This village in El Salvador accepts Bitcoin as money

On the coast of El Salvador is a small rustic beach town with 3,000 locals known as El Zonte. The village is a surfer’s paradise and is frequented by people looking for an authentic and rustic atmosphere. Like so many Central American beach towns, El Zonte’s families have been hard hit by the COVID-19 pandemic. While other tourist hotspots continue to struggle with borders remaining closed, the people of El Zonte have found their own way forward thanks to the newly formed Bitcoin economy.

Bitcoin education station in El Zonte.

Michael Peterson

The secret Bitcoin donation

Sometime in early 2019, an anonymous donor with a penchant for El Zonte discovered a forgotten USB stick loaded with Bitcoin. He had originally bought the asset at around 5 to 10 cents and put it aside for several years. When the donor realized what his holdings were now worth, he tried to unlock his wallet for several days. After many unsuccessful attempts, the donor was finally able to remember his passphrase and retrieve the money. Believing in using blockchain technology to encourage non-bank inclusion, he decided to capitalize on this windfall and put the funds to good use by making a multi-year six-figure donation to El Zonte.

After meeting with multiple philanthropists in the area, all of whom wanted to convert the funds into fiat to meet the immediate needs of the community, the donor partnered with Michael Peterson, a San Diego-born male who lived up to 9 months a year volunteering in El Zonte. Michael had the option to manage the bitcoin on one condition – he would not cash it out. Digital currency beneficiaries had to learn how to use bitcoin themselves to create a bitcoin economy. This was the hour of birth of the Bitcoin Beach initiative.

Jorge Valenzuela teaches local children how to use Bitcoin.

Michael Peterson

The vision

Bitcoin Beach is committed to creating a sustainable Bitcoin ecosystem where the majority of residents are bankless and local businesses fail to meet the requirements that would allow them to accept credit cards.

Michael Peterson developed a proposal for a circular Bitcoin economy that took into account remittances, tourism, public services and small businesses. In parallel with El Zonte, Bitcoin was also injected into another beach community, Punta Mango, 3 hours away. The aim is for the introduction of Bitcoin to grow in different communities and to close the gaps over time.

Line to receive Bitcoin payments in El Zonte.

Michael Peterson

A popular criticism of Bitcoin is the high fees and slow processing speed of the network. Using Bitcoin can be inconvenient when buying a cup of coffee, for example. The Bitcoin Beach initiative addressed this challenge head on.

“It didn’t originally make sense for 25-cent transactions, but it did for $ 5. But when the transaction costs rose again, we switched to the Lightning Network, ”says Michael Peterson, founder of Bitcoin Beach.

The Lightning Network is a second tier payment protocol that runs over the Bitcoin network and enables instant and inexpensive transactions. The group chose the Australia-based Wallet of Satoshi as their wallet of choice as it is suitable for both on-chain and off-chain transactions.

What can you buy with Bitcoin in El Zonte?

Currently, you can buy everything from tacos to hardware consumables to paying your electricity bills through the Lightning Network.

Woman buying necessities with Bitcoin in El Zonte.

Michael Peterson

Youth work programs: From cleaning the El Zonte River of trash, to repairing the storm-damaged water system, to road repairs and garbage disposal, El Zonte youth are contributing to their community in exchange for bitcoin deposited in their wallets.

Education grants: Bitcoin Beach offers educational scholarships in Bitcoin to students who choose to continue their education in high school and university.

Transport to school: One of the challenges in El Zonte is that the local school ends after the 9th grade. To continue their education, students must commute to a high school in another city. Bitcoin Beach offers students money to pay for the bus and even buy snacks in schools.

Universal money transfers: With borders remaining closed and unemployment higher than ever before, the COVID-19 pandemic has spurred the initiative to create direct bitcoin transfers to families in need. Every 3 weeks, transfers of USD 35 per family are made to 600 families, covering 50% of the basic needs per household.

Bitcoin donations to El Zonte.

