Crypto
Bitcoin Is The Opportunity For A New Economy In Central America
This is an opinion editorial by Pierre Corbin, the producer and director of “The Great Reset And The Rise of Bitcoin” documentary.
Bitcoin’s properties make it the perfect asset to gain one’s sovereignty. But this is not only true for individuals. This is as important a topic for nation-states as it is for a nation’s citizens. At an individual level, the privacy attributes of bitcoin, the fact that it cannot be censored, and the protection it can provide against a devaluing currency are often considered the most important aspects. For some economies today, particularly the ones that have been victims for decades or centuries of some form of colonialism, bitcoin could represent hope for a new uncontrolled industry that is also directly profitable at home.
The case of the U.S. expansion in Central America is an interesting one, which started less than half a century after they gained their independence. In 1813, the Spanish American wars of independence were underway. Following the French invasion of Spain in 1808, the Spanish Empire’s weakness was the opportunity for Latin American countries to fight back and gain their independence. The United States observed, from a distance, but with increasing interest. This also represented an opportunity for other European nations, particularly France and England, that could see the potential for their reach in the region to increase.
The United States would not let that happen. Soon after gaining their independence, the Central American nations started looking at the U.S. for protection from the nations of South America and Mexico. Mexico was more aggressive towards the Central American nations because Spain had a stronger influence there. From 1822, the U.S. recognized these new nations as independent, and this triggered a series of events:
In 1823, the U.S. issued the Monroe Doctrine, essentially telling the world (particularly European colonial states) to leave the Western hemisphere alone. That same year, the Central American countries, following the example of the United States, created the Federal Republic of Central America, also called the United Provinces of Central America, where they unified to create one republic. This union didn’t last long because of many conflicts of interests, opinions, etc.
As the years went by, tensions over territory were increasing between the U.S. and Mexico, particularly over Texas and California — the U.S. was trying to become a continental nation and reach the Pacific Ocean. The British Empire strongly supported Mexico (the British were the first European power to recognize their sovereignty), and this relationship further increased the existing tensions. This tension eventually led the United States to make its first of many appearances in Central America, during the Mexican-American War.
The conclusion of the U.S. Civil War ended slavery for the United States, and this required a shift in the approach the U.S. had toward the rest of the world. They started a foreign investment approach. As Walter LaFeber discusses in his book, “Inevitable Revolutions,” by the 1890s, the U.S. was investing in banana and coffee plantations, railroads, gold and silver mines, and a few years later, utilities and government securities. LaFeber notes that by the start of World War I, North Americans had already constructed the main production institutions on which a Central American nation’s trade and even economic survival depended. Between 1897 and 1908, American investments in Central America rose sharply from $21 million to $41 million, and by the eve of World War I, they had reached $41 million. Instead of government securities that the British favored, more than 90% went into direct ventures like banana plantations and mining. Between 1897 and 1914, U.S. railroad stakes in Guatemala totaled $30 million, almost catching up to London’s $40 million.
A huge portion of the Central American economy was built and directed towards US exports only. Let’s look at some numbers for each country, put together by LaFeber in his book:
- Costa Rica: In 1929, Costa Rica exported $18 million worth of goods, $12 million of which were coffee and $5 million of which were bananas. United Fruit was undoubtedly the country’s leading corporation, and American investment in Costa Rica had almost caught up to British investment. Railroads, mines, cables and oil concessions were all under North American sovereignty.
- Nicaragua: Bananas and coffee accounted for $2 million and $6 million, respectively, of Nicaragua’s $11 million in exports. United Fruit and Atlantic Fruit each claimed 300,000 acres in Nicaragua. The major mines, railroads, timber industry and financial institutions were owned by, or managed by, North Americans.
- El Salvador: Coffee and sugar together accounted for $17 million of El Salvador’s $18 million in exports. El Salvador’s most significant domestic financial institution was owned by San Francisco interests, its transportation infrastructure was reliant on North American capital and New York banks handled its bonds today instead of British banks.
- Honduras: Bananas made up $21 million of Honduras’ $25 million exports of goods. In Honduras, the train network, the ports and almost all of the land used to grow bananas and rubber were all under the control of United Fruit and its affiliates. The thriving silver mine was owned by North Americans.
- Guatemala: $19 million of Guatemala’s $25 million in exports were coffee, while $3 million was in bananas. In Guatemala, they (particularly United Fruit) had complete control of all railroads except a few kilometers, one-fifth of the country’s territory, the top bank, several significant enterprises and the largest utility company (American and Foreign Power owned by General Electric).
