Stock Trading - Entry 23

You read the subtitle right. There is a country whose President is diverting electricity from at least one of its powerplants to its bitcoin mining operation. But it doesn't stop there! They are altering laws to use Bitcoin (either directly or by converting to actual currencies) to fund the building of a new city.

It took me a few weeks to calm my brain down so it could think anything other than WTF regarding this subject..

Now that I can think more like a blockchain investor, here we go.

Volcanos are good candidates for producing geothermal energy - very green, very sustainable. According to this article, El Salvador's Tecapa Volcano has a state-owned enterprise that is doing just that. No biggie, but that same article (along with many others) say the state is sending a percentage of all the electricity produced there to a Bitcoin mining operation.

Makes a bit of sense from an operations-only perspective. I mean, you have computers to mine Bitcoin that need electricity, so give it to them. The state then earns Bitcoin, which can be exchanged for other currencies that the state can then use. To do this, they apparently use(d) Bitfinex.

Adding a socio-political dimension to it, I have two questions. First, when Salvadorans pay their electricity bill, does that amount also include the cost of the electricity being sent to the Bitcoin mining operation or does the government use the revenue from selling Bitcoins to cover the cost of the electricity? Since I don't have an audit of the Salvadoran government in this regard, I don't know. What is knowable is the poverty rate, putting El Salvador in the bottom five Caribbean countries according to this article.

The answer to my second question, however, is almost dazzling enough to ignore the previous question. They are using public funds from the Bitcoin mining operation to build, yup, Bitcoin City. You can see some pictures and details of it here that are so apparently amazing it won an award.

To enable all that, the government of El Salvadorian has, among other things, made Bitcoin legal tender. Sure you can argue that's a hedge against inflation and some kinds of corruption. At the moment, that makes Bitcoin and USD the only legal tender in El Salvador. Would you like to be the one to tell citizens of El Salvador, who can barely make ends meet, that their state-operated blockchain wallets, called Chivo, were hacked?

Well, according to this article, the President of El Salvador, Nayib Bukele, totally side-stepped the issue when it came out. Well, apparently a third of Salvadorans use Bitcoin and given how the President ousted a decade-long gang rule (click here to watch a free, very interesting short documentary about that), Salvadorans apparently swallowed that pill. How could you not with a view like this?

But El Presidente didn't stop there. To attract the materials and services to build Bitcoin City, foreign-source income became tax-exempt. I get it. You need foreign investment, material, and expertise to build a dream city, so laws better not make it difficult. It's nice being President so that's easy to make happen, eh?

That said, Nayib Bukele is self-declared as the coolest dictator who has recently been re-elected. Given what he did with gangs and Bitcoin City, I find that believable here in the cold, white north. Still, he applied something Putin-esque by eliminating presidential term limits. I guess it will be a while before Bitcoin City will be completed, then.

It's still too early for me to tell if building that city will be good for the average Salvadoran or the stability of their government. All in all, as a small-time investor, I am enticed to use Bitcoin should I ever decide to travel there. (And if you want to do that, click on this referral link to get $25 free dollars when you use Netcoins to buy and sell Bitcoin).

In my next article, I will look at a dividend-paying stock in a somewhat similar situation (minus the new city). Subscribe for free below to become notified right when that article is published. Otherwise, you will have to keep an eye out here where you will find all my entries in my stock trading journey published here on Vocal Media.