[iliekcomputers]

I never really understood what incentive a government had to recognize bitcoin as legal tender. There are no real benefits over something like UPI in terms of user UX. It takes things out of the government's hands, as it's harder to print money.

[thesausageking]

El Salvador is a USD-based economy and does not have their own currency. This means they're at the whims of the US Federal Reserve, which they have representation with. And any USD reserves that are abroad can be seized by the US, as Afghanistan ($7B seized) and Russia ($300B seized) learned recently.

Bukele is promoting BTC as a way to attract talent and capital, and also to modernize El Salvador's economy. Similar to how Africa skipped landlines and jumped right to mobile phones. It remains to be seen how effective that part is. But, either way, it gives El Salvador some more independence from the US and sovereignty in a world where alliances are shifting fast.

[paxys]

> And any USD reserves that are abroad can be seized by the US

That doesn't have anything to do with USD. Any reserves (or really any asset) that is outside the country's jurisdiction can be seized by a foreign one. El Salvador could as easily lose all their Bitcoin reserves if they held them in a Coinbase wallet, for example.

[makomk]

It absolutely does have to do with USD. Other than actual physical dollar bills, which do not scale and are not practical to use for long-distance international transactions, the only form that real redeemable USD can exist in is deposits with the Fed which can be seized by the US. This is a fundamental property of using the US dollar as your country's currency.

[JumpCrisscross]

> absolutely does have to do with USD

Comment you're responding to is saying this is not unique to U.S. dollars. All currencies are controlled by their issuing sovereigns.

Separately, the idea that Bitcoin is unsanctionable is laughable. It may require enabling legislation. But marking wallets as sanctioned, and threatening any wallets that transact with it to be either similarly sanctioned or subject to heightened scrutiny, would diminish the value of those coins relative to coins which can be freely traded with anyone. Given the public nature of the blockchain, enforcement would likely be easier than e.g. enforcing an Iranian oil embargo.

[giaour]

> But marking wallets as sanctioned, and threatening any wallets that transact with it to be either similarly sanctioned or subject to heightened scrutiny, would diminish the value of those coins relative to coins which can be freely traded with anyone

Doesn't this already happen? Basically any bitcoin that comes out of a tumbler or any wallet address that has transacted with tumbled coins is banned on KYC exchanges: https://sethforprivacy.com/posts/fungibility-graveyard/

[randomhodler84]

It’s why it’s so important to taint and mix the history of all coins. Given enough time, eventually all UTXOs are tainted, thus nothing is tainted. Most of the supply of BTC can be linked to SR taint from early 2010s. Doesn’t matter now.

Litecoin just introduced a sidechain called (mimblewimble extension blocks) MWEB, it permits “cut-through” transactions where UTXOs can mix. It looks like a single UTXO on the main chain. Very Fungible!

[walrus01]

> as Afghanistan ($7B seized)

This is because the Taliban is a terrorist organization that captured the capitol, not a government. You don't give $7bn to al qaeda, ISIS or lashkar-e-taiba either.

You can thank Trump and Pompeo and their plan to withdraw 100% of US forces by a fixed deadline for that (removing all support for the afghan government's armed forces), and Biden for going along with the foolish plan.

[anonporridge]

I really don't want to defend the Taliban, but the core of any government is the group that maintains a monopoly on violence in a realm.

The pre-Taliban government of Afghanistan as well as the US puppet state in 2021 failed in this core responsibility, and consequently lost the right to govern. Whether or not the Taliban will produce a stable or good government is a different question. I personally weep for those forced to live under it's rule.

It would make about as much sense to say the United States in 1783 was not a government, but a terrorist organization that attacked the rightful British government of the American colonies. The British lost the right to govern when they failed to maintain their monopoly on violence in the American colonies, and a new governmental organization formed from the ashes of the war that proved it.

[pessimizer]

The Taliban is not a terrorist organization. The Taliban was the government of the country of Afghanistan before we invaded it, and it is the government of the country of Afghanistan after we've left. "Terrorism" isn't a euphemism for killing US soldiers. If they're invading your country, the proper word is "patriotism."