Central America as a whole would face devastation if the cost of coffee and bananas suddenly decreased in global markets. Since they had gained so much power in Central America, many American investors would share in the catastrophe. This is what happened multiple times when the US was involved in other international conflicts, particularly World War I and World War II. The Central American industries were devastated, leaving millions in deep poverty because, in times of war, the U.S. no longer needed coffee and bananas. This pushed the local governments to bring on more debt (borrowed from the U.S.) and become even more dependent on the U.S., essentially enslaving them.
Roosevelt declared in 1905 that the United States would henceforth act as the policeman to maintain order in the Western Hemisphere, but that term allowed U.S. presidents to intervene according to any criteria they were creative enough to devise.1 These reasons included ensuring investments, securing the canal, acting as a “natural protector” and replacing the declining presence of the British. This opened the door for the U.S. to take their military into the region, with no other power to stop them. By that time, anyway, more serious problems were starting to broil in Europe, with World War I just around the corner …2
To defend the resources the United States had captured in Central America through the corporate acquisition of nations, the U.S. government had to increase its political influence in the region. This is how a century of U.S. military engagement, political involvement, manipulation, creation and funding of gangs and militia started.
Let’s not be mistaken in thinking they are not using the same influence today. Laura Jane Richardson is a general in the United States Army who is the commander of the United States Southern Command. She recently said the following, talking about Latin America3:
“This region is so rich in resources it’s off the charts rich. And they have a lot to be proud of. And our competitors and adversaries also know how rich in the resources that this region is. Sixty percent of the world’s lithium is in the region. You have heavy crude, you have light sweet crude, you have rare earth elements. You have the Amazon, which is called the lungs of the world, you have 31 percent of the world’s fresh water here in this region. And there are adversaries that are taking advantage of this region every single day – right in our neighborhood. And I just look at what happens in this region in terms of security impacts our security, our national security in the homeland and the United States. We need to strengthen our neighborhood and we need to realize how resource-rich this neighborhood is and how close our competitors and our adversaries are in the region.”
Max Keiser pointed out the hypocrisy of these words in a recent “Max & Stacey Report,” mentioning her words are a lure to bring these countries closer and repeat what the U.S. has done in the past — take control of their resources: “What about the CIA hit squads sent down to El Salvador in the 1980s? What about the coups in Central America and Latin America for decades? […] She keeps saying that we just want to be your friend, we’re friendly, we’re partners, trust us, you know we’ve always been your friend, we’ve always been here for you and those are such egregious lies.”4
Bitcoin is a property defense system that doesn’t require brute physical force. If the resource-rich nations of Central and Latin America can be put to good use through Bitcoin mining, the countries of the region have the opportunity of building a strong, independent, and modern industry that cannot be taken away from them and can secure their sovereignty. It can allow these countries to secure a new source of income at home, directly paid in a currency that can be transported instantly around the world to trade with any nation, beyond the limits of a single strong nation like the United States that will enslave them economically given the opportunity.
El Salvador is trying to lead the way by opening up its natural resources to provide energy to Bitcoin miners. This gives a strong new industry to benefit from financially, but can also allow the country to produce a surplus of energy. In fact, it is happening already: “CEL President Daniel lvarez confirmed that the country exported 595,537.2 megawatt hours (MWh) between January and July of this year, which is 390,580.52 MWh more than the previous year’s total of 204,959.68.”5
The abundance of energy is a proven way to bring prosperity to society. El Salvador, if left alone to develop in this direction, could become one of the fastest developing countries in the world.
Sources:
- Walter LaFeber, “Inevitable Revolutions: The United States in Central America” 1983
- https://www.history.com/topics/world-war-i/world-war-i-history
- https://twitter.com/Southcom/status/1549806290590846978?s=20&t=TFXycJsBn1G86IALh4NEFw
- MAX & STACEY REPORT: https://www.youtube.com/watch?v=tgoRQtE8YBQ&ab_channel=MAX%26STACYREPORT
- https://elsalvadorinenglish.com/2022/08/01/el-salvador-increases-its-energy-exports-in-2022/
This is a guest post by Pierre Corbin. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
El Salvador’s Minister of the Economy Maria Luisa Hayem Brevé submitted a digital assets issuance bill to the country’s legislative assembly, paving the way for the launch of its bitcoin-backed “volcano” bonds.
First announced one year ago today, the pioneering initiative seeks to attract capital and investors to El Salvador. It was revealed at the time the plans to issue $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, with the proceedings of the bonds being split between a $500 million direct allocation to bitcoin and an investment of the same amount in building out energy and bitcoin mining infrastructure in the region.
