{"id":19949,"date":"2021-07-11T22:23:23","date_gmt":"2021-07-11T22:23:23","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=19949"},"modified":"2021-07-25T16:46:52","modified_gmt":"2021-07-25T16:46:52","slug":"el-salvador-bitcoin-bukele-scrambles-to-get-something-anything-into-place-by-7-september","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2021\/07\/11\/el-salvador-bitcoin-bukele-scrambles-to-get-something-anything-into-place-by-7-september\/","title":{"rendered":"El Salvador Bitcoin: Bukele scrambles to get something \u2014 anything \u2014 into place by 7 September"},"content":{"rendered":"

President Nayib Bukele has declared that Bitcoin shall be legal tender<\/a> in El Salvador, alongside US dollars! The Bitcoin Law<\/a> comes into effect on 7 September. Accepting Bitcoin will be mandatory.<\/i><\/p>\n

So far, it looks like Bukele will be getting everyone onto the government\u2019s official Chivo custodial wallet,<\/a> using that as an officially-supported payment system, and saying that\u2019s \u201cBitcoin.\u201d<\/p>\n

Even in the optimistic terms the Chivo project head is allegedly using … it doesn\u2019t sound like it\u2019s going to go so well.<\/p>\n

You might think it’s rank incompetence to release an official national payment system without an API … and you’d be correct.<\/p>\n

 <\/p>\n

\"\"<\/a><\/p>\n

This is President Bukele’s avatar on his official Twitter account,<\/a> not me being disrespectful.<\/i><\/small><\/p>\n

 <\/p>\n

How\u2019s Chivo going?<\/h3>\n

I was forwarded the following text, which was posted to a WhatsApp group. The text is of unconfirmed provenance, but the path I know of is reasonably trustworthy. I\u2019m treating this as unconfirmed, though the Salvadorans I ran it past found it quite plausible.<\/p>\n

I don\u2019t know who the \u201cI\u201d writing this text is, nor who \u201cLorenzo\u201d is \u2014 named as the head of the Chivo project. Update:<\/strong> Lorenzo Rey, of Dash Venezuela.<\/p>\n

El Salvador isn’t adopting the Strike wallet, they’re doing their own called Chivo, and licensing other, non-custodial wallets that they like.\u00a0 They are aware that Bitcoin isn’t ready for mass adoption, so are creating a custodial solution since so many people are technically illiterate and they don’t want tons of people losing their private keys and all the stuff that would be sure to happen if they tried to launch non-custodial.<\/p>\n

They’re creating a huge army of educators to go door to door to start teaching people, and are working out now what they’re going to train them with.\u00a0 Keep in mind they’re launching v1 on Sept 7 so they don’t have much time to get this into the hands of the whole country.\u00a0 What they’re trying to accomplish is pretty miraculous.<\/p>\n

Today I met with Lorenzo, the head of the Chivo project.\u00a0 He\u2019s actually Venezuelan and has lived in the U.S.\u00a0 Here\u2019s some important points from the conversation.<\/p>\n

V1 will be released Sept 7. They will have a V2 for sometime in October, with more features, but he\u2019s not at liberty to say.<\/p>\n

Chivo will ONLY have Bitcoin and USD. There are no fees to send in Chivo and no fees to buy BTC there either. They\u2019re aware that this will make it very difficult for other wallet systems to compete because they will presumably need to charge fees. However, they believe that as their people get comfortable with Bitcoin, they will want to start investing in or using other cryptos as well, and that\u2019s when the non-custodial wallets become important.<\/p>\n

Many companies are coming to them now offering Point-Of-Sale systems and want to integrate with Chivo. However Chivo will not have any public APIs in v1. Some of the POS systems claim they are already partnered with chain stores in El Salvador. These POS systems generally want to work with Chivo as it is, without blockchain transactions but instead just using the centralized database.<\/p>\n

