In 2021, the the president of El Salvador in Central America declared Bitcoin legal tender. So businesses had to accept the digital currency as well as US dollars. The country had already abandoned its own currency, the colón, in 2001.
By many accounts, the move to Bitcoin has not gone well. Vendors are reluctant to exchange Bitcoin for goods and services, not least due to the volatility of the currency and the time it takes for the Bitcoin blockchain to validate a transaction. The International Monetary Fund (IMF) has urged El Salvador to abandon the use of Bitcoin as national currency, stressing the “large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection.”
Even more interesting from an urban perspective is the President’s adoption of a new idea for a city, Bitcoin City. Here’s an account in the New Scientist
“His government has teamed up with a company called Astro Babies to launch a virtual casino where guests can gamble bitcoin and trade NFTs (non-fungible tokens), with a physical branch in El Salvador. In November 2021, he presented his vision for Bitcoin City, a tax-free metropolis to be built in the shape of a bitcoin logo at the base of Conchagua volcano.”
The electricity grid of the new city is to be powered by geothermal energy from the Conchagua stratovolcano. The city plan is already designed by Mexican architect Fernando Romero. The city will sit aside the volcano and follows the usual utopian circular plan form. It will be ecologically sustainable, and the Bitcoin “mining” will also be powered by electricity generated from geothermal energy.
Bitcoin “mining” of course associates nicely with volcanoes and geothermal energy, but Bitcoin is not dug up from the ground. As we know, vast electrical resources are needed to drive and cool the banks of computers that verify transactions on the globally-distributed blockchain. Organisations, cities or countries with sufficient computer power compete to solve proof-of-work calculation challenges produced by the blockchain algorithms. In this virtual casino, the winners are rewarded with bitcoin.
The Treehugger blog site provides a good explanation of the ambitions of the Bitcoin City, about which more needs to be said, especially in light of a tweet from President Nayib Bukele this week.
- Alter, Lloyd. “Volcano-Powered Bitcoin City Proposed for El Salvador: It will be green and sustainable and ‘the financial center of the world.’.” Treehugger: Sustainability for All, 29 November. Accessed 14 May 2021. https://www.treehugger.com/volcano-powered-bitcoin-city-proposed-for-el-salvador-5210927
- Anon. “El Salvador: A crypto-powered autocracy?” Talk to Al Jazeera: In the Field (YouTube), 30 April. Accessed 14 May 2022. https://www.youtube.com/watch?v=bzwILir-qIg
- Elnagar, Randa. “IMF Executive Board Concludes 2021 Article IV Consultation with El Salvador.” International Monetary Fund Press Release No 22/13, 25 January. Accessed 14 May 2022. https://www.imf.org/en/News/Articles/2022/01/25/pr2213-el-salvador-imf-executive-board-concludes-2021-article-iv-consultation
- Taylor, Luke. “The world’s first bitcoin republic.” New Scientist 253, no. 3376 (2022): 14-14. 10.1016/s0262-4079(22)00360-8
Material written with the aid of openAI’s GPT-3 platform:
Bitcoin City. The electricity grid of the new city is to be powered by geothermal energy from the Conchagua stratovolcano. The city plan is already designed by Mexican architect Fernando Romero. The city will sit aside the volcano and follows the usual utopian circular plan form. It will be ecologically sustainable, and the Bitcoin “mining” will also be powered by electricity generated from geothermal energy. [My words so far. What follows is GPT-3.]
The city will have a population of about 1,000 people [?????], who will all be employed in the Bitcoin mining operation. The city will also have a university, which will research Bitcoin and blockchain technology. Critics have said that the city is a “pipe dream”, and that it is not possible to power a city with geothermal energy. They are also critical of the idea of building an economy on cryptocurrency, because the value of Bitcoin is so volatile. They also think it offers false hope to people who are struggling economically.
Mining bitcoin is extremely competitive between different miners all over the world. The city is banking on the fact that by being the first city to be powered by geothermal energy, they will have a competitive advantage in the mining market. Like cities that relied on their oil reserves, Bitcoin City will be built on their energy reserves, it will also need to have a very efficient way to use and store the energy. If bitcoin loses a lot of value due to fluctuations in the crypto market, then the city could become a ghost town. To prevent that, the city needs to have a backup plan or some other way to sustain its economy. Here are some suggestions for diversifying its economy:
1. Use the geothermal energy to power other industries in the city, such as manufacturing or agriculture.
2. Use the Bitcoin mining operation as a way to attract other businesses to the city, such as data center operators or software development companies.
3. Diversify the city’s income by investing in other cryptocurrencies, or in blockchain technology startups.
4. Promote the city as a tourist destination, due to its unique location and history.
Here is the source for those ideas:
https://www.investopedia.com/news/bitcoin-city-pipe-dream-or-real-deal/#ixzz5A6X5cKOU [dead link]
El Salvador has introduced other cryptocurrency innovations such as the world’s first Bitcoin ATM and a cryptocurrency remittance service.