What is bitcoin? The search has been going on for years, but the answer to the dilemma is quite fluid and often depends on current circumstances. It was originally conceived as a (digital) currency, a universal means of payment that will make the financial system accessible to everyone through the back door, and bypass conventional financial institutions (or parasites, whichever you prefer).
The initial formulation has evolved in the meantime (because the global currency project has not really come to life), so bitcoin is increasingly mentioned today in the context of a separate asset category that does not bring any return but is very popular in a small part of the population.
It can be considered a luxury good (like artwork) or even a commodity.
The vision turned into - a failure
With the simultaneous rise in inflation and the intense fall in the price of bitcoin, the latter is becoming increasingly difficult to prove (there is no point in talking about industrial application), so now the conclusion is that it is primarily a volatile means of speculation on which the minority got rich.
Unfortunately or fortunately, thanks to an enterprising president, one poor Central American country has recently turned into a kind of petri dish, allowing us to observe in real-time an experiment that tests all the above theses.
Starring El Salvador and President Nayib Bukele, a proven crypto enthusiast who stunned the world public last June, used the Bitcoin Conference to announce legislation that would make bitcoin (in addition to the US dollar) an official means of payment.
The idea was implemented three months later, and the consequences are quite unpleasant so far. For a start, the initiative to make bitcoin a generally accepted means of payment experienced a real fiasco. Or so the authors of a study entitled “Are Cryptocurrencies Currencies? Bitcoin as Legal Tender in El Salvador ”; already in the introduction it is stated that the use of bitcoin is concentrated among the young male population which (unlike the poorer strata) has no problems with access to the banking system anyway.
The authors also conclude that in the given circumstances (low standard of living and pandemic), the concept of digital currency was given an ideal opportunity to brighten the face of crypto evangelists, but the project failed miserably.
Technically, admittedly, it is still ongoing, but the results are far from encouraging. In September, a presidential decree launched the Chivo (digital wallet) app, which reserved the same amount of bitcoin for each resident (the equivalent of $ 30, roughly three days' average income in El Salvador), but only half of those surveyed tried to run the app.
Of the most persistent, less than half continued to use Chivo after spending the presidential token of attention, and worst of all, the percentage of foreign remittances with cryptocurrencies sent through digital wallets is measured in single digits only.
Or in translation, bitcoin as an (official) currency is - failed. And despite the great potential, El Salvador is a very poor country in which foreign remittances are a very important item along with the modest standard of living of citizens.
In addition to a number of technical problems, one of the most important reasons for failure, as you can guess, is the extremely large fluctuations in the price of bitcoin, which makes it a very unreliable means of payment.