Pictured at right: Top locations by usage of Bitcoin over the Lightning Network as of today.
Three weeks after Bitcoin officially became legal tender in El Salvador, its President claims that 2.1 million Salvadorans -- a third of the entire country's population -- are "using" Bitcoin. And while it's probably true there's about that many downloads of the official Chivo Wallet app -- currently over 1 million from Google Play alone -- there's a small problem:
Evidence of actual usage, i.e. transacting with Bitcoin to buy goods and services, is scant.
That's my conclusion after referencing the Lightning Network Search and Analysis Engine, a layer built on top the Bitcoin network, and on which the Chivo Wallet runs. (Handy explanation for how that works below.) As of today, El Salvador isn't listed among its top locations of usage, and doesn't even show up in the engine's listings of usage by country.
BitcoinBeach, a Salvadoran beach town popular with international Bitcoin enthusiasts in El Salvador, currently only lists 55 nodes, i.e., payment points.
This is all, to put it technically, seriously sus.
Over 2 million Salvadorans now own Bitcoin -- anyone who downloads the Chivo Wallet gets $30 worth of free Bitcoin to spend -- yet somehow, not even 1% of them are using it on a regular basis. And El Salvador's government has been pushing Bitcoin for everyday use, i.e. buying groceries, paying employees, etc.
My old Linden Lab buddy John "Pathfinder" Lester, a Bitcoin supporter, tells me that's it's too early to declare El Salvador's experiment with Bitcoin a failure.
"Time will tell," as he puts it. "It hasn't even been a month since everything went live (September 7th)."
That could be, and l'll be sure to check back next month. But my strong suspicion is almost everyone in El Salvador who owns Bitcoin is doing exactly what almost every Bitcoin owner around the world does with it: HODL-ing.
As for why El Salvador's government is actually interested in Bitcoin, this from my interview with UC Irvine currency expert Bill Maurer from last June:
"El Salvador's adoption of Bitcoin has more to do with efforts there and elsewhere in Latin America to attract wealthy techno-libertarian investors than anything about financial inclusion or remittances (which is what the official line has been)," he tells me, and gives me more backstory.
"Concurrent with the declaration that Bitcoin is legal tender, El Salvador's president also laid out the welcome mat for crypto-entrepreneurs willing to invest in the country... for a certain amount in Bitcoin, you get permanent legal residency. Given the high barriers to actually using Bitcoin for anything--no one will accept it in payment, and you need to be pretty tech savvy to buy and send it-- I don't see it becoming a pathway for remittances, like the president has been touting. The real angle here is providing a tax-free, safe haven for the ultrawealthy Bitcoin bros to take it easy and rake in more crypto-millions in the tropics."
Emphasis mine! Meantime, more info on the Lightning Network from Pathfinder:
"Lightning channels are how nodes in lightning network are interconnected. The channels form a web, with each channel providing different levels of liquidity and different routes across the network. People sending payments across the lightning network share both nodes and lightning channels to move funds across the network.
"So it flows like this:
"1) John wants to send Jill some Bitcoin over the Lightning Network. 2) John opens his lightning wallet, which is connected to a particular node. 3) John puts in Jill's lightning receiving address and tells his wallet to sent the funds. 4) The node that John is connected to queries the network to find out the shortest route across the network to reach the node that Jill's wallet is connected to. 5) The funds move across the network using the lightning channels.
"... The network is deliberately opaque for privacy and censorship reasons, so you can't really query [the search engine] for things like 'show me all the transactions everyone is doing in geographic area xyz."
Much thanks to Pathfinder for the background!
What's happened 1 month since launch?
https://www.forbes.com/sites/theapothecary/2021/10/07/in-el-salvador-more-people-have-bitcoin-wallets-than-traditional-bank-accounts
Posted by: Pathfinder | Friday, October 08, 2021 at 02:59 PM
Path, this guy is only talking about total downloads of the app. Unless I missed it, he offered no evidence of *actual usage*.
Remember how in 2006 people created 2 million Second Life accounts and the press kept saying SL had 2 million "users" until Clay Shirky pointed out how that didn't make sense?
Posted by: Wagner James Au | Friday, October 08, 2021 at 03:42 PM