@Melis 15 June 2021

Contra Monetary Luddism: From Bitcoin Legal Tender in El Salvador to Bitcoin Cash Innovation

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 Henceforth this attack on Bitcoin is no longer valid and this can only have a positive effect in reducing skepticism.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? https://twitter.com/nayibbukele/status/1402714926800674827 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. https://en.wikipedia.org/wiki/Red_flag_traffic_laws#Red_flag_law_in_the_United_States 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. https://twitter.com/BitcoinCashCity 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.