El Salvador abandons Bitcoin as legal tender

Yeh, it failed so hard no one even uses it anymore.

It’s being “used” as a speculative asset. That’s not a firm foundation to run a governmental monetary system on. Maybe there are other cryptocurrencies better suited to the task, but BTC isn’t

Governmental monetary systems are usually founded on hopes and prayers (and military might).

Are you able to point to a single case where Bitcoin was used as legal tender in an every day business transaction? By this I mean, can you give an example where someone ordered a cup of coffee with Bitcoin directly and not through a proxy?

The article says "92% of Salvadorans did not use bitcoin in their transactions in 2024". Which means that 8% did use it in their transactions.

does buying drugs count?

The post you're replying to is about Bitcoin being "used", not specifically "used for everyday transactions". Bitcoin has so far been a decent asset to hold as a store of value if you don't want to or can't store your money in the traditional financial system. Lots of everyday people in countries with high inflation or strict controls or how people can store money hold Bitcoin (or perhaps more commonly, stablecoins) for a very practical purpose other than speculation.

Bitcoin has only failed so far as a replacement for Visa and Mastercard. So no, nobody's using it to buy coffee.

Military Might ( and hopes and prayers)

I used to pay my dish network bill with it before they stopped accepting it. I've also used it to send money to friends and family, and to donate to open source projects and other things.

If the fees were lower I'd use it for plenty of other things too.

Government monetary systems are all inflationary, for a lot of very good reasons.

this is the funniest way to reply

100% this.

Food, medicine, transportation, education, and everything else at or near the bottom of Maslow's pyramid of needs still cannot be directly purchased with bitcoin.

The other punchline to the Bitcoin joke is that it's finite. In 120 years it will begin to evaporate from existence as more and more wallets are simply lost to time.

BTC cash has lower fees I believe, I wonder if it could actually work as a currency for day to day payments.

>The other punchline to the Gold joke is that it's finite. In 120 years it will begin to evaporate from existence as more and more gold chests are simply lost to time.

This is how insane that sounds

Is it even possible with BTC? I mean, how long does the transaction take to completely confirm? 30 mins? I guess if you paid way in advance; or loaded up a prepaid wallet.

I wonder what volume of all transactions it represents. I've used Swiss Franc this year but it's a fraction of a percent of all my transactions.

It can work as a day-to-day currency, but it compromises the decentralization that is key to Bitcoin's usefulness as a store of value:

+ By allowing 8x larger blocks (unless it's even larger now?), if in widespread use with full blocks, the blockchain would be 8x larger. Bitcoin's blockchain is already the better part of 1TB, though you can still fit that on a cheap SSD. Imagine if it were 8 and growing fast.

+ Because BCH uses the same hash algo as Bitcoin, but is much less popular, it's at risk of 51% attack.

+ Because there is no pressure on block sizes, fees are very low, which means that as halvings continue the block rewards for BCH will get extremely small. This will result in hashrate continuing to decrease, putting it at even greater risk of 51% attacks. Bitcoin's high fees allow it to remain profitable for miners even without inflation. Miners have to be paid to keep the network secure, and that's either going to come from tx fees or from inflation. BCH aims to have neither and that puts it at risk.

And anyway, there are much better solutions for day to day payments, such as Monero and Ethereum.

It is highly divisible though, there’s 2.1e15 satoshi and 2.3e14 cents in the world (re google). It can lose 90% of itself before being unable to replace cents. Also, the network can just agree to change the protocol to fix this issue, should it arise. Countries do redenominations all the time.

That's because it's actually quite sane; relying on commodity backed currencies - especially those which are _finite_ leads to deflation. You see that with BTC, where the value keeps rising and you need more and more fractional denominations to make sense. With gold (and historically, more so silver), it was _very rarely_ used for actual trade because it ended up being like five gold coins == someone's entire life savings. It was always silver, copper and unit of account.

Debased currency - a problem every large state eventually faced - is a consequence of deflation.

Your being silly. Its an INTERNET currency for use on the INTERNET. I use it to pay for cloud storage, VPN and web hosting on the INTERNET.

