6 December 2021: Back in November, El Salvador President Nayib Bukele released in a speech his country's plan to construct the first ever 'Bitcoin City'. With El Salvador seemingly going all in on Bitcoin at this point, could this idea truly pay off for the country? That depends on the timeline being used to measure success.
El Salvador - Soon Bitcoin Capital of the World?
El Salvador is planning on building its very own Bitcoin City by utilizing bitcoin. Bukele announced in his speech that Bitcoin City will be just that - a sprawling metropolis that includes transportation, residential areas, commercial areas, entertainment, restaurants and more. The city is to be built in near the Gulf of Fonseca in proximity to Conchagua volcano that will be leveraged for natural energy to mine Bitcoin with.
Conchagua volcano, El Salvador
The very first iteration of this process is a $1 billion bond backed by Bitcoin that is to be developed by Blockstream via Bitfinex. $500 million of the bond is to be used to re-purchase more crypto afterwards with the rest going to infrastructure development. After a lock up period of 5 years, investors will be paid back via dividends. Bukele announced that not only will this city be fully operational on just Bitcoin, but will come with no taxes other than a valued added tax or VAT.
At this point everyone is probably familiar with this graphic:
Could this idea actually work out? Well, it depends. In five years, Bitcoin is expected to be significantly higher than it is priced at right now. Although settling on any number is foolish, it has been reported that the figure being targeted for this particular project is a $1 million Bitcoin. Should that be the case, El Salvador could easily raise the capital necessary to begin investing in such a major project like Bitcoin City.
Another important note to make here is that this is potentially decades into the future. The idea that is being raised here is not something that should be expected to actually come into fruition in the next few years. It will take years just to raise the capital let alone actually turn the five year gains into viable city infrastructure.
Summary
Overall, this is an extremely bold, risky move for the country of El Salvador and for that reason it is perfect for the country. Prior to the Bitcoin excitement, El Salvador was seldom mentioned in major news outlets, let alone have an impact on the global financial system. In certain aspects, El Salvador has little to lose and everything to gain.
If this idea is to be taken seriously by both El Salvadoreans and the broader globe, Nayib Bukele and his government should release a full-fledged plan to make this idea a reality. Bitcoiners, after all, are all for such a project.
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