bitcoin and share their journey with fellow students and Bitcoin tourists.
And they do this everyday. Living in the Bitcoin fishbowl entertaining the curious Bitcoin tourist with a hearty smile and an amazing attitude and sharing their vision of empowering the locals with financial inclusion. It is a moving and emotional thing to experience.
Above: Dennis, Roman and I sharing a picture after receiving the first ‘hot off the press’ rough draft of the Bitcoin Beach White Paper.
While at Hope House, we met Josh Young and New Story, a charity – Josh is Chief of Staff for the charity. They build affordable houses in developing countries and are promoting a Bitcoin based mortgage. It was fascinating to run into him and the group. You just don’t know who you will run into as the world gets a little smaller. Dennis and I had lunch at Olas Permanentes, a beachside surf hotel and restaurant, and then made our way back to San Salvador to meet up with the group for an evening training on what we would be doing the next day with the students for their final exam test and diploma ceremony.
Above: My assigned student, Jonathan, showing me his Bitcoin knowledge.
The main point of coming to El Salvador was to go to the school, La Pacheco, to participate and witness the first Bitcoin Diploma commencement at a public school in the world. We were part of a group of 40 or so worldwide participants asked to come in and do this with the thought that the Bitcoin community from around the world wants you, the student, to succeed in this endeavor. The group was from all aspects of the Bitcoin ecosystem. Early adopter OG’s, venture fund capitalists, creators, open-source software leaders, policy makers, advocates, educators, and me. My background is retail point of sale and I built BTCRetailX, https://btcretailx.com , with the explicit goal of integrating Bitcoin lightning payments into a traditional full-service retail point of sale system. And these participants came to El Salvador primarily on their own dime to be a part of this – they weren’t here “lining their pockets” as Mr Nelson Rauda Zablah would have you believe. I was amazed at the depth of knowledge in this space in El Salvador at this moment in time celebrating the graduation of 38 students. My amazement and awe would build as the day went on for what the potential is of this educational movement.
La Pacheco is in San Marcos. San Marcos is right in the middle of gang central. Gangs recruit the students (children) to drop out of school and join the gangs. It happens regularly. We were told that the school lost 3 kids this year to join the gangs already and the school year is only half way through. The school is down a side street tucked under a canopy of trees and has a basketball court and courtyard and two main outdoor corridors with classrooms off them and a small kitchen down one corridor. The kids are wearing uniforms of tan bottoms and white tops.
We are here to monitor and witness a final exam to the Bitcoin Diploma. It’s a task to show that the kids know how to download a wallet, restore a seed phrase, download a different wallet, and make a transaction from wallet to wallet. My wife made the comment that she wasn’t positive she knew the steps to do this (we’ve reviewed the steps since then).
My student Jonathan got through it pretty quickly. It was clear these kids paid attention in class and were comfortable with the exercise.
Afterwards, we attended the graduation ceremony, awards were presented, and then a basketball game broke out between the students and the attendees. We spent time with the headmaster and the kids, and enjoyed a lunch of pupusas with salsa and a vinegar coleslaw and either coconut water or hibiscus juice.
This picture shows the gratitude and the sense of accomplishment that the students had when going through this course. They were proud of their achievement. And they should be. This class may offer a chance of changing their world for the better.
Bitcoin to many is about empowerment. It is about banking the unbanked and providing financial inclusion to those that have ZERO access in the traditional sense.
People who think of this as purely a speculative asset or have cynically labeled it as a way to “line their pockets” are shortsighted. These people need a bit of education to see the potential of the impact that this technology can provide.
Think a bit deeper about this use-case. A woman on one side of El Salvador earns money and wants to get it to her family on the other side of the country. She doesn’t have access to Western Union. Her family on the other side also does not have access to Western Union. Banks – nope, none are readily available – based on western regulations because of the U.S. dollar as legal tender, banks charge $50/month for an account due to the regulatory cost of compliance in such a small market. It’s not worth it to the bank to provide the account and it’s not worth it for most Salvadorans to pay for such an account as this would make up 20% of the typical monthly income. So this woman has to carry cash on a bus through several transfers risking gangs robbing her on her five hour trip to hand cash over to her relatives. Don’t be naive and think this doesn’t really happen, this kind of scenario is a normal occurrence.
Enter Bitcoin and the layer 2 Lightning Network. If this woman receives or converts her money into Bitcoin, she can text her relatives to have them send her a lightning invoice that she can then send money to as ‘sats’ to her relatives instantly with very little cost. There are three very fixable problems here.
- People need to know how to transact in Bitcoin (education)
- Everyone needs a cell phone.
- Need to convert fiat dollars to Bitcoin
Education is key everywhere Bitcoin is transacted – not just in El Salvador. Sending sats is easy. But protecting your keys and learning to think as a Bitcoiner takes some effort. Mi Primer Bitcoin is doing the heavy lifting here. They are teaching kids and the community FOR FREE. They are looking for the kids to teach members of the community also starting with their own parents. This education process scales as people teach other people and they teach others and on down the line.
