Last week, something that would be considered in the upcoming periods as one of the most significant events in cryptocurrency history happened for the first time ever. El Salvador announced that it would introduce Bitcoin as a legal tender (i.e., official currency) in the country.
First question that comes to mind: “But Bitcoin was decentralized, how can it be a legal tender?” Here, it is important to note that: Bitcoin was not issued by a central authority, so there is no authority to interfere with its price, supply, or minting. Therefore, its use as a trading instrument in a country or within an institution does not mean any intervention to its decentralized nature. Moreover, there is a detailed program implemented for this transition process in El Salvador. If everything goes as planned, it will prove the success of this decision to the entire world.
Let us look at more details of this adoption…
On June 8th, 2021, Nayip Bukele, the president of El Salvador gave a speech on Twitter Spaces for 20,000 people and congress voted during the live stream. 62 members out of 84 members voted for Bitcoin to become a legal tender and the official local currency was determined to be changed from US dollars to Bitcoin with the absolute majority of the votes in favor.
Bukele announced the work prepared for a period of 90 days for the implementation of the decision after the voting. The first step towards this goal is to launch a fund of $150 billion.
Why is that?
Everyone dealing with trade in the country is required to accept Bitcoin payments; however, those who do not want to hold Bitcoin will be given US dollars against their Bitcoins from the fund. This value will be based on the US dollar equivalent of the products sold. For example, in case of sale of a product worth of $50, then $50 will be given to the requesting party regardless of the Bitcoin exchange rate. This implementation will ensure that US dollar flows are not completely cut off as well as increasing the number of Bitcoins in the official treasury.
The plan also includes an important clause to increase the Bitcoin volume in the country and attract investors around the world: Residential and living permit for 3 Bitcoins.
President Bukele said that priority would be given to blockchain developers. The goal is not only to generate an income, but also it is to make the country as a focus and center of attraction for blockchain technology.
Energy source of mining is shifting to a new direction
As already known, energy consumption of Bitcoin mining activities sometimes leads to controversy. The issue of how future technologies could consume less resource in the future would also change the course of mining activities. While efforts are made to find solutions to problems such as global climate crisis and the scarcity of natural resources, El Salvador plans to introduce a new approach to mining of blockchain-based asset, which is considered as the ‘technology of the future’.
The government of El Salvador also takes a great initiative in this respect to create an infrastructure allowing for Bitcoin mining using geothermal energy from the volcanoes located in the country. With this implementation, unfavorable aspects of mining are eliminated while it may also bring a huge income to the country. In addition, it may also set an example for other countries to make use of natural energy resources.
What else would this decision contribute to the country?
The aforementioned implementation program seems to be almost perfect. Provided that the same perfection is the case in practice, El Salvador would come to the forefront in many headlines about Bitcoin around the world. It will be the first country in the world to make Bitcoin a legal tender, boost tourism with a cryptocurrency, promote mining using natural energy resources, and granting residential and living permit by cryptocurrency.
Although we have mentioned about this news as a significant and positive development since the beginning of this article, this was not very well received by some around the world. In the American media, there were some speculative news about Bitcoin and the IMF issued statements about possible negative impacts of such government decision. Such kind of controversy is quite normal since such a small country like El Salvador takes a significantly innovative and brave decision. We will all see what will happen following this decision and which further steps are to be taken: How will El Salvador establish the system and which other countries will take similar decisions? We are holding our breath.
Bu içerik en son 26 October 2022 tarihinde güncellenmiştir.