The Bitcoin Beach Project
The Bitcoin Beach Project started with Californian Michael Peterson in 2019.
He discovered El Zonte beach and its surf break nearly 20 years ago and loved the area so much that he and his family started to split their time between El Salvador and the US in 2016. They got involved in charity works (especially gang prevention) and through a church contact a mysterious and still anonymous donor offered them to contribute. . . with a condition.
The money would be given in BTC (bitcoins) and could not be changed back to any fiat currency. Sounds technical but fiat currency is money unbacked by any commodity (like gold or silver). Like the US Dollar, or the Euro, or pretty much any currency around the world. Plainly explained, money was offered in BTC but it could not be converted to Dollars, Euros, Pesos, Rupiahs or Yuans.
Peterson was first suspicious but finally agreed and started the Bitcoin Project with the village’s youth. El Salvador is gang infested and many youngs join as early as age 10. They are locally called ‘maras’ and the most infamous one is Mara Salvatrucha (MS-13), funded in Los Angeles, USA, over 50 years ago by Salvadoran immigrants. So the Project started to offer community-focused jobs, paid in BTC, as an alternative to joining a mara.
Then the pandemic came, and they started giving an universal basic income to the 500 or so families in the village. The general stores that accepted BTC would receive payment and deliver the goods. Priceless in lock down times. Convincing the stores and the people to use and accept BTC was not easy and without Peterson’s long term involvement with the local community, it might have proved impossible. Nowadays many of those stores income is more than half in BTC.
In the cash economy of bankless El Zonte, the BTC project brought, besides a much needed extra income, a better way for families to manage their savings and a hugely more convenient channel to receive remittances from relatives abroad. Using BTC transaction networks bypasses the intermediaries fees on both sides, is fast, low-cost, and avoids end-users the half day trip to the nearest bank… and the associated risks of traveling back with a lump of cash on public transports. This is huge in El Salvador, where around 20% of the GDP comes from personal remittances (according to World Bank data) and 70% of the people lives outside the banking system.
2 years now into the project, there are 22 community programs running (such as garbage collection and life guards duties) and a few hundred people receive their salaries in BTC, directly employed by the project or by local & foreign BTC-involved companies. But as much as the first users saw their BTC assets gain value, started holding onto them and made long term plans of better education or larger businesses, the volubility of the digital currency was, and still is, a concern.
How? First they’ve discouraged from the start any investor fever, like borrowing from relatives or selling the family’s land. The prices in the village are still in US Dollars, which serves as reference. And even if some are now reluctant to accept BTC and charge more for it, most understand the game, hold on to their coins when low, and delay the big buys until high again. The shifts in the BTC value are changing the mentalities in a society that is still pretty much living by the day. They understand that the BTC market is in a bull (buying) phase even it takes occasional spectacular dumps. What will happen if it changes to a bear (selling) market?
They might loose big, even all. That is the current reality. But fiat currencies can go bust, too. They have no intrinsic value, since they are not backed by gold or any other tangible asset since the Nixon era.
One thing is certain though, the El Zonte experiment with BTC is spreading countrywise now (see Is Bitcoin legal in El Salvador?), and Paraguay, Panama, Brazil, Mexico, Colombia and Argentina have shown interest. Is this the dawn of the Bitcoin revolution?
Hold my wallet!
Where is Bitcoin Beach?
Bitcoin Beach is in the village of El Zonte, on El Salvador’s coast. The small Central American country, sandwiched between Guatemala to the west and Honduras to the north and east, has the whole of its coast on the Pacific Ocean, to the south. El Zonte is at about 30 km/ 21 mi southwest of the capital, San Salvador.
Is Bitcoin legal in El Salvador?
Not only BTC (bitcoin) is legal in El Salvador, but it will become a legal tender in early September 2021.
The “Ley Bitcoin” (Bitcoin Law), voted June 9 2021 in the Asamblea Legislativa (legislative Assembly), will be effective 90 days thereafter and state that “all economic agents must accept bitcoins”.
There is still legal work to be done before the September deadline, notably regarding exemptions for the sectors of the population that lack access to the technology needed to accept BTC. At that date, the country will 3 legal currencies, BTC, Colón Salvadoreño, and the US Dollar, which will the reference currency. The BTC official rate of exchange to the US Dollar will be freely determined by the market and updated in real time by the financial regulators.
The government will create a 150 million US Dollars trust fund that will automatically convert BTC to US$ for the persons who do not wish to keep the digital currency. It also plans to create a governmental digital wallet, which implementation has been awarded to Jack Mallers, the developer of the Zap and Strike digital transaction apps.