[ceejayoz]

The Taliban is both. I agree that killing invading foreign soldiers on your own soil isn't terrorism, but that's not where the Taliban stops. Plenty of attacks on their own populace over the last two decades.

[daemoens]

While all this is true, his point still stands. The US still has the ability to seize your country's money at will.

[ForHackernews]

...if you keep it in US banks (because you can't trust your own corrupt local financial system).

[anonporridge]

Almost all USD now is electronic, and control of movement of those dollars is entirely controlled by the single master node of Washington D.C.

Russia defaulted on their USD loans, not because they don't have dollars, but because the US won't allow them to pay.

[giaour]

Russia also defaulted because it can't pay (in any currency) parties that are barred by sanctions from transacting with the Russian government. It wouldn't matter if Russia were able to ship paper USD to their creditors; the creditors cannot accept that payment.

[guelo]

I would also blame Trump's relentless political attacks about Obama returning Iran's assets. And Biden's political cowardice after the Afghan collapse. All of it is reducing trust in US's supposed rules-based institutions. US is speedrunning through the fall of an empire

[daemoens]

Calm down with the theatrics. Money continues to flow into the US during this current crisis because the US is still seen as the most stable place in the world. Rich people around the world wouldn't be rushing to park their money here if they thought the US was going to collapse.

[0xB31B1B]

Bukele is promoting BTC as a sort of crony capitalism/kleptocrat play. This is not a high minded “advancing society” play.

[fny]

It's a patently stupid strategy over the long run though. Abandonment of ones own currency is suicide regardless of whether it's USD or Bitcoin. And clearly, Bitcoin did not help El Salvador improve it's financing situation: the Bitcoin bond they tried to push was a complete flop. Argentina has a way better model: they control their money, they've defaulted repeatedly, the currency has magically remained stable, and everyone comes back after each default.

Another massive issue is that as a currency with an inelastic supply Bitcoin price volatility is guaranteed to remain unstable. This is not a desirable feature for any currency.

[thesausageking]

I'm not sure why you view Argentina as a "better model". They're in the middle of (another) currency crisis right now which is causing their economy to collapse and social unrest:

https://www.wsj.com/articles/argentina-names-new-economy-min...

The annual inflation rate in Argentina is ~76%. It's basically impossible to do business in Pesos when it's devaluing so quickly. Every contract programmer in Argentina is doing business in Bitcoin or stablecoins because they would lose ~40-60% if they were paid in USD from abroad. People are stashing savings dollars (and Bitcoin) to keep it out of government hands and protect it from becoming worthless.

[randomhodler84]

If historically your government has breached the trust of its people from careless money printing local currency, using a major world currency as your money is something to keep you honest.

Bitcoin is like this for all governments and currencies. It is honest true hard money that cannot be devalued by the money printers. It’s the hard money of last resort and you bet this will be more and more important as we lose trust for each other’s currency.

[jcranmer]

The wrong (but popular) answer is to say that this is a move to break El Salvador's reliance on the USD--the USD still remains legal tender in El Salvador, and from what I can tell, there is absolutely no movement whatsoever towards things like pricing in Bitcoin in lieu of USD or other steps that would insulate El Salvador from US monetary policy.

The charitable answer I would give is that Bukele hoped to attract cryptocurrency investors with the move, perhaps to supplement existing institutional investors who haven't been happy with some of Bukele's policies.

The uncharitable answer I would give is that Bukele is trying to innovate and translate core cryptocurrency strategies of extracting money from people's pockets into extracting money from El Salvador's citizens' pockets.

[JumpCrisscross]

> never really understood what incentive a government had to recognize bitcoin as legal tender

El Salvador is very corrupt, in the neighborhood of Sierra Leone and Algeria [1]. It is unclear to what degree the state has a monopoly on violence [2]. Bitcoin is a precedented dark money channel.

[1] https://www.transparency.org/en/cpi/2021/index/slv

[2] https://www.cfr.org/in-brief/why-has-gang-violence-spiked-el...

[Spellman]

The Libertarians would argue that the government not being able to print money is the feature and can build trust in the currency

[andrewmutz]

History has repeatedly shown that being able to print money is a critical tool during financial crises. No one likes their money being debased, but they like economic depressions even less.

