El Salvador is one of the first countries to officially adopt crypto in its economy, specifically Bitcoin.
This was done after a new regulation was created through the President of El Salvador, Nayib Bukele.
The president was re-elected on February 5th, 2024 which continues El Salvador’s plans to heavily adopt Bitcoin into the economy.
Currently things have been going well with Bitcoin in El Salvador while some are adapting to it and some still ignoring it.
But, since Bitcoin became a legal tender, the country has successfully included it in its treasuries giving huge profit for El Salvador.
The fast adoption pace of crypto has raised questions regarding crypto adoption in a country, one of which is the possibility of a fully decentralised country that is run by a DAO.
El Salvador Crypto Adoption
El Salvador is not on full decentralised adoption level yet as the country is still being governed by the government with the house of representative representing the people of El Salvador with new decisions, just like in most countries.
But, El Salvador currently sets the highest level of crypto adoption in the world with Bitcoin being a legal tender and its future plans regarding Bitcoin.
Bitcoin as a Legal Tender
Currently Bitcoin is a legal tender in El Salvador, which means that it is a legal currency that can be used for any transactions including sales of retail goods, remittance, and even government treasuries.
The Government of El Salvador itself has released a wallet called Chivo which can be used to pay transactions in real time with Bitcoin, even withdrawing money through ATMs with Bitcoin.
This was launched after the government officially announced that Bitcoin is a legal tender in 2022, with current plans of further integrations with Lightning Network, the layer two blockchain of Bitcoin that processes transactions faster and cheaper than the Bitcoin Blockchain itself.
In 2022 this was the new thing that most retail vendors and the overall people of El Salvador are using. But sadly the transaction count fell hard in 2023.
The lower transaction count was a result of the Bitcoin Blockchain becoming popular again thanks to the Ordinals Inscription that brought heavy volume into the blockchain, essentially increasing the transaction fees of Bitcoin.
In 2023, according to data from University of Central America, only 22% of the population used Bitcoin with remittance falling to only 1% of the overall remittance in 2023 using Bitcoin.
But, this is not a let down as the re-election sparked hope and new plans of integration with the lightning network essentially trying to tackle the fees problem that occurred in 2023.
Bitcoin as a Treasuries
Looking into the government treasuries, Bitcoin seems to play a huge role in the economy as the El Salvador government treasuries is sitting at a 40% profit since the Bitcoin price surge of the late 2023.
This is a result of El Salvador buying Bitcoin regularly during price dips and a citizenship program that allows El Salvador to essentially “sell” the country’s citizenship by paying $1 Million in Bitcoin.
The program is a huge hit among rich people as most of the country’s Bitcoin came from that program in 2023.
According to data from Bitcoin Treasuries, currently El Salvador holds 0.011% of the overall Bitcoin supply, which is around 2,381 BTC.
This is worth around $157 Million which is huge considering how the country’s treasury was before they adapted Bitcoin.
Through Bitcoin the country has been able to receive foreign transactions and foreign investments that essentially boosted the public and private sector of the economy.
This is a huge help considering that El Salvador is currently facing delays of foreign monetary aid from the IMF, ironically because the IMF does not approve of the Bitcoin Adoption.
In the coming months after the election, Nayib Bukele is planning to launch a new government bond backed by Bitcoin, dubbed the Volcano Bond.
This might be another way to attract foreign investors and essentially boost El Salvador’s economy by utilising the decentralised nature of the Blockchain to hinder regulatory obstacles.
Can a Country Survive with a DAO?
Even though this seemed like high level adoption, which it is, it still has not reached the point of full decentralisation yet.
This is because in crypto full decentralisation is achieved through a DAO or a decentralised autonomous organisation.
El Salvador is currently still being governed by government bodies, but is it really possible for a country to survive with a DAO.
To fully adapt a DAO this means that the country will not have any centralised representative as everything is governed through that DAO.
This does not seem logical as a country needs at least one representation to announce new plans, to interact in foreign matters, and to overall be the face of the country.
While all of those can be replaced with a DAO and an “AI”, to be able to achieve a perfect DAO, especially in foreign matters, all the countries in the world have to use a DAO so that everything can be aligned automatically through those DAOs.
But, it is not impossible for a country to adopt a DAO to increase its democracy overall. This is because a DAO can be used by all the people to vote on new things, essentially creating real democracy instead of just relying on the house of representatives as the voice of the people.
The term “voice of the people” itself has been tainted through years of corruption and personal political interests, which is why it might be good to implement a DAO so that every new policy that is going to be implemented is treated like an election to be considered worthy or not by the people.
DAOs have so many other use cases in a country, but to make a country run fully on DAO just seems too far fetched at the moment.
El Salvador’s crypto adoption is the highest level of adoption we can expect to see other countries replicating in the coming years so the thought of a DAO running a huge country seems to be a plan for the future generations.