Interesting take. Therefore they needed a bridge between the deflationary BTC and a low-inflationary day-to-day note. Is there an obvious fix, my liege?

Don’t forget buying drugs online! Which is mostly what I use it for…

it is probably the same with gold - in fact, i say gold is used even less in transactions. Yet, nobody would deny that gold cannot form a good monetary foundation . Of course, it's not the best - fiat is still, imho, better - but it doesn't mean it can't work.

So why is the IMF so against bitcoins that they'd rather pay to eliminate it? Or are the IMF scared that bitcoin can actually succeed, in a way which prevents IMF members from asserting monetary pressure in ways that benefits them?

>Debased currency - a problem every large state eventually faced - is a consequence of deflation

Inflation in the monetary supply, not deflation, leads to the debasement of a currency. An example is how the influx of gold from the conquistadors into 16th century Spain led to inflation, due to the increased supply of this means of exchange resulting in the debasement in value of a given unit of this means of exchange.

Edit: I'd remembered wrong. It was silver, not gold, that Spain experienced an influx of.

> If the fees were lower

Aye, there's the rub.

With all due respect, why not Bitcoin Cash or some other coin? Bitcoin Cash is the exact same thing as Bitcoin - same protocol, same 21 million coin limit, same Satoshi whitepaper, same everything, except bigger blocks and thus, much lower fees. If you are using a coin as an actual currency, and not as a speculator, why stick with high-fee Bitcoin?

Well, for buying Monero to buy drugs online right?

I think the fundamental appeal of Bitcoin is the lack of ability to change the protocol based on any external factors at all.

Otherwise it's just fiat all over again

30 minute transaction times are kind of a deal-breaker. 3 seconds is the edge of reasonable.

>Bitcoin has only failed so far as a replacement for Visa and Mastercard. So no, nobody's using it to buy coffee.

It not being "used" in this context is referring to it not being used as legal tender. The law that was walked back was one which had made bitcoin legal tender throughout the country. As others have mentioned, it seems to have largely failed in being adopted as such, as surveys seem to indicate that less than 10% of people in the country had used it as legal tender in the previous year.

Depends on the particular government. The ones that are heavy on hopes and prayers usually don’t do well though.

Ahh yes, the age old “let’s use a precious metal to denominate our currency” idea.

Cryptocurrency bros are literally speedrunning the entirety of monetary system failures. All of them. You’d think, maybe after the first couple they’d read a book or something?

Heck no! YOLO!

But you can change the protocol – you just need to convince people to use your version, i.e. make a softfork. https://en.bitcoin.it/wiki/Softfork

(Or a hardfork, if your changes have to apply to all transactions, though this would be extremely tricky.)

Every Bitcoin Cash transaction is on the chain itself. Bitcoin is increasingly reliant on off-chain "Lightning" transactions. An extra few TB of data or majority of transactions not on the chain at all? I'll go with more data & transparency, thank you.

> Inflation, not deflation, leads to the debasement of a currency. An example is how the influx of gold from the conquistadors into 16th century Spain led to inflation, due to the increased supply of this means of exchange resulting in the debasement in value of a given unit of this means of exchange.

No, that's not debasement - in fact it was the opposite, the huge supply of silver (not so much gold) meant those Spanish coins were good-quality bullion. Inflation happened, and while that can commonly be caused by debasement, that wasn't the cause in this instance.

> Yet, nobody would deny that gold cannot form a good monetary foundation

I wouldn’t say nobody (fools exist), but, sure, only a fool would deny the statement “gold cannot form a good monetary system”.

But... Isn't that the opposite of your Bitcoin claim?

In 2021, the percentage of Salvadorans who were using Bitcoin was 26%. After three years of mandatory acceptance requirement, it's now 8%.

It says a lot about the popularity of Bitcoin, no?

Of course the protocol can change if a large majority of miners agree to the change.

It's just a question about updating the source code.

The fundamental appeal of bitcoin is the lack of ability to change the protocol without buy-in from a sufficient fraction of the community.

8% use at least one.

The government literally give (almost) everybody $30 in btc to promote this, 8% is too low

...had used at least once, not "using"

The government were giving out btc

Em. Spain, famously, didn't debase its currency.

