The problem

About 70% Salvadorans do not have a bank. The average Salvadoran earns 400 per month. Therefore, the cost to onboard and maintain accounts is far greater than any revenue that banks could possibly generate.

The majority of Salvadorans cannot save, invest, or get credit. Local businesses, including those catering to tourists, are not eligible for merchant accounts. This makes credit card payments difficult.

The cost of sending money into the country can consume up to 50% of the transfer amount. The recipients then incur extra costs in time and money, as they have to travel a long distance before being able to collect the physical cash.

(Bitcoin Beach)

Projects to Watch: Reclaiming Purpose for Crypto

Bitcoin Beach

Mike Peterson is the owner of a successful California food service company that sells barbeque and desserts. Chocolate-covered bacon is one of the company’s best sellers.

Peterson stated that the bacon “tastes quite good”. The key is to make the bacon crispy and salty.

He bought his house twenty years ago in El Zonte, a small town on the Pacific coast of El Salvador. Some call it ” World Surfing Mecca“. El Zonte is a small town with a population of 3,000. The residents of El Zonte are mostly poor or near poverty. Their national GDP per capita is just over $4.500. (The U.S. GDP per capita is around $70,000). The beaches are beautiful and attract recreational surfers such as Peterson, who has been involved in 30-40 faith-based charities projects in El Zonte for over a decade.

A anonymous donor, who had amassed a large amount of bitcoins ( BTC), noticed the charity work Peterson was doing in 2019. The anonymous donor wanted to support Peterson’s efforts, which he had done in collaboration with locals from El Zonte including Roman Martinez and Jorge Valenzuela. The donor wanted to make the donation in bitcoin, but didn’t want it converted into cash.

Peterson remembered, “I had already been a bitcoiner so I thought, ‘Wow! This sounds amazing’.” “I mean who else would entertain such a crazy idea? We then came back with a proposal, saying, “Hey, let’s try to create a bitcoin circular economy.”

Bitcoin Beach is the home of this circular economy, where BTC will become a standard currency.

Enjoy a day at the beach

Peterson divides his time now between El Zonte, California and El Zonte. The Bitcoin Beach team now has 15 contributors, and more than a dozen volunteers. They have reduced bitcoin adoption to three steps.

In the first phase, bitcoin is introduced into local communities. This is achieved by encouraging local businesses accept BTC as payment and creating social programs which also pay participants using bitcoin.

To make this happen, residents must first download a wallet and get some BTC. They then need to execute their very first transaction. Peterson claims that this is the most difficult part of the process.

Peterson said that the biggest obstacle is getting people to do their first bitcoin transaction. He explained, “The hardest part is to get them to have that aha moment when they realize, ‘Wow! This is so much more convenient, cheaper and easier’.” It takes a lot more than just hand-holding to convince people to make their very first bitcoin transaction.

Second phase focuses on the core issue – encouraging consistent bitcoin use. Here is where the circular economy will be created.

As remittances play a central role in the lives of many Salvadorans it is important to create a consistent bitcoin usage by transitioning families to a bitcoin-centered remittance system.

Enter Strike. This app runs on the Lightning Network. The Lightning Network is a layer 2 or companion blockchain system which enables faster and cheaper bitcoin transactions. Strike allows recipients to receive funds sent by foreigners in their local currency. Western Union, for example, takes a large chunk of your transfer value and requires you to wait in line. They also require a $2 bus ride after an hour.

El Zonte residents now use bitcoin to pay for electricity and purchase lunches for their children.

Peterson estimates that over 70% of El Salvadoran families have at least one smartphone in their home with internet access. World Bank data shows that only 55% Salvadorans have access to the internet.

Peterson explained that “with bitcoin on their phones, they can zap back and forth.” “If their child is at school and they want to buy something for lunch, then they can text their mother and ask, ‘Hey can you send me 20 [satoshis]?’

The final and third phase of adoption is the one where bitcoin creates jobs, boosts tourism and helps tech startups.

“Bitcoin’s a tool.” Peterson stated that the end goal was not to simply get people to use bitcoin. “Our ultimate goal is to empower youth in El Salvador and transform the opportunities available for them.” We believe bitcoin is an important part of this, but for us the most significant thing is the social change.

Valentin Popescu from Motiv (Peru), Mike Peterson, and Roman “Chimbera Martinez” of Bitcoin Beach (El Salvador). (Mike Peterson)

The domino effect

Bitcoin Beach now has over 3,000 users spread across 500 families and more than 120 businesses. The project has been expanded to PuntaMango, another popular surf destination located 3 hours east.

In 2020, Galoy, a bitcoin-fintech company, developed the Bitcoin Beach Wallet to support the project’s aim of establishing a Bitcoin economy.

The project was credited with planting the idea that Bitcoin would be legal tender in El Salvador, which was achieved on September 7, 2021.

Peterson and his crew were training local youths to be lifeguards in order to get them out of the shadowy underworld of Salvadoran criminal gangs. The youth received international certification and were then paid for their services in BTC.

Peterson stated that El Salvador never had professional lifeguards in their civil protection services. Every year, 200-300 people would drown at the beach.

El Salvador’s Minister for Tourism was impressed by the success of the Bitcoin Beach lifeguard certification program. The lifeguard program was adopted by the government and implemented across the country. Bitcoin Beach was a huge success.

Peterson’s team and he have quietly advocated for the government to recognize bitcoin as legal tender. After all, El Salvador has already ditched its colon currency in 2001 in favor of the U.S. Dollar.

It’s difficult to deny that Bitcoin Beach played a major role in El Salvador becoming the first country to ever make bitcoin legal tender .

Peterson: “I don’t know how much it impacted the situation – clearly, it helped.” “But it was the government that made the decision to jump and do what is best for El Salvador.”

Peterson’s team at Bitcoin Beach has made a dent. It’s not bad for a Californian surfer who makes his living selling chocolate-covered bacon.

Editors: Christie Harkin, Jeanhee Kim