A sidechain is an independent blockchain that runs parallel to another blockchain, allowing for tokens from that blockchain to be used securely in the sidechain while abiding by a different set of rules, performance requirements, and security mechanisms. Liquid is a sidechain of Bitcoin that allows bitcoin to flow between the Liquid and Bitcoin networks with a two-way peg. A representation of bitcoin used in the Liquid network is referred to as L-BTC. Its verifiably equivalent amount of BTC is managed and secured by the network’s members, called functionaries.
“Digital securities law will enable El Salvador to be the financial center of central and south America,” wrote Paolo Ardoino, CTO of cryptocurrency exchange Bitfinex, on Twitter.
Bitfinex is set to be granted a license in order to be able to process and list the bond issuance in El Salvador.
The bonds will pay a 6.5% yield and enable fast-tracked citizenship for investors. The government will share half the additional gains with investors as a Bitcoin Dividend once the original $500 million has been monetized. These dividends will be dispersed annually using Blockstream’s asset management platform.
The act of submitting the bill, which was hinted at earlier this year, kickstarts the first major milestone before the bonds can see the light of day. The next is getting it approved, which is expected to happen before Christmas, a source close to President Nayib Bukele told Bitcoin Magazine. The bill was submitted on November 17 and presented to the country’s Congress today. It is embedded in full below.
This is an opinion editorial by Joakim Book, a Research Fellow at the American Institute for Economic Research, contributor and copy editor for Bitcoin Magazine and a writer on all things money and financial history.
I don’t.
That’s it. That’s the article.
In all sincerity, that is the full message: Just don’t do it. It’s not worth it.
You’re not an excited teenager anymore, in desperate need of bragging credits or trying out your newfound wisdom. You’re not a preaching priestess with lost souls to save right before some imminent arrival of the day of reckoning. We have time.
Instead: just leave people alone. Seriously. They came to Thanksgiving dinner to relax and rejoice with family, laugh, tell stories and zone out for a day — not to be ambushed with what to them will sound like a deranged rant in some obscure topic they couldn’t care less about. Even if it’s the monetary system, which nobody understands anyway.
Get real.
If you’re not convinced of this Dale Carnegie-esque social approach, and you still naively think that your meager words in between bites can change anybody’s view on anything, here are some more serious reasons for why you don’t talk to friends and family about Bitcoin the protocol — but most certainly not bitcoin, the asset:
- Your family and friends don’t want to hear it. Move on.
- For op-sec reasons, you don’t want to draw unnecessary attention to the fact that you probably have a decent bitcoin stack. Hopefully, family and close friends should be safe enough to confide in, but people talk and that gossip can only hurt you.
- People find bitcoin interesting only when they’re ready to; everyone gets the price they deserve. Like Gigi says in “21 Lessons:”
“Bitcoin will be understood by you as soon as you are ready, and I also believe that the first fractions of a bitcoin will find you as soon as you are ready to receive them. In essence, everyone will get ₿itcoin at exactly the right time.”
It’s highly unlikely that your uncle or mother-in-law just happens to be at that stage, just when you’re about to sit down for dinner.
- Unless you can claim youth, old age or extreme poverty, there are very few people who genuinely haven’t heard of bitcoin. That means your evangelizing wouldn’t be preaching to lost, ignorant souls ready to be saved but the tired, huddled and jaded masses who could care less about the discovery that will change their societies more than the internal combustion engine, internet and Big Government combined. Big deal.
- What is the case, however, is that everyone in your prospective audience has already had a couple of touchpoints and rejected bitcoin for this or that standard FUD. It’s a scam; seems weird; it’s dead; let’s trust the central bankers, who have our best interest at heart.
No amount of FUD busting changes that impression, because nobody holds uninformed and fringe convictions for rational reasons, reasons that can be flipped by your enthusiastic arguments in-between wiping off cranberry sauce and grabbing another turkey slice. - It really is bad form to talk about money — and bitcoin is the best money there is. Be classy.
Now, I’m not saying to never ever talk about Bitcoin. We love to talk Bitcoin — that’s why we go to meetups, join Twitter Spaces, write, code, run nodes, listen to podcasts, attend conferences. People there get something about this monetary rebellion and have opted in to be part of it. Your unsuspecting family members have not; ambushing them with the wonders of multisig, the magically fast Lightning transactions or how they too really need to get on this hype train, like, yesterday, is unlikely to go down well.