He wasn\u2019t allowed to tell me if or when Chivo would use Lightning Network. However, he told me that their goal was to include both layer 1 and layer 2.<\/p>\n

They want ALL crypto companies of every type coming to do business in El Salvador, even though they are only making BTC legal tender.\u00a0 Within several months, they will make decisions about if and when to add other cryptos to the legal tender list. Meanwhile, they\u2019re all legal to operate in El Salvador.<\/p>\n

Oh two other things:<\/p>\n

    \n
  1. He thought it was a really good idea to put the government’s books on blockchain to prevent corruption but hasn’t heard any discussion about doing that.<\/li>\n
  2. He also hasn’t heard any discussion around El Salvador creating it’s own cryptocurrency or blockchain.<\/li>\n<\/ol>\n

    He also said that everything he told me could be considered to be on the public record, so feel free to use this info how you see fit.<\/p><\/blockquote>\n

    In the above text, \u201cboth layer 1 and layer 2\u201d would mean Bitcoin and the Lightning Network.<\/p>\n

    Bukele\u2019s problem: crypto doesn\u2019t work<\/h3>\n

    Bukele\u2019s team\u2019s biggest problem is: none of this stuff works.<\/p>\n

    As a payment system, crypto is still at the bunch of wires on a lab bench<\/a> stage. It\u2019s absolutely not a production-ready system usable by normal humans, and not just laser-eyed cultists.<\/p>\n

    Bitcoin is expensive and clogged, and Lightning is even less functional in practice.<\/a><\/p>\n

    Bukele thought Jack Mallers’ (Strike) and Mike Peterson’s (Bitcoin Beach) systems were sufficient proofs of concept that Bitcoin could work as an electronic payment system at scale.<\/p>\n

    It looks like Bukele fell for a rigged demo. He bought Mallers\u2019 and Peterson\u2019s pitch that Bitcoin and Lightning was a functional electronic payment system \u2014 and now he’s stuck trying to make anything about this work.<\/p>\n

    Bukele’s team would have a hard time even with 100% phone and Internet coverage in El Salvador. A 2020 survey put El Salvador’s Internet penetration at 45%, and 10% in rural areas. [IDB<\/i><\/a>] Though a recent survey (below) is a little more promising.<\/p>\n

    Chivo, you\u2019re our only hope<\/h3>\n

    Using Chivo as the layer where everything interesting happens is the only way Bukele\u2019s Bitcoin scheme has any hope of working.<\/p>\n

    Bitcoins and dollars may go into and out of Chivo \u2014 with whatever degree of friction \u2014 but the payments action at scale would be entirely inside the centralised database.<\/p>\n

    Setting up this sort of national payment provider might even be a good and useful idea \u2014 if it wasn\u2019t being implemented by a clown show.<\/p>\n

    As far as I know, even the banks in El Salvador haven’t been told yet how they’re supposed to handle bitcoins. Chivo on a phone at each teller window? Who knows?<\/p>\n

    There\u2019s no external API (application programming interface<\/a>), so nobody can just interface their company or bank computers to Chivo in the obvious manner. Declaring an official electronic payment system that nobody else can interface to<\/em> is not up to release standards.<\/p>\n

    UFG survey: How do Salvadorans feel about Bitcoin?<\/h3>\n

    Bukele makes grand gestures that are audacious, striking and only just legal. He gets away with it because he’s very popular.<\/p>\n

    So far, Bukele isn’t selling Bitcoin very well.<\/p>\n

    Universidad Francisco Gavidia surveyed 1,233 people (error bars +\/- 2.8%), taking questionnaires house-to-house nationwide, between 1 and 4 July 2021, for their magazine Disruptiva. More than three-quarters thought making Bitcoin legal tender was a bad idea. [Disruptiva<\/i><\/a>, in Spanish; <\/i>report<\/i><\/a>, PDF, in Spanish<\/i>]<\/p>\n

    The Bitcoin Law:<\/p>\n