Michael Peterson

Food and basic needs: When businesses and corporations desperately sought income during the pandemic, they started accepting bitcoin. Today, you can use Bitcoin in several grocery stores, three restaurants, a barber shop, a nail salon, and two hardware stores.

Jorge Valenzuela helps families install Bitcoin wallets to receive their COVID payments.

Michael Peterson

Community construction projects: Bitcoin Beach invested in long-term infrastructure and developed a system that allows contractors, builders and suppliers to get paid for construction projects in Bitcoin.

Utilities: The local water department accepts payments in Bitcoin, the electrical department will follow shortly.

Woman buying eggs with bitcoin in El Zonte.

Michael Peterson

It’s all about education

“When we injected Bitcoin into the community, we also taught local businesses how to accept it, and educated them about the pros and cons of accepting Bitcoin … There was a lot of resistance among the adults, [it was] too technical. So we went on to youth, they picked it up right away. The key is to get them to start transactions right away. Then they want to learn more about it, about its safety and how it works, ”said Michael Peterson.

Bitcoin training courses in El Zonte, El Salvadore.

Michael Peterson

Bitcoin training stations in El Zonte. Residents scan a QR code to receive their deposits.

When COVID-19 hit, the community became more open to learning about Bitcoin out of necessity. To maintain social distance, Bitcoin Beach set up a tutorial on Facebook to help fuel the educational effort.

Bitcoin Beach is building an education center in El Zonte.

Michael Peterson

One local who has worked closely with Michael to help boost the Bitcoin economy is Jorge Valenzuela. Jorge has focused on local youth philanthropy initiatives for several years and oversees all training funded by the initiative as well as universal money transfers during COVID-19.

Jorge Valenzuela trains a local coffee shop owner in the use of Bitcoin.

Michael Peterson

“It’s great to see young people getting excited and dreaming about their future in El Salvador and seeing a way forward here instead of thinking that they have to go to the US. They can work, support their families and go to university … Bitcoin helped me understand what money really is and provided the resources to influence life around me, ”says Jorge Valenzuela.

Bitcoin education group.

Michael Peterson

Another local volunteer work as part of the initiative is Roman “Chimbera” Centeno, who returned to his hometown after several years in Italy to find his community with Bitcoin:

“It’s amazing what’s going on here in El Zonte. We prepare the children of the future. They are used to it now – they can check their money on their cell phone, they look forward to saving. This financial education is important. We never got that opportunity, and the opportunities children have now are incredible. It makes them believe that there is a future in El Salvador. That they don’t have to go and go somewhere else to be successful … Our children start dreaming again. You have time to be kids, swim, and play. Bitcoin gives them freedom. ”

Roman “Chimbera” Centeno at a Bitcoin training station in El Zonte. Residents scan a QR code … [+] receive their deposits.

Michael Peterson

Transfers

Bitcoin is capable of disrupting the remittance industry in El Salvador, which is valued at around $ 5 billion annually. Most families in cities like El Zonte don’t have bank accounts and rely on services like Western Union WU, which have fees of 5% to 10%. The closest Western Union is about an hour away by bus. The recipient of the money transfer has to take back the bus with cash, which is a security issue.

Bitcoin Beach is testing a new product, the Strike app, which also runs on the Lighting Network and connects to the recipient’s Bitcoin wallet and the sender’s bank account, making a transaction from the US to El Salvador quick and inexpensive.

El Zonte also recently received its first Bitcoin ATM from Athena Bitcoin. Notably, the city still doesn’t have a regular ATM.

So far, the project has received no government intervention, but the founder hopes to involve the authorities to help and promote clarity of the regulations.

“The President of El Salvador is a huge advocate of new technology and we believe he will support the effort,” said Michael Peterson.

At the time of writing, the price of Bitcoin is $ 9226.56.

UPDATE: Michael and his family’s early philanthropic efforts in the area were linked to the support of Christian missionaries in a number of community endeavors through an organization called MissionSake. After further investigation, Bitcoin Beach initiatives have been separated from MissionSake, although the organizations remain closely linked through their founder. Donations and support for families are provided regardless of their religious beliefs.