There is a reason that nations have abandoned the gold standard.

[jkepler]

Gold's physical characteristics tended towards centralization. Centralizing gave the institutions controlling the gold strong incentives to allow debasement of gold-backed money, as it gave those institutions handsome profits and strong political control.

[randomhodler84]

History has repeated shown us that printing money in a crisis just makes it worse, eventually. Taking that away is hard, but honesty is the best policy, even if it hurts at first.

The reason we ditched the gold standard was for deviance. It’s very hard to fight wars if you can’t print the money. Ww1 ww2 Vietnam, Afghanistan, Iraq … try that on gold. Bitcoin = End of all war.

[daemoens]

I mean most wars happened before I the World Wars. Like the overwhelming majority of wars happened on a gold standard. Bitcoin would probably make us too poor for war though.

[aaaaaaaaata]

> Bitcoin would probably make us too poor for war though.

...?

[aaaaaaaaata]

Let a recession happen when we deserve one, so the depressions don't happen.

Holding back the floodgates until the problem is ready to kill everyone equally is stupid, and the opposite of a meritocracy.

[dragontamer]

But you could more easily "not print money" by making the Euro or US Dollar your currency.

[makomk]

As people have pointed out this means that the US or wherever can print money and controls your monetary policy, but that's actually the least of the problems. Euros and US Dollars in large quantities, and digitally transferrable versions of them, can essentially only exist as numbers in databases controlled by the US and EU government respectively. So by adopting them as your country's currency, you're effectively giving them control over your money. They get to decide whether it continues to exist, whether you get to access it, whether it gets transferred to some well-connected megacorporations in those countries that bribed your former leader into a dodgy deal... In short, it gives a whole bunch of control to powerful entities who have tended to use their powers in ways that have not been good for developing countries at all.

[Spellman]

Because then you're beholden to another country, which may be hostile to your country, and their money printer.

With Bitcoin, no one has control!

[ceejayoz]

> With Bitcoin, no one has control!

Well, until a little over 50% of the miners decide they don't like you.

Ethereum's fork proved "no one has control" is an illusion.

[jkepler]

Ethereum is not Bitcoin. Ethereum just showed the world Botcoin's unique value compared to Ethereum and the thousands of crypto projects so often conflated with Bitcoin.

The 2017 Bitcoin scaling wars proved that one can't simply change Bitcoin's consensus rules by majority control of the miners. I think at one point 80% of the miners were in favor of large blocks, yet they didn't have buy-in from the rest of the network participants (developers, regular users, merchants, exchanges).

Bitcoin has really robust decentralization.

[chrisco255]

Bitcoin also famously forked into BTC and BCH. And Ethereum Classic is still ticking away printing blocks. Forks are a feature, not a bug.

[ForHackernews]

Forks promise an infinite, ever-growing supply of deflationary digital scarcity.

[aaaaaaaaata]

Stop repeating this.

The ETH fork happened before the people on HN were even following cryptocurrency happenings.

That's how early in the project a fork was done — the project would never survive another at this stage of maturity.

And everyone knows that.

So stop repeating it?

[ceejayoz]

That’s silly. HN is where I heard about it. The collapse of the DAO got many, many comments. Just one of the threads: https://news.ycombinator.com/item?id=11921900

[eftychis]

If you are using another country's currency you are tied to their monetary and indirectly fiscal policy which most likely does not align to yours.

In fact trying to get a neutral or deflationary currency is a no brainer. Especially, if you have a small banking system/network.

Of course there are gotchas.

[toomuchtodo]

You are always tied to the monetary and fiscal policy of the majority of a currency’s participants.

Can you make your own currency? Of course. How will you back it? Who will trust it? Who governs those policies? These are people problems people want to solve without people (crypto folks), with expected results (speed running financial regulation). They came at the king (reserve currencies) and missed by a mile.

[louloulou]

The US dollar was el Salvador's currency. They are trying to diversify away from that total dependence.

[schemescape]

El Salvador already uses the US dollar, but it has no control over what the US does to its money supply.

[altarius]

Correct, but historically the price had been stable and predictable.

