Around the world, bitcoin has a mixed reputation.
This marks a sharp change in bitcoins reputation on the global stage.
And El Salvador clearly has a need to receive funds fast.
Remittances totaledover 20% of GDP in 2019.
A software app known as a wallet manages the cryptocurrency as needed.
Such wallets are safeguarded on phones and protected by passwords or biometric mechanisms like fingerprints.
It’s free, every week, in your inbox.
Recipients of bitcoin realize their funds by connecting to the internet.
Once bitcoin has been received, there are multiple ways to exchange cryptocurrency for cash.
Other Latin American politicians have sincecalled forthe adoption of bitcoin as legal tender.
We know the unbanked face tremendous challenges in bothsaving and accumulating wealth.
Those without a bank account are discouraged from saving for at least two reasons.
First, holding cash is risky.
Second, savers are rewarded by receiving interest on their money.
Without this incentive, there is little upside to saving.
But there arefirmsthat allow bitcoin holders to receive interest on their cryptocurrency.
The downsides
Adopting bitcoin as legal tender is not without its downsides.
But I dont have all of my savings in bitcoin either.
If I did, my reaction would be very different.
There are roughly2,000 walletscontaining more than 1,000 bitcoins each.
Another issue El Salvadorians and other adopters will face is the inherent deflationary design of bitcoin.
The supply of traditional currencies such as the US dollar can be changed as economic conditions warrant.
Americas central bankers manage the supply of money to stimulate, or slow, the economy as needed.
And historically the supply of US dollars has increased to reflect population growth.
By contrast, the total supply of bitcoin isfixed at 21 million coins.
At the time of this writing, only some 2.2 million bitcoins are left to be mined.
Prices, as expressed in bitcoin, will inevitably fall over time.
This has already happened with those lucky enough to havepurchased bitcoin before 2010when it cost less than one dollar.
Finally, there are mounting concerns about bitcoinsenvironmental impactto consider.
By design, stablecoins such asTetherare fixed at the price of one US dollar.
