That’s the actual president of El Salvador announcing plans for a new
Bitcoin City in the country.
Even those who reckon they know everything about the crazy world of cryptocurrency and
where it’s going - and we all know a guy like that - probably wouldn’t have seen this coming.
It’ll have everything you’d expect from a regular city
except here it’s all centred around digital currency - quite literally.
If that didn’t sound crazy enough the whole place is going to be powered by a
massive volcano that sits right next to it.
Surely nothing to worry about there.
It looks and sounds completely mad, but in a country that is already running on Bitcoin,
could this crazy idea for a new city actually happen?
In 2021 El Salvador became the first country in the world to adopt Bitcoin as legal tender.
That means the cryptocurrency can be exchanged for goods and services in the same way as US Dollars,
which had been the country’s only official currency for 20 years.
So far it hasn’t been a roaring success - and we’ll explain why a little later on.
The move was brought about by this guy, El Salvador’s President Nayib Bukele.
“President Trump is very nice and cool and I’m nice and cool too.
We both use Twitter a lot so… we’ll get along.”
As if the currency thing wasn’t groundbreaking enough, he now plans
to double down on his crypto gamble in quite spectacular fashion with this - Bitcoin City.
Due to be built in the south-eastern region of La Unión, not far from the border with Honduras,
the city is designed in the shape of a circle, resembling a giant coin.
The main streets will all radiate outwards from the centre - a bit
like a bike wheel or the arrondissements of Paris.
But instead of the Arc de Triomphe,
here you’ll find a central plaza covered in a giant Bitcoin logo.
It’ll have “digital amenities” like galleries for Non-Fungible Tokens or NFTs,
museums on the history of money, and of course everyone will be encouraged to use Bitcoin.
That'll either sound either really exciting or incredibly tedious,
depending on where you stand on all this.
To attract more investment there are even plans to scrap all taxes apart from VAT,
with money from that used to develop the city further and keep it maintained.
Now despite how it may appear, Bitcoin City is not
just aimed at people who are into crypto and don’t like paying tax.
They can bring the family too - the intention is for it to be an entirely liveable city.
Half of it will be allocated to housing,
there’s schools, shops, a light rail system, airport, seaport, green spaces, you name it.
We don’t really know what any of this will look like yet as there are only
a few renderings in existence at the moment - but it’s all there in the plan.
OK, I know what you’re thinking and let’s not
delay it any longer - where does the volcano come in?
Well, the idea is that placing the city right next to this one,
named Conchagua, will enable it to be used as a power source.
Bitcoin City will tap into the geothermal energy that the volcano produces below ground,
funnelling it into the grid.
It works like this. When water is heated underground by the volcano
it makes lots of steam - enough to turn a turbine, which generates electricity.
Because it creates virtually no emissions and the volcano provides a constant source of heat,
it’s a completely renewable and clean - if somewhat terrifying - form of energy.
As for what the plan is if the volcano erupts,
there are no confirmed reports of it ever doing so.
It’s fair to say the new citizens of Bitcoin City will be hoping that status quo continues.
Now before you dismiss this plan as just a load of hot air, the Salvadoran government
is apparently already doing something similar in another part of the country.
A little further to the west, steam from the Tecapa volcano is being used to carry
out Bitcoin mining - a process that has come under fire for the amount of energy it requires.
Bitcoin mining involves getting powerful computer systems to
solve complex mathematical sums, which creates new units of currency that are
then entered into circulation on this thing called the blockchain.
We could go on, but this is a construction channel and to be
honest I don’t really know what I’ve just said, so let’s stop it there.
The point is the more computing power you have the
more likely you are to solve one of these puzzles and make lots of money.
Unsurprisingly, a lot of this mining will be going on at Bitcoin City too,
and because the energy will be coming from the volcano,
it’s a lot cleaner than in other places where the electricity is generated using fossil fuels.
Although this way of making energy has been done on a small scale elsewhere,
getting it to work at a city-wide level will be a significant challenge.
In fact, a lot of questions remain unanswered about the whole project, and details from the
government have been a bit scarce, despite it due to start construction this year.
What we do know is that the public infrastructure is set to cost about 300,000 Bitcoins.
That sounds like a bargain, until you realise one Bitcoin was worth over $40,000
at the time this video was produced. Do the math and that works out at around $12.6BN.
Money for construction won’t just come from VAT; to get it up and running El
Salvador plans to issue USD $1BN in bonds backed by the virtual currency,
with a big chunk of the cash gained from that going towards the project.
To predict whether this scheme could be a success then, perhaps we should look at
how well the roll-out of Bitcoin in El Salvador has gone so far.
Is the president's big bet paying off? Well, not exactly - at least not yet.
The dollar remains by far the most popular method of payment and there have been several protests.
A lot of Salvadorans simply don’t understand how to use Bitcoin properly or feel it has
been forced on them, and many are concerned about how quickly things can fluctuate.
Because it’s a digital currency - without a physical form like coins and notes
or a central bank or authority - the value of Bitcoin can rise and fall dramatically.
In 2022 so far there have been more downs than ups, including a 9% drop in a single day.
So having it as a form of legal tender and investing
tens of millions of public dollars in crypto - which the government here has
done according to some reports - is a bit bold, to put it mildly.
Despite the difficult start, Bitcoin City proves that El Salvador is not ready to
cash out on its crypto experiment - in fact quite the opposite.
And with Bukele’s party now in full charge of the government after what some called a
power grab in May 2021, there’s certainly enough political will to get it done.
While the crypto crowd might see this as a city built just for them,
the way it’s being powered may attract interest from elsewhere.
Maybe other volcanic countries needing new ways to generate clean power will find themselves
looking to El Salvador for advice in years to come, regardless of their stance on Bitcoin.
Whether it goes on to rise or fall like the currency itself,
keeping an eye on this unique scheme is something we’ll be investing our time in for sure.
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