El Salvador’s adoption of bitcoin as legal tender received a tremendous amount of international media attention. This attention has been a welcomed change from ten years of Bitcoin obituaries and claims of Ponzi schemes and the like. Even so, there are myths out there about El Salvador’s momentous new law that deserve busting.
Myth one: The citizens of El Salvador are not sophisticated enough to use Bitcoin.
This is complete rot. The wallet that the government commissioned to handle trading crashed in the first hours of its launch not because it was broken; but because it became too popular too fast for the app stores to keep up.
The government offered $30 in BTC just for the download and that caught on very quickly. Salvadorans are highly sophisticated at dealing with multiple currencies and exchange rates — toggling between official and gray market rates — and will adapt quickly. In this, they are far more sophisticated than the typical American who believes that the Canadian dollar is somehow mispriced.
Myth two: Bitcoin is too volatile to be a good currency.
Maybe that line worked five years ago, but anyone can look at the price charts and, therefore, the long-run trajectory. This currency has been declared dead hundreds of times and it keeps not dying. On the contrary, it is widely seen as a deflationary token, which is to say that it grows in value relative to the goods and services it purchases.
That could be the biggest experiment of all: what a deflationary currency does for a nation’s economy and culture. We’ve not really seen this since the late 19th century, when it was widely expected that a sound currency grows more valuable over time. My prediction is that it will do very well, incentivizing savings and encouraging investment.
Myth three: Bitcoin can’t compete with standard remittance technology.
This, again, is completely incorrect. Western Union is slow, expensive and embeds lots of ...