“Angry protests, technological glitches and a plummet in value marked the first day of El Salvador adopting Bitcoin as legal tender” is not exactly the kind of news coverage that will encourage sceptics that El Salvador has made the right move by embracing a more decentralised financial system.
Many citizens of the country are worried, no doubt because Bitcoin’s value changes so frequently and unpredictably that a single tweet by Elon Musk could potentially destabilise the El Salvador economy.
But despite institutions like the IMF being wary, there’s something very interesting happening here.
As the BBC reports:
The government has even given Salvadorans $30 each of Bitcoin to encourage its adoption. It says bitcoin could save the country $400m a year in transaction fees on funds sent from abroad.
However, using data from the World Bank and the government, the BBC calculates this to be closer to $170m.
“We must break the paradigms of the past,” President Bukele tweeted. “El Salvador has the right to advance towards the first world.”
From the comfort of a wealthy Western country, it’s easy to discount Bitcoin as a currency for blockchain nerds, speculative investors, and criminals.
But for the developing world, cryptocurrencies offer a way to bypass an established financial system that punishes them with ridiculous fees for simple international money transfers, while providing an easy route into making investments and helping people route around their own national currencies’ inadequacies, as a really interesting Financial Times piece
detailed at the weekend.
So, cryptocurrencies are a fascinating force in the modern world, but Bitcoin’s environmental impact cannot be discounted. The New York Times explained the current situation last week, noting
that Bitcoin activity now uses “seven times as much electricity as all of Google’s global operations,” or “about the same amount of electricity as Washington State does yearly.”
We should beware of anti-cryptocurrency rhetoric that simply seeks to maintain the current world order, but the environmental concerns are serious. There may be little that can be done, however. Given Bitcoin’s decentralised nature, stopping its growth may be impossible.