The gold escudo was 22-karat for basically it's entire existence,.

and update the hardware wallets if needed

What it really is is basically a consensus between participants. Once the consensus about a change gains critical mass, that change just happens, by someone coding it into the software and people updating to it. The change (fork) becomes mainstream and the old version becomes fringe. And vice versa, if consensus never achieved. There will be people who stay on old version anyway. It’s up to who believes in what, based on available software based on ideas that are worth new code.

How can anything ever be changed once 51% is abandoned?

I also think there will be a gold rush of hacking old wallets one day when the encryption is broken. Not sure if that will happen before or after btc failure though. You can’t upgrade security on lost wallets.

> By allowing 8x larger blocks (unless it's even larger now?), if in widespread use with full blocks, the blockchain would be 8x larger. Bitcoin's blockchain is already the better part of 1TB, though you can still fit that on a cheap SSD. Imagine if it were 8 and growing fast.

This has always felt like a completely weaksauce argument to me. Even with Bitcoin, very few people other than dedicated miners download a full blockchain (like it or not). 1TB is already too large to keep on your phone or laptop, but 8TB is at most a minor inconvenience on a server or dedicated mining rig. What's the demographic where a measly factor of 8 makes a difference?

I was more thinking in terms of the modern conception of currency debasement resulting from the increase in the monetary supply, though I think I must have just been thinking of the real, not the escudo. Several years ago, I read a couple of books on the conquistadors, where the details of the devaluation of silver was discussed, but it's been a while since the information was fresh in my mind.

Trying to use bitcoin like this is like trying to use certificates of deposit to buy coffee. Bitcoin is a store of value, it’s nonsense to try and use it like this. Look at Ethereum if you want a medium of exchange fit for the digital age.

I think you're confusing proof of work with proof of stake. The integrity of the Bitcoin network is enforced by the miners agreeing on the rules, not by anyone staking their ownership for governance.

Don't try to reason with them. Their minds are as closed as a MAGA.

Governmental monetary systems have been used by every government for what now? 3000 years?

Why would the people who are getting richer and richer by hoarding btc and not engaging in anything productive ever agree to that?

> Countries do redenominations all the time

That’s not really the same, in several fundamental ways.

What about if you hack a lost wallet and then you transfer the coins to yourself. No proof of work needed then. It is just there, in your wallet.

They don't need to increase the supply of bitcoin, the nodes can simply be updated to recognize that a satoshi is also divisible by a billion.

This really feels like it doesn't belong here.

Fine but what does this have to do with the price of bitcoin in El Salvador?

You should report him to the police for misogyny.

Just… really suggest you take a deep dive into blockchain technologies. You’re confusing a few things.

Gresham's law says that "bad money drives out good". Due to the dynamic this describes, it is unlikely bitcoin would commonly be used to buy and sell things even if it did not suffer practical obstacles.

Bitcoin experiences less inflation than regular currencies. Some coins get created now, but over time we know its character will become deflationary: no new coins will be created, and some will be lost at times due to poor wallet management.

As a result, people will chose to spend other currency in preference to spending bitcoin. This is self-reinforcing. The infrastructure will not be in place to use it on the odd occasion that someone wanted to.

You could create a blockchain currency which had a natural and continuous rate of inflation, to encourage people to spend it. You could bootstrap this by mutualising it across an industry. e.g. imagine if the largest datacentre groups got together to create ModestlyInflationaryCoin, and then said they would offer discounts to customers who paid in ModestlyInflationaryCoin, as a means of bootstrapping it. Other groups might start to use it, and it would stay in circulation because people would want to be rid of it once they had it.

Even if such a currency existed, it would probably be short-lived. /Once it was bootstrapped/, its stakeholders would have strong incentive to change its contract to be non-inflationary. Making that change would convert their holdings from Bad Money to Good Money, and as a result the character it would significantly increase its value.

But the datacentre groups could then mutualise a new currency in place of the old one. It is possible that there is a virtuous loop here, and that there will be a race to quality in currencies in our future, grown from how easy it is to create new currencies. We might start to see the identity of currencies a bit more like the way we see futures contracts in our current era.