Not everyone in El Salvador has a cell phone. We spoke with merchants in El Salvador about why they didn’t take Bitcoin. The answers varied. Some were immigrants and didn’t have access to the Chivo wallet which is provided to the citizens of El Salvador. These immigrants were not told of alternative wallets to access Bitcoin. Some of the people also did not have phones. Some of this is education. Some people either don’t trust banks or don’t trust the government and so wouldn’t touch the Chivo wallet. Lack of a cell phone as an adult in a country that has widely available mobile service is a fixable thing. NGO charities can help fill that need. And as the country becomes more prosperous and grows, the people will be able to afford the goods and services they need to live and work.
Cash conversion seems to be a mixed bag in El Salvador. Both Dennis and I put cash in a Chivo ATM and it took 14 hours to be credited with Bitcoin at around 2 AM. 14 hours. And of course when I tell people that story, I get snarky responses about Bitcoin being really fast. But if you think about it, it’s faster to credit a balance than an American bank where you have to wait until the next business day for access. These kinds of responses make me realize just how much these people don’t know about Bitcoin, or their own bank, for that matter. And I make a mental note to educate them later on. If this were a true Bitcoin ATM, we should have seen a credit in 30 minutes or less for an on-chain transaction. The Chivo ATM and Chivo Wallet is not Bitcoin, and Bitcoin is not the Chivo ATM or Wallet. Chivo is a private wallet and transaction system that is not widely known in how it is programmed or funded. Thankfully we can transact on Bitcoin outside of a Chivo ATM. But citizens of El Salvador are incentivized to use the Chivo ATM and wallet as the conversion from Bitcoin to fiat and vice versa is free to the users. They are not paying a conversion fee with a 3rd party. However, I would argue that using a 3rd party to get access to either fiat or Bitcoin quickly is worth it. Chivo also apparently has some accounting issues where deposits disappear or don’t get credited and that is causing some friction with the users. However, market forces are at play here and conversion from cash to Bitcoin/lightning is much cheaper than Western Union and can be had instantly utilizing a service that merchants can offer from their point of sale to take in cash and provide a Bitcoin voucher in return that can be credited to a Lightning wallet instantly. That is the miracle of Bitcoin. That five hour dangerous bus ride across the country with all that cash could be a thing of the past. That is empowerment. That is financial inclusion. That is not lining the pockets of business people in the Bitcoin industry.
Mr Rauda Zablah continues in his missive that he doubts the truth of a tourism increase of 30%, or that 50 crypto companies have started in the country, and some announced creating 113 jobs. My group was part of the tourism and we heard about the increase in tourism on the ground. Mr Rauda Zablah also mentions remittances via digital wallets only made up 1.5% of the total in April. This is the role of education. It’s not just the citizens of El Salvador in-country but also for its immigrant citizens elsewhere. They have to have access to Bitcoin exchanges in order to get money into their wallets. This is difficult now because the commercial infrastructure for this is brand new. But people are building this infrastructure. Bitcoin ATM’s are showing up more and more. Azte.co Bitcoin vouchers are available at many locations around the world. Bitcoin/Lightning vouchers are a function of the BTCRetailX point of sale. It takes time for mass adoption of this technology. Again, this calls for a little patience and a lot of education. Mr Rauda Zablah states that “Bitcoin is the regime’s currency, primarily designed for foreign crypto enthusiasts”. I would counter that by saying that Mr. Bukele’s Bitcoin Law is for the people of El Salvador that is being promoted and cheered on by Bitcoin enthusiasts as we know the inherent properties of Bitcoin are more sound than any money the world has ever known. And by people such as Mr Rauda Zablah rooting for its failure without actually understanding Bitcoin, they are by extension rooting for the failure of the El Salvadoran people, and that’s immoral.
I wish the best for the people of El Salvador. They are, en masse, friendly, generous and warm people. Time is needed to build the Bitcoin infrastructure and educate the population. Time is needed to get through the current bear market. Time is needed for Bitcoin policy to take flight. In time, I believe Mr Bukele’s vision will be rewarded.
In South Carolina, the South Carolina Emerging Tech Association (SCETA) has been hard at work developing sound policy for Bitcoin and blockchain technology. And we are seeing the fruit of that hard work now. The South Carolina State Treasurer’s office is establishing a newly created Office of Digital Assets utilizing the framework of guidance provided by SCETA. Treasurer Curtis Loftis has endorsed and will be attending the South Carolina Blockchain Week conference being held in Charleston, SC on Oct 5 – 7, 2022. The conference will bring business leaders and state policy makers together for education and networking.
For information on the conference, please visit: https://scblockchainweek.com
SCETA is also exploring two initiatives in the near-term:
1) bringing the Mi Primer Bitcoin education (in English and Spanish) to the population of South Carolina through partnership with a public school in the state.
2) establishing a Bitcoin circular economy for the benefit of the local economy of an Opportunity Zone in South Carolina as a public/private partnership to prove the sustainability of such an economy featuring education of the public including students, merchants and service providers, along with establishing a community run Bitcoin mining facility for the direct benefit of the community.
Please reach out to SCETA at https://sceta.io to inquire on our emerging tech initiatives or to become a member. Please join and be a part of the narrative for Bitcoin and blockchain policy. We work with national blockchain trade groups and strive to influence sound policy on the local, state and national levels.
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