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El Salvador’s adoption of bitcoin has been hampered by a simple money-making loophole

El Salvador became the first country in the world to legally bid on Bitcoin on June 9. The move was hit by protests, fraud, market volatility, and technical glitches. Currently,…
There have been protests against bitcoin in El Salvador
REUTERS/Jose Cabezas via Alamy

El Salvador became the first country in the world to legally bid on Bitcoin on June 9. The move was hit by protests, fraud, market volatility, and technical glitches. Currently, Central American countries need to suspend key features of Chivo Wallet, a government-issued smartphone app for storing and exchanging Bitcoin, as economic traders are using it for profit. did.

El Salvador’s President Nayib Bukele touted Bitcoin as a way for Salvadorans to save about $ 400 million annually in remittance fees, deposit 70% of the poor in banks, and boost the national economy.

However, as Bitcoin is a new currency, its value has fluctuated significantly, dropping 17% when the Chivo Wallet was launched on September 7.

To encourage Bitcoin trading, Chivo Wallet allows users to freeze for 1 minute while previewing the price. It is designed to stabilize transactions, for example, to know how much a customer has to pay for a meal at a restaurant and to ensure that the restaurant knows how much to receive for that meal.

However, traders are taking advantage of this feature by comparing the freezing price of their wallets to the real-time market value of Bitcoin converted to dollars. If the market price of Bitcoin rises within 60 seconds of being frozen, they will buy cryptocurrencies at the lower freezing price of the wallet. If the price goes down, they sell it.

This legal practice is called scalping. Chivo Wallet announced on October 18 that it will suspend value freezes and visibility of all prices after claiming that people are using it for “illegal” behavior. To make an infinite profit.

In El Salvador, taxpayers pay invoices through a $ 150 million national trust fund, while other crypto exchanges cover losses through fees.

This issue further undermined confidence in Bukele’s vision of transforming the country into a cryptocurrency state. Critics say it shows the naivety of trying to regulate evil currencies. The government is designed to be decentralized.

“Everyone is blind and doesn’t know the price to buy Bitcoin,” said Oscar Salguero, a crypto enthusiast in El Salvador. It is ready for commercial use. “And people have lost trust in the app!”

However, Bukele is still promoting the benefits of cryptocurrencies. He announced that the benefits from the recent rise in Bitcoin’s value will be used to build a veterinary clinic called “Chivo Pets” and a bank, the world’s first volcanic-powered Bitcoin mine. did. Powerful Geothermal Powered Computer-Production will begin on October 1st.

“Chivo” is a cool slang term, but the reaction from the Salvadorans is that most of them don’t trust Bitcoin and oppose forcing businesses to accept it. Many complained on Twitter and some protested on the streets. On September 15th, the Chivo ATM ignited.

In July, many Salvadors found that the $ 30 Bitcoin they promised to open Chivo’s wallet was due to a personal information scam. When Bitcoin became fiat on September 7, the Chivo wallet was offline for several hours due to server issues. He often provides technical support when Bukele does not endorse the Bitcoin initiative on Twitter.

In addition to the volatility of Bitcoin not being suitable for use as a national currency, the lack of internet coverage and trust in the government means that Bitcoin is destined. Gerald added that this is unlikely to happen, as Bukele argues. Bukele said on Twitter on September 30 that Chivo Wallet has 2.73 million users.

Neither the president of El Salvador nor Chivo Wallet responded to New Scientist’s request for information on how to deal with the latest technical issues.

Bitcoin gambling in El Salvador is drawing attention around the world. Panama submitted a bill this month that could make Bitcoin the local fiat currency, with reports that the Kingdom of Tonga in Polynesia could follow.

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