More like Solana… Eth fees are also way too high.

A bit more detail on the subject of historical coinage and the place of gold in it:

https://acoup.blog/2025/01/03/collections-coinage-and-the-ty...

I suspect Ransomware is a key part of its value

Everything is a speculative asset.

Your marriage is a speculative asset that your wife doesn't cheat on you in future and actually loves you.

S&P is a speculative asset that it will perform like it has been performing in last 30 years.

USD is a speculative asset on US not going bankrupt.

Your career is speculative asset that you don't get fired tomorrow and you can find another job if you do get fired.

Bitcoin is a speculative asset that a decentralized cryptocurrency is better than relying on coins issued by bankruptable nations.

You are a speculative asset of your ego.

Society needs at least some inflation for things to keep moving, but an individual usually wants the opposite.

The elected government serves the society of its citizens, while inventors and holders of unofficial currencies are individuals who ultimately serve only themselves.

There is a legitimate role for both things: to have some non-inflationary things that serve as a store-of-value, and then some inflationary things to serve as regular currency.

It is worth emphasising here: non-inflationary currency does not grow its value, so it would be unusual for people to want to put their wealth exclusively into store-of-value. Rather, most people will want a mix of inflationary-currency, store-of-value, and investment in growth-generating businesses.

When people talk about wanting to use bitcoin as a day-to-day currency, I feel like they are missing the best benefit if could offer us.

We already have effective day-to-day currencies. But we have not had a reliable store of value. The US, UK and Australia each have a history of denying ownership of gold when it suits them, which is when people need it most.

The lack of reliable store-of-wealth has made it too-easy for governments to fleece wealth-generating people in order to buy votes. This is not the long-term strategic path, but it creates a race-to-the-bottom due to short-term incentives. Perhaps blockchain will change that, by allowing the creation of an easily accessed utility that sits beyond the easy influence of the nation state.

To be effective it does not need to be perfect, just better than the options we have now. It has been encouraging to me to see the CCP struggling with blockchain, and then outlawing it because they cannot control it.

Humans didn't have the technology to build a decentralized currency for 3000 years. That tech was invented only 17 years back

3000 years from now what would be the store of value would be the question to ask.

I mean, what I'm about is really the same, just the other way round. Countries usually erase zeroes after hyperinflation adds them, cryptocoins can just add extra zeroes due to deflation. No change in value, just higher granularity.

The rest left me puzzled, can you elaborate? Why should the money holder do anything productive? Why getting richer and richer becomes something bad when we go crypto?

Sure, all you have to do is compute until the heat-death of the universe. No proof of work needed!

Sorry what?

Yes. First I buy bitcoin from the X, then I transfer it to my bitcoin wallet.

Next I transfer it to kraken, convert it to Monero and deposit it on my drug market of choice.

It used to be simpler but this is how I do it nowadays.

What? People buy food with bitcoin all the time …

8% is huge

Lightning transactions are instant

I'm fine with letting decentralized currency maturing for say, 300 years, in some small corner of the world, before letting it loose on the rest of us.

Lightning transactions are instant and near zero cost …

There have been stores which accepted bitcoin as payment. Webhallen.com is an electronics store in Sweden which at least used to accept bitcoin (not sure if they still do).

As a general rule it's not very convenient to do so though since the value can fluctuate. (Which naturally all currencies do, but it would be kind of like paying with USD in the EU. You could do that, but most stores are not interested in the extra hassle of keeping track of multiple currencies.)

It is also not uncommon for services like VPN or IPTV streaming ("pirate streaming") providers to accept crypto.

> Why should the money holder do anything productive? Why getting richer and richer becomes something bad when we go crypto?

This question works better the other way round. Why should people that do all the work and take all the investment risks to make the riches get continually decreasing returns on their efforts whilst the people that sit and HODL get continually increasing returns on doing nothing?

Yeah, that’s true. We invest in a lot of things, hoping for future value. But I guess I still treat those differently. I only hold enough USD for upcoming purchases. And I struggle to understand how investing in my marriage is speculative. For a variety of reasons I can’t (or wouldn’t want to) manage that risk like I would in normal speculative investment. I can’t hedge, size up, size down.

