El Salvador's approach to Bitcoin is banking system 2.0

Bukele made Bitcoin legal tender, which is good, but unfortunately, people in El Salvador won't be able to afford on-chain fees. Salvadorians will be forced to use custodian services; the government Chivo wallet is just another PayPal, but this time a state sponsor, PayPal. It will have your financial data, so the government will know exactly how much you made and when. Say goodbye to privacy with the Chivo app.

Chivo wallet means zero privacy for Salvadorians because the government will have a history of all the transactions people make. As such, people will lose their privacy, and that will also mean that people will disclose their income to the exact penny to the government, which in turn means that you will be forced to pay every penny of taxes on money that you earn.

Salvadorians will receive a $30 bonus from the government; at least we know that at first, the government won't print that bonus, and it is real Bitcoin because the government is going to buy Bitcoin to give it to the citizens. This bonus will be to incentivize the usage of the government application. You can use other apps, but if you want your bonus, you must sign up using the government app.

The government has citizens' data, like your photos and IDs, but it doesn't know exactly how much money you have or make because cash allows for privacy. That privacy will be gone if people use more and more government applications, so in terms of privacy and tax collection, the government will have another tool for surveillance and tax collection because it will have the records to collect taxes.

I don't have a problem with paying taxes; the problem is that the possibility for an authoritarian administration is always possible, and they could go and use the data you provide to collect unfair taxation in the future. Taxes are never a problem until it is too late and you can't afford to pay taxes because your government went overboard and decided that from now on, you need to pay 75% instead of just 50%. Once they have the data on you and your earnings, it is too late for you to resist; you will have very few options, and your choices will be to pay whatever amount they say or go to jail and even be killed happens to John McAfee.

Suppose the citizens of El Salvador adopt more and more government apps. In that case, they will make themselves vulnerable to a possible bitcoin fractional reserve system within the app or even Bitcoin printing by a future administration. To avoid this, citizens must withdraw into dollar bills or other crypto assets using LN exchanges.

Using services like Wallet of Satoshi, Strike, Bluewallet and the El Salvador government application called Chivo is not Bitcoin, and it is not using Lightning Network either. Using those applications is just like using another bank application where you have no control over your funds and are putting your money at risk by trusting third parties. Using Chivo is not the same as using Bitcoin or Lightning Network is just using yet another bank service like PayPal, Coinbase, or any other banking service.

For Salvadorians to use Bitcoin or Bitcoin Lightning Network, they will need to pay transaction fees that can be more than what Salvadorians earn for a whole day of work. $10 a day is the salary of Salvadorians, and to open and close a Bitocin LN channel, you need at least $20 to open and at least $10 to leave as a commit or reserve fee. Sending Bitcoin on-chain will be financially prohibited for Salvadorians. Bitcoin government sympathizers are promoting custodial services as if they were using Bitcoin; they are not; they are just using PayPal bank account service.

A way to refuse the law will be to say that whatever they have is not Bitcoin because they are using custodian services.

As a citizen, I refused to use your custodian services because that is a service, not Bitcoin. I don't care about the law, and I won't accept your payment in custodian services. You must send me your payment on-chain if you want me to get your money. You will also have to pay for my transaction fee so that I can move my funds or send payments to a channel I can control the private keys, and every Salvadorian should do that to make sure they are holding real Bitcoin.

If you buy $5 of my tomatoes, you will have to send me $5 plus the cost of a transaction fee so that I can move my funds without costing me; otherwise, I want dollars. Your custodian wallet is not Bitcoin to me, so I refused, and I don't care what the law says so that you can pay with dollars.

Also, Bukele plans to give users free data to use their bank account service because it is not a wallet; it is an account you will hold with the Chivo banking application.

Here are the good things about the law.

But the last thing the president said is that other altcoins are not prohibited. Still, they will be optional for the people to use them if they feel like it, which is huge because it means that citizens will be able to exchange their custodian or PayPal Bitocin for the real deal or just other altcoins like Bitcoin Cash. At least Salvadorians who are smart enough to understand cryptocurrencies can use other alternatives.

Salvadorians won't be forced to hold Bitcoin or token dollars. People in El Salvador can exchange into other altcoins, which is the only good thing about this. Those who don't believe in Bitcoin bankers' coins can get the real deal legally.

Banking 2.0

It only means that in the future, the banks and governments will know all of your financial data, and it will be practically like living in a Horwalian end where the citizen doesn't have any saying. And banking 2.0 is linked with CBDC. A digital bank that the government has access to is just a privacy nightmare and much more, and Salvadorians are getting a system like that with a custodian service. The all-seeing eye of the government storylines from movies is becoming a reality.

Custodians mean you don't hold your private keys, so it is not your crypto.

Just because Chivo is a government-sponsored bank service doesn't mean it can't go under like Celsius. It is nothing more than the worst because the application could lose the funds. The government could force citizens to accept payments using the app that could end up not being backed by real bitcoin. A default on the Chivo wallet will be worst for Salvadorians because they will be forced to accept it even if it is not the real deal.