Feature Article Travel Diary of Bitcoin Nation El Salvador

Discovering Bitcoin Nation A Travel Diary of El Salvador's Crypto Revolution

Original | Jonathan Martin, CoinDesk

Translation | Wu said blockchain

Original link:

https://www.coindesk.com/consensus-magazine/2023/08/18/el-salvador-diary-lightning-is-key-to-bitcoin-adoption/?utm_medium=social&utm_source=onecryptofeed&utm_coupon=& utm_campaign=headlines

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This week, while I was traveling around El Salvador, I met two enthusiastic individuals who are dedicated to accelerating the adoption of Bitcoin and helping foreign investors engage in Bitcoin-related businesses.

The current market price of Bitcoin is approximately $29,500, which puts owning a whole Bitcoin out of reach for most people. However, each Bitcoin can be divided into 100 million subunits called “satoshis,” making it possible for anyone to convert fiat currency into Bitcoin with smaller amounts. Bitcoin investors refer to investing with smaller amounts as “stacking sats.” This, combined with integration with second-layer (L2) solutions like the Lightning Network, is seen by many as a way to increase Bitcoin use cases and enhance its role as a medium of exchange.

I had lunch with a Salvadoran entrepreneur named Edgar Borja, who is the founder of a company called K1, and I spoke to him about the project he is building. Borja invented an ATM that supports the Lightning Network, which significantly reduces the friction costs of converting fiat to Bitcoin compared to other Bitcoin gateways that use the first layer (L1) blockchain.

Just as we sat down for lunch, Borja took out a small metal box with an LCD touchscreen from his backpack and placed it on the table. He plugged it into the wall and turned it on while explaining the technology it uses. This version of the device he brought only accepts coins and looks like a mini slot machine. He said K1 also sells another version of the device that accepts US dollar bills.

Image source: CoinDesk

Borja put a 5-cent coin into the coin slot, gently tapped the LCD screen a couple of times, and instructed me to align the QR code of my Lightning Network-enabled wallet (named Satoshi Wallet) with the built-in camera. Within seconds, the equivalent of 5 cents in satoshis arrived in my wallet. There were no fees for this transaction.

The Lightning Network allows for near-instant transactions, much like a bar tab, where people can exchange funds without using the slower underlying L1 Bitcoin network until the final settlement. The significant increase in speed and decrease in transaction costs make Bitcoin less cumbersome and more liquid, potentially making it a more easily accepted medium of exchange for regular users.

K1 sells its lightning network ATMs for $1,200 and does not charge any recurring fees thereafter. Business owners can choose whether or not to charge fees for using the device. K1 ATMs lower the barrier to entry for fiat to bitcoin conversion and may serve a larger market than the Athena ATM solution, which uses the L1 blockchain and incurs higher fees.

K1 has sold machines to businesses in 11 countries, including El Salvador, and Borja has the clearest roadmap for driving widespread adoption that I have seen.

Bitcoin Business for Enterprises

Before arriving in El Salvador, I contacted a lawyer named Carlos Miguel Rivas Carrillo, who is the secretary of the board of directors of the Bitcoin Association of El Salvador (ASOBITCOIN), to understand the process of starting a business here. The government of this country is actively attracting American entrepreneurs and investors and has created a very friendly business environment. ASOBITCOIN works closely with the government-approved Bitcoin Office to help investors obtain project approvals from relevant authorities.

Rivas is very knowledgeable about local Salvadoran laws and regulations and offered to help me set up a company. With the help of the lawyer, this process takes three to four days and costs $1,500-2,000. There is also a government fee of $300, and the minimum investment capital requirement is $2,000.

He told me that Salvadoran banks do not yet support bitcoin as they are still integrated with traditional systems like SWIFT. To conduct business transactions using bitcoin, non-bank service providers accept this digital commodity and issue a bank draft, which can be deposited into a regular bank account. After this meeting, I gained a better understanding of starting a business in El Salvador as a foreigner.

My work experience mainly involves being an entrepreneur. Before attending the Wharton School of Business, I founded two successful real estate companies in Austin, Texas. I came to El Salvador with the intention of finding opportunities in the emerging bitcoin economy, including the possibility of using bitcoin in real estate and coffee farming. Things that we take for granted in the United States, such as multiple listing services (MLS) that include all currently listed properties and recent attractiveness, do not exist here. Similarly, the property ownership chain is not transparent; centralized records are sometimes incorrect, and lawsuits by individuals claiming property liens or rights may delay the investment process for up to a year.

Several people, including Rivas, mentioned how blockchain technology can be used to address existing problems and eliminate some existing inefficiencies in the economy. These inefficiencies may create significant opportunities for enterprising entrepreneurs.

Bitcoin in Business

Wherever I go, I try to use bitcoin first to purchase goods, whether it’s using my Coinbase wallet or the Satoshi Wallet. I went shopping at a supermarket in my community and attempted to pay with bitcoin at the checkout. The cashier initially said the store accepted bitcoin and was busy pressing buttons on her computer, which looked like it had been around for five years or more. However, the components for the bitcoin point of sale system were not working. So, I could only pay with cash.

Image source: CoinDesk

As I explored the Presidential Plaza (one of the newest shopping centers in the country that is not yet fully developed), I attempted to use my Satoshi wallet multiple times. Neither the coffee shop nor the comic book store had a working Bitcoin point-of-sale (PoS) system. I ended up using my credit card twice, and the vendors used handheld BAC Credomatic scanners, which are commonly used in El Salvador for credit and debit card transactions. I’m not sure if these vendors have Bitcoin PoS devices.

In order to make it easier to use Bitcoin as a medium of exchange, these devices might need to add a third integration – the Lightning Network – to make it more intuitive and simple for vendors to accept Bitcoin. The barriers to widespread adoption exist on both sides of commercial transactions.

After spending over a week in El Salvador, I can see evidence of President Bukele’s vision for Bitcoin and the infrastructure he outlined. The inherent price volatility of Bitcoin might scare some people away, but this overlooks the volatility that comes with using fiat currencies due to inflation. My best estimate is that it will take a few more years for people to trust the Bitcoin network in the same way they trust the US dollar.

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