So I think I’m missing something. I feel like you’re suggesting that we should be more comfortable speculating because we do it all the time, but I’m not seeing how those are all the same.

An argument can be made that if there is a 100% reliable, maybe even deflationary, store of value, it would have a similar effect to currency deflation: since it is worth more tomorrow, then you are disincentivized to spend your wealth, and not spending wealth (not investing it in some value-producing enterprises, buying things and services) seems like a recipe for stagnation and wealth gap increase.

If bitcoin utility is storing value outside of tax jurisdiction and moving it without obstruction, globally – then the question is Why should that even matter? Former is every rich person's dream, and latter enables a lot of things, good or bad.

A counter-example: can you come up to a coffee shop with a gold collectible coin, chew a piece out, and use it to pay for your coffee directly? You need a proxy in form of a pawn shop for that.

Instruments are instruments, if it is not used for every day business transactions doesn't mean it is not heavily ab-used inside it's niche

In my POV it's all the same since all of them are essentially beliefs with various probabilities.

You don't know what will happen in any of the cases. You just choose to believe one more over the other based on what has happened in the past.

>Everything is a speculative asset. >Your marriage is a speculative asset that your wife doesn't cheat on you in future and actually loves you.

Spouses are not very fungible though, not that I've ever tried ! ...

> very few people other than dedicated miners download a full blockchain

I'm gonna have to ask for evidence on this one, I strongly believe most full nodes are not mining pools. http://bitdash.io/ says there are ~10,000 running full nodes, yet there are only ~100 mining pools that have produced a block in recent history: https://miningpoolstats.stream/bitcoin

> 1TB is already too large to keep on your phone or laptop

On your phone, sure. But my desktop already has a few TB of storage. But not 8. And Bitcoin Cash supporters usually seem to indicate that they'd increase it beyond 8 if the 8mb blocks filled up.

> Why getting richer and richer becomes something bad when we go crypto?

Is that sarcasm? It discourages any type of economic activity.

Why would someone invest into or try to start a business when you can become richer by just sitting on your money pile with no risk.

Artificially constricting the supply of money in a non static economy is a bad idea. Like the gold standard just much worse.

That would be terrible for the economy and everyone not sitting on piles of bitcoin.

It’s hard to imagine a financial instrument that’s less suited to be used as an actual currency than bitcoin. Even going back to the gold standard would be a better idea.

Spouse is an idea in your head though. Very hard to measure. Because she used not to be a spouse before getting married right. One day she became spouse. So it's an idea. Not tangible.

I was literally thinking of this article!

I think that's right. At some level, any anticipation of a future state has to be measurable in some kind of confidence level.

I suppose where I get lost is that, at least subjectively, I end up treating different anticipated return distributions differently. I want a mixture of risks, both in terms of their covariance and the absolute properties.

When I think of "speculation", I am intentionally shaping only a small portion of my personal portfolio toward high risk, high reward activities. And I only really feel comfortable doing that because a larger fraction of my personal risk is in safer vehicles.

Atop that, I also think a lot about liquidity time bounds. I want access to a reasonable amount of highly-liquid, low-risk investments. I need that flexibility to be safe in the event that I need to buy something.

To my eye at least, I qualitatively differentiate between speculative investments and these liquid/low risk ones. If I felt I only had one kind of risk, I would seek out the other in some proportion.

Because starting a business might still lead to higher returns for you than hoping that your money will be worth more.

One thing i’ve always wondered: If something like Bitcoin was the only currency, then it would be like a direct mapping of 21 Million Bitcoin <-> all global economic activity and goods and services. In that case, shouldn’t its price be relatively stable, and might actually even go down sometimes? Like in big natural disasters increasing the cost of certain goods?

I’m not a crypto zealot, but I’m not a big believer in the idea that the economy needs to be stimulated and I need to be forced to spend my money before it loses its value. I just want to buy what I need or really want.

