[ad_1]
In recent months, Central American country El Salvador has made headlines around the world following its announcement to make bitcoin legal tender, becoming the first country to do so. This has met with a mixed reaction from financial institutions, such as the World Bank and the International Monetary Fund, due to the historically volatile nature of cryptocurrency. However, El Salvador remains bullish and believes it will soon become the top new haven for Bitcoin.
In addition to implementing legislation making bitcoin legal tender, El Salvador has also announced that it will mine bitcoin in an environmentally friendly manner. By leveraging the untapped geothermal energy produced from the country’s volcanoes, El Salvador is seeking an economic boost through bitcoin mining. This article will focus on introducing bitcoin as legal tender, as well as the eco-friendly mining process, and how they can both profit in El Salvador.
Bitcoin law
On June 8, 2021, El Salvador became a pioneer in the world of Bitcoin by transmitting their “Bitcoin Law”(Bitcoin Law) through Congress, which allowed bitcoin to become legal tender in the Central American country as of September 7, 2021. In addition, the government continues to promote cryptocurrency by donating 30 $ bitcoin to citizens who sign up for their national digital wallet known as Chivo. Foreigners who invest three bitcoins in the country will also be granted residency in an effort to further promote El Salvador as a cryptocurrency-friendly destination.
Inevitably however, despite the fear of the potentially harmful environmental impact of bitcoin mining allaying, the promotion of bitcoin through the Bitcoin Law has led skeptics to call the passage of this law a gamble. , many believing that the country will now become a safe haven for money laundering and other types of financial crime. This was cited by the World Bank which rejected a request by El Salvador to help implement bitcoin as legal tender in June 2021.
Nonetheless, there is still a wide range of possibilities for the Bitcoin Law to help reduce poverty in El Salvador and have an overall beneficial impact on the Salvadoran economy. By temporarily ruling out the benefit of geothermal energy powering bitcoin mining in El Salvador, which will be mentioned later in this article, the main ways the new legislation has the potential to benefit El Salvador is to attract new ones. foreign investment and remove dependency. on USD.
Starting with the first, before the passage of the bill, the President of El Salvador, Nayib Bukele, said that bitcoin has a market capitalization of $ 680 billion, and if 1% of that amount is invested in El Salvador, this would increase the country’s GDP by 25%. This shows that, if El Salvador were to successfully become the Bitcoin capital on a global scale, the economic benefits would significantly improve the financial situation of the country. This investment attraction has already started, with several companies such as Athena Bitcoin, Strike and Paxful showing an interest in setting up operations in the country.
Additionally, it can be argued that passing the Bitcoin Law will reduce reliance on the USD. Currently, eight countries outside of the United States use the USD as their official currency. This was originally introduced to reduce currency risk, however, it has the negative consequence that these countries effectively subcontract their monetary policy to the United States Federal Reserve. By introducing bitcoin as legal tender with the USD, it helps reduce reliance on the USD, which currently lowers GDP and passes it on to the United States.
Geothermal energy mining
In recent years, cryptocurrency mining has come under heavy criticism for the negative impact its operations have on the environment. When it comes to bitcoin specifically, Bitcoin’s public ledger operates on a decentralized network called a blockchain, which is maintained around the world through a network of computers operated by miners.
The process of mining the Bitcoin network results in high power consumption due to the amount of energy required of mining rigs when verifying transactions by solving complex mathematical problems. This growing concern about how the environment is suffering from bitcoin mining has led countries to receive negative reviews, which has led the Chinese government to implement a mining ban for crypto. currencies in China with the aim of achieving carbon neutrality.
While this has led the miners to sell their equipment or move overseas to continue their practice elsewhere, one country that has recently received praise for its environmentally friendly bitcoin mining is El Salvador. In June 2021, President Bukele said he would use a state-owned geothermal power company to harness geothermal power from the country’s volcanoes when mining cryptocurrency. This renewable energy source offers a clean alternative to the generally harmful cryptocurrency mining found elsewhere.
So how will this benefit El Salvador? While there is a declining poverty rate, as the smallest country in Central America, El Salvador is recognized by the World Bank as a relatively poor nation. However, bitcoin mining could potentially be the way for the country to achieve economic growth. Bitcoin miners receive bitcoin payments as a reward for their work in verifying transactions. By harnessing clean and cheap geothermal energy, El Salvador has the potential to become a global mining hub, which will undoubtedly have a positive impact on the country’s economy.
In conclusion, it must be noted that the implementation of this legislation involves various risks, which can prove to be problematic for the country of El Salvador as well as for its citizens. The volatile nature of cryptocurrency can have a negative economic impact, putting the country in a worse financial position than it currently is. Additionally, its potential to be used for various types of financial crimes can tarnish both El Salvador and Bitcoin, making it synonymous with illicit behavior similar to the events of Silk Road, which has allowed the public to find out how crypto -currency can be used as a vehicle. for crime.
However, this argument was rejected by Bukele who took to Twitter to dismiss the notion, stating that the majority of money laundering in the world is still carried out using cash. Therefore, if the risk of financial crime is always present regardless of the currency, why not implement bitcoin when it has the potential to benefit the nation? Thanks to the increase in the number of investors, the reduction in dependence on the US dollar and the potential growth of El Salvador as an international mining hub through the use of energy geothermal. Either way, September 7, 2021 will be a historic day, which many will view with keen interest to see if the legislation will have the positive impact that Bukele believes it is capable of or if skeptics of the law will be right. .
This is a guest article by Seth Galia. The opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
[ad_2]
Source link