The world’s first “crypto city” is coming closer to El Salvador, and its success could lead to cities and countries taking the same route.
With no small amount of fanfare, the El Salvadorian President Nayib Bukele revealed this month that starting in 2022, the country will build a “bitcoin city” at the base of Conchagua, an oceanside volcano.
The city will be supported by Bitcoin-backed bonds, with construction starting 2 months after funding. The announcement came at the end of a week-long bitcoin event, after which Bukele advertised the place as ideal for both residents and tourists, with restaurants, shops, homes, public transportation, an airport and other standard resources.
The central plaza will be in the shape of a bitcoin logo.
However, securing the bitcoin network requires a trade-off with energy consumption. In order to support the vast amounts of power needed to power the city, El Salvador will make use of its natural energy sources, i.e. the volcano. While a city at the base of a volcano may sound awesome, Conchagua plays a practical purpose: to power the network and verifying events on the blockchain using geothermal energy.
The geothermal system will extract hot groundwater and convert it to steam, which in turn powers turbines which convert energy in electricity to power bitcoin mining.
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The country already supports a quarter of its power grid with geothermal energy, which it harvests from a handful of the country’s 20 active volcanoes. In October, the government set up a prototype for the crypto city’s system at the base of Tecapa volcano, though results haven’t been optimal so far. While geothermal energy is cleaner than fossil fuels, it could impact the natural habitat surrounding the site.
Still, fiat-funded legacy media haven’t reported on this potentially world-altering development in the best light. Regardless, El Salvador is aggressively pursuing a bitcoin first agenda, after having made bitcoin legal tender alongside the US dollar – requiring that all businesses accept the crypto earlier this fall. Citizens can still instantly convert bitcoin to fiat if they so choose, but naturally, the prevalence of bitcoin in the country hasn’t happened in a vacuum.
Having gone down this route, bitcoin adoption in El Salvador now threatens $400 million in losses per year for US banks. Beyond that, a potentially cascading effect of adoption could send traditional banks in a death spiral.
The country’s choices have prompted the rest of the world to inquire as to where cryptocurrencies fit in with the financial system. While constructive debates are great for adoption, it might be some time before countries view Bitcoin in the same absolutist light as El Salvador.
Regardless, if successful, the Volcano bitcoin bond represents a pivotal moment in modern financial history, opening the door to country-wide Bitcoin adoption.
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