On the 7th of September, El Salvador has started using Bitcoin as a lawful payment method. There has been a lot of controversy surrounding the decision of El Salvador, as Bitcoin is seen as risky by the International Monetary Fund (Beunderman, 2021). By now, we have probably all heard the story of Bitcoin. Bitcoin is a decentralized currency that relies on Blockchain technology instead of a third party, like a bank, to prevent the double spending problem and it is introduced in a white paper written by an unknown person who uses the alias Satoshi Nakamoto (Nakamoto, 2008). Since its introduction, Bitcoin has gotten a lot of attention, mainly for its insane value and deviations in value. For example, when Elon Musk changed his twitter bio to #Bitcoin, the price increased almost 20 precent (Shevlin, 2021). Although Bitcoin can be used for payments, it has, according to research, mainly been used for speculation (Glaser et al., 2014). But is the introduction of Bitcoin as a lawful payment method in El Salvador going to be the start of Bitcoin use as an actual currency?
There are many advantages to the use of Bitcoin, such as transparency and the possibility to send and receive Bitcoin at any time, right away. Yet, there are also some strong disadvantages, such as high volatility in the price and the lower level of acceptance in the use of Bitcoin as a payment method (Bitcoin.org). The disadvantages seem to currently outweigh the advantages in many places of the world with regard to the actual use as a payment method. The limited places accepting Bitcoin as a payment method is something that probably holds down the use of Bitcoin as an actual payment method, but perhaps the introduction in El Salvador will change this, as big companies like McDonalds and Starbucks have announced to start accepting Bitcoin in El Salvador (Beunderman, 2021). This might be the beginning for many big companies to start accepting Bitcoin as a method of payment. Maybe, if it turns out that the introduction of Bitcoin as a lawful payment method is a success in El Salvador, other countries will follow, enabling the actual large-scale use of Bitcoin as a currency. Time will tell how the Bitcoin situation in El Salvador will unfold. One thing is for sure, exciting times lie ahead for Bitcoin.
Beunderman, M. (2021, September). De Bitcoin is in El Salvador nu een wettig betaalmiddel. Ook bij de McDonald’s en Starbucks. NRC. Retrieved from:
https://www.nrc.nl/nieuws/2021/09/08/el-salvador-waagt-gok-met-bitcoin-als-betaalmiddel-a4057603
Bitcoin.org. Veel gestelde vragen. Retrieved from: https://bitcoin.org/nl/faq#algemeen
Glaser, F., Zimmermann, K., Haferkorn, M., Weber, M.C. and Siering, M., 2014. Bitcoin-asset or currency? revealing users’ hidden intentions. Revealing Users’ Hidden Intentions (April 15, 2014). ECIS. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2425247
Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. Retrieved from: https://bitcoin.org/bitcoin.pdf
Shevlin, R. (202, February). How Elon Musk Moves the Price of Bitcoin With His Twitter Activity. Forbes. Retrieved from: https://www.forbes.com/sites/ronshevlin/2021/02/21/how-elon-musk-moves-the-price-of-bitcoin-with-his-twitter-activity/?sh=7f635eb45d27