Even with all the buzz and excitement that the adoption of the new law provoked worldwide, not everybody is happy, though. According to a poll conducted by El Salvador’s Chamber of Commerce and Industry and cited by CNN, 96% of those surveyed didn’t agree with the obligation to accept BTC. Moreover, and unsurprisingly, the FMI warned El Salvador of the “risks” of adopting BTC as legal currency and saw “macroeconomic, financial and legal issues” in doing so. It’s sidekick, the World Bank, flatly denied its technical assistance to help the country make the law effective, contrary to the BCIE (Central American Bank for Economic Integration), which offered its legal expertise and, according to El Salvador’s Ministry of Finance, to fund the BTC to US Dollar government trust.
President Nayib Bukele also announced the creation of a BTC mining hub in the proximity of a new well of 95MW that state owned geothermal energy company laGeoSV dug recently. About 25% of the Central American country’s electricity is produced with the zero emissions energy, and it is considered that about 2/3 of the country’s geothermal potential is yet to be harnessed. By offering cheap, green electricity on top of a pioneer legal framework to the energy-intensive crypto currency industry, El Salvador’s digital bet is going in full gear.
What can you buy with Bitcoin in Bitcoin Beach?
Apart from the water, electricity & cable tv bills, you can buy your meal, your smoothie, your hotel, your groceries and even your hair cut with Bitcoins in Bitcoin Beach.
Fancy a pupusa, the local corn tortilla, similar to the Colombian or Venezuelan arepa? No problem, several pupuserías will gladly receive the satoshi you send them (a satoshi is a millionth BTC, or 35 cents of a US Dollar at the time of writing). And the trend is extending beyond El Zonte. Punta Mango, 3 hours down the coast to the east, is another beach where BTC acceptance is on the rise in grocery stores, restaurants and food trucks.
Bitcoin ATM in Bitcoin Beach
Yes there’s a “bitcoin atm” in El Zonte, the Bitcoin Beach village. The place is getting ever more popular since the parliament gave the green light to the use of BTC as co-legal tender.
According to an article in Guatemalan press outlet Prensa Libre, the daily transactions in the ATM have gone up 8 fold since the law was passed. Some travel over 100 km/ 60 mi to change their dollars into BTC.
The ATM is situated inside the Cafe Cocoa, in El Zonte’s main street and is operated by Athena, a Chicago-based company that is expanding all over the Americas.
Is Bitcoin Beach safe?
El Zonte, or Bitcoin Beach is in El Salvador, which has a bad reputation safety-wise, just like his Central American neighbors. Between all the natural disasters such as earthquakes, hurricanes, volcanic eruptions, landslides, floods, and the political ones, such as civil wars, guerrilla, dictatorships and corruption, it seems that some malevolent power lurks over the country’s destiny.
However, the civil war is long over (1992), and even if the crime rate is scary, especially the homicide rate, it is drug and gang related, occurs mainly in San Salvador and the bigger cities, and seldom involve tourists.
Travelers constantly praise the friendliness and helpfulness of Salvadorans, who are extremely very well mannered and eager to share the raw beauty of their country.
Use caution in the bigger cities and public transport and don’t flash your valuables around. Always ask the locals about the no-go areas, dos & don’ts, and don’t ever try to resist if mugged.
How do I get to Bitcoin Beach?
To get to Bitcoin Beach, first you’ll have to get into El Salvador. The Comalapa International Airport is 50 km / 30 mi east of Bitcoin Beach and most likely will be your port of entry.
Bitcoin Beach and the airport are connected through the carretera del litoral, (coast highway) CA2. You can travel by bus to La Libertad and then on to El Zonte, but it is not recommended as buses are usually packed and a theft hazard. The current Covid capacity reductions rules might have changed the situation, but we can only assume that queues and travel times have grown accordingly.
The other options are to rent a car, grab a regular or private taxi or better, especially if it’s your first time around in the country, to have your hotel/guest house organize the transfer. In any case, except the bus, it should take around a hour and 25 US$ to get to Bitcoin Beach.
How can I join the Bitcoin Project?
If you can travel to El Salvador, go and visit them. There are less picturesque places where to participate in a a good cause! If you cannot travel but have some satoshis to spare, just donate.
In either case, visit the project website for more details. You will find a more in-depth description of their work, the people involved, and future plans for Bitcoin Beach.
For those even further interested in this movement and other aspects of the BTC phenomenon, check the coindesk.com podcast of a june 11 2021 interview with Mike Peterson, founder of the Bitcoin Project.