And in the hypothetical case of having a mapping of “all economic activity” <-> “21M payment units”, then the relative stability of this money might still make investments more lucrative than just hoping for my money to be worth slightly more tomorrow. In this hypothetical scenario it would be more like “my money is worth 1000 eggs today, next month it might be 1001 (if others grow the economy) or 999 (if something unforeseen happens halfway across the globe). So if an investment looks like it might yield the value of 1100 eggs there would still be people to take the risk of investing, no?

kraken must have some from of KYC, right?!? meaning that you're buying drugs online without trying to be anonymous. impressive...

Took a lot of scrolling to find a mention of Bitcoin Cash.

I used to believe in Bitcoin in the beginning, but the high fees make it impractical to use as everyday currency.

Bitcoin Cash is much closer to what I had hoped Bitcoin would become. It’s the same as Bitcoin, except that it ideologically split exactly for the reason that some people wanted it to behave more like an actual currency, while others invented the “digital gold” narrative.

I used to run nodes to “contribute”, but it’s cumbersome and does not really contribute to decentralization .

The only ones who need to have full blockchain nodes are the miners, and for them it’s just another disk in their data center.

>Your marriage is a speculative asset that your wife doesn't cheat on you in future and actually loves you.

Because you wouldn't do either?

Because people are willing to pay more. Why should I make money because my house is worth more than it was? Because people are willing to pay more. There's no more "should" required than that.

Just to be clear, people who have downvoted you are likely doing so because of tone and attitude, not because they're pro-bitcoin.

They're founded on the shared illusion that the money they create is worth something, and the fact that this works pretty well is arguably one of the most important achievements of human civilization.

Nothing in this world is certain/forever, but that doesn't mean you should completely disregard probability distributions of possible futures.

I said "Don't try to reason with them. Their minds are as closed as a MAGA."

Um... if the only legal tender around was an asset with fixed supply, people holding it wouldn't be willing to pay more, (or invest it in making more stuff) that's the whole point.

It’s barely illegal where I live.

And what was your point?

My point is: Don't try to reason with them. Their minds are as closed as a MAGA.

Any type of economic activity in USD involves paying rent or huge surplus to those who hoarded real estate (which doesn’t go away any soon). I don’t see the big difference here. Doesn’t mean it’s a good thing, but let’s at least apply the arguments symmetrically.

Why would someone invest into or try to start a business when you can become richer by just sitting on your _property_ pile with no risk.

Yeah, I guess.

Risks vary based on the mitigation strategy and the time available for preparation. Only S&P can distantly resemble the volatility of a pure speculative asset which depends on psychology and the amount of extra money in the markets. But even S&P depends on a lot of factors which don't trigger overnight for a knowledgeable investor. It's a snowball but not an avalanche.

BTC has shown itself magically profitable indeed, but its value could only be kept by the ability of holders to keep the asset. Most marriages and some jobs will endure even in the toughest times.

> might still

It might. It would be significantly less likely. Basic economics. Unless you don’t think that most people are at least marginally rational..

> In that case, shouldn’t its price be relatively stable, and might actually even go down sometimes

That’s true only if there is no economic growth. Gold standard had a similar problem.

> Your marriage is a speculative asset

I’m guessing that you had a divorce /and/ that I know the reason why she left you

But you see my point, right? I'm challenging the question of "why should someone buy that thing for more than the seller paid for it?" The answer is: because the new buyer is willing to pay that for it.

You are a smart man.

> I don’t see the big difference here

Well that implies that you are more or less economically illiterate. I’m not talking about property and even renting residential/commercial property (as relatively safe as it is) does provide an actual service.

Anyway.. a very basic example, imagine you have $1000000, you can:

- keep it under your bed and lose 2% every year

- invest it into real estate etc. and make e.g. 4% every year.

- invest into the stock market and make 6%.

Now with a deflationary currency like bitcoin (or gold back in the mid to late 1800s) you can just hoard it and conservatively make 2-3% every year* invest into safe bonds and gain another 3-4%. Business would need to grow at an extremely fast pace to be able to attract much capital in such an environment.

* of course it’s only hypothetical. You’d need the economy to grow and productivity to increase YoY for this. That would be unlikely in any economy that used Bitcoin as its primary currency.

And I was talking about property. Replying about something else made no sense here.