Call it a large-scale urban experience, where cryptocurrency lays the foundation for everyday life – literally – but can be as explosive as the volcano that powers it.
Last week, it was learned that El Salvador was planning to build a “city of bitcoin”, in turn funded by bitcoin, still the flagship name of cryptocurrency, and actively promoted by the government (and monetary policy ) as legal tender.
The city that Bitcoin built, or will build, was announced by tweet by Salvadoran President Nayib Bukele. As previously reported here, Bukele has been an active bitcoin booster, but the country’s rollout of bitcoin as a mainstream payment method, in tandem with the Chivo digital wallet, has been a bit bumpy.
Read also: El Salvador Dumps Bitcoin Profits In Health And Education Amid Fury Of Chivo Wallet Fraud
A particularity of the city, whose inauguration is planned near the Conchagua volcano in the south-east of the country: there will be no levy of taxes (with the exception of the value added tax, or VAT ).
In a preview of how it all will work, where the site itself will harness geothermal energy from the Conchagua volcano to facilitate bitcoin mining, Reuters reported that Bukele said, âInvest here and earn it all there. money you want. It is a fully ecological city that functions and is powered by a volcano. As for the funding itself, the country will use VAT to fund the issuance of bitcoin bonds.
Financing the Crypto City of tomorrow
Half of the VAT will finance bonds to build infrastructure, the other half will finance city services. The construction infrastructure coin would cost 300,000 bitcoins (at the recent price of $ 58,000 per coin, which equates to approximately US $ 17.4 billion). Bitcoin is a complex part of the design, it seems, as the city will be circular in design, will have its own airport, and a central plaza will be built that will resemble a bitcoin.
Would we be relieved that all of this wasn’t funded with Dogecoin and the place looked like a Shiba Inu?
Samson Mow, chief strategy officer at blockchain firm Blockstream, said the first bond sale will be worth up to $ 1 billion, will be backed by bitcoin, and half of the money raised will be used to buy bitcoin on the open market.
“This is going to make El Salvador the financial center of the world,” Mow said in remarks last weekend. The volcano will provide power to the city and, as noted in June, this same volcano was to be used to power bitcoin mining.
Now: We see a number of trends converging here, all related to El Salvador’s efforts. Floating bitcoin bonds will show whether crypto can cross the Rubicon into more traditional finance; The development of a city funded by bitcoin itself is new, but it will be necessary to monitor who actively wants to become a inhabitant of the city. Recall that a significant percentage of Salvadoran citizens said they were less than enthusiastic about bitcoin.
Read more: Poll shows 70% of Salvadorans are anti-Bitcoin
The energy conundrum inherent in bitcoin / crypto production (it takes a lot of energy to mine crypto) can indeed be solved by the volcano / geothermal part of the equation. But what does the ambitious bitcoin-based city plan? not specifically address: the price volatility that has been a key feature of crypto, how the city would maintain operations in a time of this extreme volatility, and even what would happen if, well, bitcoin went bankrupt. People will still need to live, after all, in this legendary city, and paying for everything will be a daily concern.