However, if in the post-dinner lull on the porch someone comes to you one-on-one, whisky in hand and of an inquisitive mind, that’s a very different story. That’s personal rather than public, and it’s without the time constraints that so usually trouble us. It involves clarifying questions or doubts for somebody who is both expressively curious about the topic and available for the talk. That’s rare — cherish it, and nurture it.
Last year I wrote something about the proper role of political conversations in social settings. Since November was also election month, it’s appropriate to cite here:
“Politics, I’m starting to believe, best belongs in the closet — rebranded and brought out for the specific occasion. Or perhaps the bedroom, with those you most trust, love, and respect. Not in public, not with strangers, not with friends, and most certainly not with other people in your community. Purge it from your being as much as you possibly could, and refuse to let political issues invade the areas of our lives that we cherish; politics and political disagreements don’t belong there, and our lives are too important to let them be ruled by (mostly contrived) political disagreements.”
If anything, those words seem more true today than they even did then. And I posit to you that the same applies for bitcoin.
Everyone has some sort of impression or opinion of bitcoin — and most of them are plain wrong. But there’s nothing people love more than a savior in white armor, riding in to dispel their errors about some thing they are freshly out of fucks for. Just like politics, nobody really cares.
Leave them alone. They will find bitcoin in their own time, just like all of us did.
This is a guest post by Joakim Book. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
This is an opinion editorial by Federico Tenga, a long time contributor to Bitcoin projects with experience as start-up founder, consultant and educator.
The term “smart contracts” predates the invention of the blockchain and Bitcoin itself. Its first mention is in a 1994 article by Nick Szabo, who defined smart contracts as a “computerized transaction protocol that executes the terms of a contract.” While by this definition Bitcoin, thanks to its scripting language, supported smart contracts from the very first block, the term was popularized only later by Ethereum promoters, who twisted the original definition as “code that is redundantly executed by all nodes in a global consensus network”
While delegating code execution to a global consensus network has advantages (e.g. it is easy to deploy unowed contracts, such as the popularly automated market makers), this design has one major flaw: lack of scalability (and privacy). If every node in a network must redundantly run the same code, the amount of code that can actually be executed without excessively increasing the cost of running a node (and thus preserving decentralization) remains scarce, meaning that only a small number of contracts can be executed.
But what if we could design a system where the terms of the contract are executed and validated only by the parties involved, rather than by all members of the network? Let us imagine the example of a company that wants to issue shares. Instead of publishing the issuance contract publicly on a global ledger and using that ledger to track all future transfers of ownership, it could simply issue the shares privately and pass to the buyers the right to further transfer them. Then, the right to transfer ownership can be passed on to each new owner as if it were an amendment to the original issuance contract. In this way, each owner can independently verify that the shares he or she received are genuine by reading the original contract and validating that all the history of amendments that moved the shares conform to the rules set forth in the original contract.
This is actually nothing new, it is indeed the same mechanism that was used to transfer property before public registers became popular. In the U.K., for example, it was not compulsory to register a property when its ownership was transferred until the ‘90s. This means that still today over 15% of land in England and Wales is unregistered. If you are buying an unregistered property, instead of checking on a registry if the seller is the true owner, you would have to verify an unbroken chain of ownership going back at least 15 years (a period considered long enough to assume that the seller has sufficient title to the property). In doing so, you must ensure that any transfer of ownership has been carried out correctly and that any mortgages used for previous transactions have been paid off in full. This model has the advantage of improved privacy over ownership, and you do not have to rely on the maintainer of the public land register. On the other hand, it makes the verification of the seller’s ownership much more complicated for the buyer.
Source: Title deed of unregistered real estate propriety
How can the transfer of unregistered properties be improved? First of all, by making it a digitized process. If there is code that can be run by a computer to verify that all the history of ownership transfers is in compliance with the original contract rules, buying and selling becomes much faster and cheaper.
Secondly, to avoid the risk of the seller double-spending their asset, a system of proof of publication must be implemented. For example, we could implement a rule that every transfer of ownership must be committed on a predefined spot of a well-known newspaper (e.g. put the hash of the transfer of ownership in the upper-right corner of the first page of the New York Times). Since you cannot place the hash of a transfer in the same place twice, this prevents double-spending attempts. However, using a famous newspaper for this purpose has some disadvantages:
- You have to buy a lot of newspapers for the verification process. Not very practical.
- Each contract needs its own space in the newspaper. Not very scalable.
- The newspaper editor can easily censor or, even worse, simulate double-spending by putting a random hash in your slot, making any potential buyer of your asset think it has been sold before, and discouraging them from buying it. Not very trustless.
