If you look at the past, you can see a series of dots that silently connect the arguments of economic theorists with what happens today and will happen in the future. At first glance it may seem trivial but it is not, considering that when a theory was formulated, the future was yet to arrive. This is the case of Bitcoin and its legal tender in El Salvador. In the 1970s, F. A. Hayek wrote a wonderful essay in which he imagined a way in which the free market could express itself in all his creativity and innovation: A Choice in Currency. In that essay he tried to convey the number 1 idea about how the free market works: replacement, not destruction.
The recognition of Bitcoin as legal currency means that it can be used directly in the State and that there is no taxation on the capital gain. This part was the one most relaunched by the media which therefore show that they are unprepared on the subject and they haven't understood its significance. El Salvador is not the first State in which taxes are not paid on BTC capital gain, so if we limited ourselves to that, the news would be of little importance. In fact, capital gain taxes were already lifted in Portugal. The crux of the matter is the legal tender status, because this has a number of economic and macroeconomic implications. The State has to accept Bitcoin as a tool for paying taxes and that the Salvadoran central bank will be able to save Bitcoin as a reserve.
One of the main accusations against Bitcoin had been that since it is not a currency there is no State that validates it with its economy. In addition to this, one has always been forced to convert BTC to pay taxes. Henceforth this attack on Bitcoin is no longer valid and this can only have a positive effect in reducing skepticism.
This news potentially has very important geopolitical implications, the economies of developing states and South America in particular have often found themselves crushed by debt because they have found themselves having to repay a foreign debt denominated in dollars. Just look at the history of Argentina that defaults almost every day. Bitcoin, on the other hand, has a deflationary nature and for this reason it tends to strengthen against the dollar, for the first time in history having the debt denominated in dollars could become an advantage for poor States rather than a gun aimed at their heads. It is no coincidence that a few days after the announcement of El Salvador also Paraguay, Mexico and Panama announced projects in this direction. If this experiment should give good results, it is difficult to think that there is no domino effect on many other States.
As for the internal economy, then, just think of what Bitcoin mining represented for cities that were dead and economically resurrected thanks to it. And here too we learn that El Salvador wants to follow the same pattern. Not to mention the ease with which citizenship can be acquired. Did all this simplicity exist before with the dollar or with fiat money in general?
But the really important thing, now individuals will have the right to choose and, above all, they will be incentivized to use BTC daily, fueling mass adoption exponentially. If Hanyecz represented the turning point of the Gartner Cycle between the "innovators" and "early adopters" phase, the law presented by Bukele will mark the turning point between "early adopters" and "early majority". Like all technologies, Bitcoin is also going through the aforementioned cycle and, wanting to replace one of the most important and most "managed" technologies in the social sphere, the obstacles it faces are enormous and continuous.
It is no coincidence that in the last hearing of the US Senate Banking Committee one senator in particular put forward the idea of banning Bitcoin in all those jurisdictions with the dollar as their official currency. That's why Hayek was right: command/control destroys society and ends up destroying itself; the free market instead replaces what is obsolete. In this sense, those who oppose Bitcoin's relentlessness with force and violence, but more particularly the will of human beings to improve their living standards through more precious and practical technological solutions, are not so different from those in the past who opposed electricity to favor candle makers. In this regard, it is useful to read Frederic Bastiat's essay, The Candlemakers' Petition. Historically, we could compare El Salvador signing Bitcoin into legal tender law to the Red Flag Act, when it was understood that cars would become the wave of the future despite the fact that most people were scared of it and still prefer horses.
In conclusion, that of El Salvador is a fascinating experiment that deserves all the attention of the case. It will also be very important to follow the trend of use in everyday life, because are already emerging people that complain about Bitcoin high fees and muddled second layers. Lightning Network is not user friendly. At all. Neither is business friendly. As time passes by, people will be incentivized to study the topic because Bitcoin narrative is fascinating. Moreover, having a tool that allows permissionless, borderless, timeless, censorshipless transactions in today privacy ripped world, is fundamental. Therefore, as people sought alternatives to fiat money, they will seek alternative to a crippled Bitcoin. That is the main reason that they will turn to Bitcoin Cash: simple, easy to use and, most of all, it is Bitcoin as designed in Satoshi's white paper. Bitcoin Cash community must take this period of public crypto enthusiasm to continue the developing of its environment. Bitcoin Verde, SmartBCH and, most of all, everyday life adoption (something that Bitcoin core lacks) are some developments that give Bitcoin Cash the upper hand in the long run.
Why are we so confident? Because Luddism has no place in history and innovation and human creativity will always replace obsolete technologies which don't satisfies human desires and needs. Crypto world isn't immune to this phenomenon.
What you have written is very true and that Bitcoin could help nations but unfortunately in El Salvador people will be forced to use custodian services and once you use custodian services you have lost all advantages that Bitcoin could have offered you.
In El Salvador since people only earn around $10 a day, they will be forced to always use custodian services, and once the whole population is into custodian services those custodians will start the process of either printing Bitcoin or at least fractional reserve Bitcoin.
Bitcoin is growing in price thanks to having a 21 million limit but everyone around the world only uses custodian services that limit won't exist any longer. Unfortunately only a very small group of people will be able to use Bitcoin using the chain and as such able to verify that they hold real Bitcoin.
If I live in El Salvador and I earn $10 a day I don't be able to verify that my custodian actually holds Bitcoin and that the Bitcoin that my application account shows is not printed Bitcoin by them or by orders of the government. The only choice for poor people will be to trust that your custodian won't print Bitcoin once they have enough users. Or exchange my satoshis for real dollars.
Salvadorians will be able to test if their custodian holds real Bitcoin by withdrawing to dollars because only the US can print them, without funds to chain and pay the high fees, or exchange those satoshis into other altcoins that are cheaper to use like Bitcoin Cash.
I am pretty sure that Salvadorians will understand that they are not holding real Bitcoin if they are using Strike or Wallet of Satoshi and I am pretty sure that they will withdraw to real Dollars or other altcoins soon after recognizing that.
And I am pretty sure that Bitcoin maxis won't be able to pass custodian services as adoption for much longer either.
There are 6 million Salvadorians that will switch to Bitcoin Cash once they discover the lies of Bitcoin Core. And people like me will make sure Salvadorians know the truth about Bitcoin Cash.