Last week was one of total uproar, where El Salvador was the first country to pass legislation making Bitcoin Core BTC legal currency, which was done by turning this action into a revolution in a country with more than 6M inhabitants and 70% population without access to banking facilities.
...to be clear, Bitcoin Core (BTC) can be used anywhere in the country, whether to pay bills, electricity or even buy a hamburger at MacDonalds.
History of El Salvador
Before going further, it's good to understand a little bit of the history of El Salvador.
El Salvador is a country in Central America with the official language Spanish and its capital is the city of San Salvador. Its population is constituted (estimated at more than 6.8 M inhabitants), 86% mestizo, 12% white and the other half composed of blacks and indigenous people. The country is mostly Christian, with a Roman Catholic and Protestant religion.
Its political constitution is led by President Nayib Bukele in a system of government that also involves Vice President Félix Ulloa. It was a Spanish colony until September 18, 1821 when independence was declared. In 1823 the Federal Republic of Central America was proclaimed.
Its official currency is the US dollar and recently approved Bitcoin Core (BTC) as its currency (becoming the first country in the world to adopt the currency). It should be noted that the colon was the territory's currency until it was abolished in 2001 and the dollar introduced as currency.
Economy
The economy in El Salvador is split between agriculture (10%), industry (30%) and other services (59%). The population in linear poverty is decreasing and is situated at 29% and a labor mass of about 2 million workers. Its main industries are:
food processing, beverages, petroleum, chemicals, fertilizer, textiles, furniture, light metals.
The country exports coffee, sugar, textiles, gold, chemicals, electricity, iron and much more to the United States, Guatemala, Honduras and Nicaragua.
But it also imports consumables, fuel, oil or even food and has the United States, Guatemala, Mexico, Colombia, China and countries in the Eurozone.
Remittances involving El Salvador
The country is the leader when it comes to remittances per capita, the equivalent of saying that almost everything that exports, every house in the country has some remittances coming from abroad, mainly from the United States.This ability to receive money from abroad in remittances in El Salvador peaked in 2006 when it hit over $3.3 billion.This ability to receive money has also benefited greatly in reducing absolute poverty in the country which in 2005, which was 20% in the period, and without remittances this same number would have increased to 37%.In addition to the advantages of receiving remittances, a lack of productivity in the work sector was also noted, as most residents did not accept to receive less than what the family sends abroad.
But will BTC be better for the people
There are advantages for El Salvador having adopted Bitcoin Core (BTC) such as speed in processing and fees for remittances sent to the country, taking into account that banks or financial means charge a lot for these services.
...but is it beneficial?
To receive remittances, it will be very good for the country to have more money inflow entering transactions quickly and safely, as these will be directly carried out by the author and received by the relative who needs it in the country. But it must also be foreseen that for the same person who receives the value, the money may be reduced, since in order to be able to move it (withdraw), he will have to pay exorbitant fees in the BTC blockchain.
For example, for the average citizen the movement costs will be a bit pulled as transaction fees on the BTC blockchain are not very user-friendly, and, taking into account that more than 70% of El Salvadorians do not have a bank account, the adoption of BTC can exponentially increase the number of people using legal financial means in the country.
For the government, it will be good to secure its value reserves in BTC and reduce any kind of inflation in the territory.
Using Bitcoin Cash for Daily Payments
Of course there has been a modeling and acceptance of BTC as the official currency but we have to consider certain mitigations when it comes for using Bitcoin for fast, low-cost, daily transactions. Considering BCH as digital money, it makes more sense to bet on currency for payments.
BTC is not for low-cost, daily payments like paying for a soda or something smaller than that could cost less than twenty cents of the dollar. It will be a martyrdom to want to pay tiny amounts using Bitcoin Core, but using Bitcoin Cash these payments are possible. It should be noted that we have to accept BTC as digital gold (Maxis said so), but Bitcoin Cash is peer-to-peer electronic cash for payments.
This approach of Bitcoin Cash as digital cash is more efficient in a territory where there is no official native money (hence the use of the US dollar and now the BTC), making the asset not work as a payment currency. Of course they will refer the matter to the lightning network, but why use this tool while there is already a currency that really works for peer-to-peer payments without needing to be centralized?
Concluding
Although it is a great novelty to have the BTC as the official currency of a nation, it is necessary to keep a firm head, as this currency (treated as a store of value) honestly does not work in a country where the common citizen lives below $3.2. This amount only pays for a transaction on the blockchain network while you can use Bitcoin Cash which has rates that are much more favorable to the quiet citizen who will receive money from remittances from their family members abroad.
It is necessary to be faithful to the wishes of the people and also ensure that when using the world's first decentralized currency, such as Bitcoin Core (BTC), as Legal in the territory, the people do not pay a high price for it. The high price would be to see the people receiving money from abroad, but when using the same, its real value in the market would register a drop in purchasing power and this would only benefit the state and service providers who will be managers of the centralized portfolios they will obtain the Bitcoin Core (BTC) that enters in the country.
Bitcoin Cash serves as a digital payment currency with super reduced rates that are a great appetizer for its adoption and there's no reason not to approach it as digital cash, after all, those who don't like to pay much smaller amounts to move money, banks charge a lot, BTC too but Bitcoin Cash doesn't!
Disclaimer: personal thought and ideas on the article, based in real facts and resources.
Find me on noise.cash:
...'Read also 8 of my other Articles about BCH😎:
True ❤️❤️❤️❤️