On El Salvador’s Bitcoin Beach, A Glimpse of Cryptoeconomics – Finance and Trade

On El Salvador's Bitcoin Beach, A Glimpse of Cryptoeconomics - Finance and Trade

The store’s namesake, María del Carmen Avilés, said she is now expert in bitcoin transactions. In El Zonte this week, construction worker Hilario Gálvez walked into Tienda María to buy a soda and snacks to share with his friends. Instead of reaching for his wallet, he paid through an app on his phone. “When a customer comes I ask him if he’s going to pay with the application or in cash. The majority pay with the application Bitcoin Beach. I look for it on my cell to charge them.”

Experts are trying to figure out why Bukele is pushing bitcoin. They say it is unclear how the highly volatile cryptocurrency will be a good option for the unbanked and only time will tell if the new system translates into real investment in El Salvador. President Nayib Bukele, who pushed through the bitcoin law, touts it both as a way to help those many Salvadorans without access to traditional banking services and as a path to attract foreigners with bitcoin holdings to invest in El Salvador, which is the first nation to make the cryptocurrency legal tender.

Bitcoin, intended as an alternative to government-backed money, is based largely on complex math, data-scrambling cryptography — thus the term “cryptocurrency” — lots of processing power and a distributed global ledger called the blockchain, which records all transactions. No central bank or other institution has any say in its value, which is set entirely by people trading bitcoin and its value has moved wildly over time. El Zonte’s mini bitcoin economy 26 miles from the capital came about through an anonymous donor who started working through a local nonprofit group in 2019. Supporters of the financial change point to it as a demonstration case for how digital currency could help in a country where 70% of the people don’t have bank accounts.

“People ask me if I recommend bitcoin, I tell them I’ve won, but I’ve also lost,” Avilés said. “When bitcoin hit $60,000, I won and I bought this refrigerated room for the store, but then it went down and I lost.” Román Martínez was a pioneer in using bitcoin in El Zonte. He said the anonymous U.S. donor heard about community projects through the nonprofit Hope House where he works and began working through another American who lives in El Zonte. Hope House shares a building with Strike, a Chicago-based start-up that has been working with Bukele’s government on the nationwide bitcoin launch. Avilés notes that the volatility of the bitcoin can be a problem.

“It’s easier than paying with bills,” Gálvez said. “I can buy from my house, do the transaction with the application Bitcoin Beach, and I just come to pick up what I need.” It doesn’t take more than two minutes.

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