Imo you're just trading "beholden to the usgovt" with "beholden to miners, whales and wall street" plus wild price swings. Former or latter may be preferable for certain reasons, but for fiscal stability or day-to-day use the choice seems obvious to me.

[dragontamer]

I'm pretty sure that if the US Government wanted to be a BTC whale to mess up El Salvador, we would be able to do so and barely break a sweat.

The price of BTC, even today, seems very easy to manipulate.

[jdminhbg]

Sure, but the ECB or Federal Reserve can print money, and you don't control them. If your goal is a mathematically guaranteed money supply (this would not be my goal, fwiw), BTC is superior.

[avrionov]

The supply is mathematically guaranteed, but the price fluctuates more than the dollar.

[imtringued]

I am not sure what libertarian really means but the idea that the rich of the past deserve to control the present and future strikes me as secretly authoritarian.

[anonporridge]

Except in bitcoin, having a large share from the past doesn't directly confer control in the present, since it's not a proof of stake system.

If it's actually used as a currency, a person with a large stockpile will gradually lose their relative share over time as they consume, since you don't generate interest on it.

It's also confusing to me that people can hold the cognitive dissonance of defending a post gold standard, infinitely inflatable currency with a negative view income inequality, which only started increasing drastically after we abandoned the gold standard.

An inflationary currency benefits the wealthy asset owners more than the working class almost by design. Asset owners get to borrow against their assets and pay it back in a depreciating currency, while at the same time getting to use a psychological magic trick to make poorly educated employees think they're getting a pay raise, when in real terms they're getting a pay cut.

If I was a greedy rich person who wanted to make sure I could never lose my wealth, I would build a financial system on a currency that inflates away by design.

[daemoens]

A small amount of inflation (1-2% per year) is required or else you'd get deflation. Deflation is an almost guarenteed death spiral for an economy as everything grindes to a halt because not spending makes you richer.

[aaaaaaaaata]

This is something you might hear in a grammar school economics class, or a Federal Reserve presentation, but I don't think it's a hard fact.

Why are you presenting it as such?

[daemoens]

Because it has occurred multiple times in multiple countries. It is a hard fact.

[chrisco255]

What does that even mean? Is there any fiat currency system you can point to where elite insiders don't get special access to the money printer before us plebs do?

[vlunkr]

You could have stopped after "I am not sure what libertarian really means"

[tokai]

Might even call it crypto-fascism lol

[Geee]

In addition, bitcoin limits government power. Most autocracies fund their operations with inflation. Even in liberal democracies, deficit spending funded with inflation is not really what people have voted for. People are fine with taxes to the extent they have voted for them, but that should be enough. Inflation is a way to covertly siphon wealth from citizens on top of tax revenues.

[JumpCrisscross]

> autocracies fund their operations with inflation

There is limited evidence for connecting countries' foreign debt levels to their degree of democratization [1].

More pointedly, there is ample evidence--millenia of it!--for empires on commodity money waging war and whatnot and having a fine time of it.

> deficit spending funded with inflation is not really what people have voted for

Deficit spending / bond issuance is voted on at multiple levels of government practically every cycle. People have voted for this. Because the alternative is austerity, and fanatical governments that pursue that for its own sake tend to get replaced.

[1] https://d1wqtxts1xzle7.cloudfront.net/68966375/bf00224681202...

[Geee]

Well, you are right in that people usually do vote for more government spending. The problem exists in all kinds of governments.

Anyway, my point was that bitcoin can limit government spending and protect individuals against inflation due to government spending. It doesn't mean that a rich nation couldn't wage war.

[randomhodler84]

It would be deeply unpopular as it could only be funded by austerity at home, and it would be very short.

I believe Bitcoin standard world is post war. It is uneconomical, and that hits the people very hard very quickly. No home propaganda could convince the people it was just…

[overtonwhy]

Presumably people in the government got bribed. Did they also make their banking system crypto friendly?

[el-salvador]

> Did they also make their banking system crypto friendly?

El Salvador banks don't exchange or accept bitcoin as deposit. Some of them accept bitcoin for loan payments, via an external payment processor.