For these reasons, a better place to post proof of ownership transfers needs to be found. And what better option than the Bitcoin blockchain, an already established trusted public ledger with strong incentives to keep it censorship-resistant and decentralized?
If we use Bitcoin, we should not specify a fixed place in the block where the commitment to transfer ownership must occur (e.g. in the first transaction) because, just like with the editor of the New York Times, the miner could mess with it. A better approach is to place the commitment in a predefined Bitcoin transaction, more specifically in a transaction that originates from an unspent transaction output (UTXO) to which the ownership of the asset to be issued is linked. The link between an asset and a bitcoin UTXO can occur either in the contract that issues the asset or in a subsequent transfer of ownership, each time making the target UTXO the controller of the transferred asset. In this way, we have clearly defined where the obligation to transfer ownership should be (i.e in the Bitcoin transaction originating from a particular UTXO). Anyone running a Bitcoin node can independently verify the commitments and neither the miners nor any other entity are able to censor or interfere with the asset transfer in any way.
Since on the Bitcoin blockchain we only publish a commitment of an ownership transfer, not the content of the transfer itself, the seller needs a dedicated communication channel to provide the buyer with all the proofs that the ownership transfer is valid. This could be done in a number of ways, potentially even by printing out the proofs and shipping them with a carrier pigeon, which, while a bit impractical, would still do the job. But the best option to avoid the censorship and privacy violations is establish a direct peer-to-peer encrypted communication, which compared to the pigeons also has the advantage of being easy to integrate with a software to verify the proofs received from the counterparty.
This model just described for client-side validated contracts and ownership transfers is exactly what has been implemented with the RGB protocol. With RGB, it is possible to create a contract that defines rights, assigns them to one or more existing bitcoin UTXO and specifies how their ownership can be transferred. The contract can be created starting from a template, called a “schema,” in which the creator of the contract only adjusts the parameters and ownership rights, as is done with traditional legal contracts. Currently, there are two types of schemas in RGB: one for issuing fungible tokens (RGB20) and a second for issuing collectibles (RGB21), but in the future, more schemas can be developed by anyone in a permissionless fashion without requiring changes at the protocol level.
To use a more practical example, an issuer of fungible assets (e.g. company shares, stablecoins, etc.) can use the RGB20 schema template and create a contract defining how many tokens it will issue, the name of the asset and some additional metadata associated with it. It can then define which bitcoin UTXO has the right to transfer ownership of the created tokens and assign other rights to other UTXOs, such as the right to make a secondary issuance or to renominate the asset. Each client receiving tokens created by this contract will be able to verify the content of the Genesis contract and validate that any transfer of ownership in the history of the token received has complied with the rules set out therein.
So what can we do with RGB in practice today? First and foremost, it enables the issuance and the transfer of tokenized assets with better scalability and privacy compared to any existing alternative. On the privacy side, RGB benefits from the fact that all transfer-related data is kept client-side, so a blockchain observer cannot extract any information about the user’s financial activities (it is not even possible to distinguish a bitcoin transaction containing an RGB commitment from a regular one), moreover, the receiver shares with the sender only blinded UTXO (i. e. the hash of the concatenation between the UTXO in which she wish to receive the assets and a random number) instead of the UTXO itself, so it is not possible for the payer to monitor future activities of the receiver. To further increase the privacy of users, RGB also adopts the bulletproof cryptographic mechanism to hide the amounts in the history of asset transfers, so that even future owners of assets have an obfuscated view of the financial behavior of previous holders.
In terms of scalability, RGB offers some advantages as well. First of all, most of the data is kept off-chain, as the blockchain is only used as a commitment layer, reducing the fees that need to be paid and meaning that each client only validates the transfers it is interested in instead of all the activity of a global network. Since an RGB transfer still requires a Bitcoin transaction, the fee saving may seem minimal, but when you start introducing transaction batching they can quickly become massive. Indeed, it is possible to transfer all the tokens (or, more generally, “rights”) associated with a UTXO towards an arbitrary amount of recipients with a single commitment in a single bitcoin transaction. Let’s assume you are a service provider making payouts to several users at once. With RGB, you can commit in a single Bitcoin transaction thousands of transfers to thousands of users requesting different types of assets, making the marginal cost of each single payout absolutely negligible.
Another fee-saving mechanism for issuers of low value assets is that in RGB the issuance of an asset does not require paying fees. This happens because the creation of an issuance contract does not need to be committed on the blockchain. A contract simply defines to which already existing UTXO the newly issued assets will be allocated to. So if you are an artist interested in creating collectible tokens, you can issue as many as you want for free and then only pay the bitcoin transaction fee when a buyer shows up and requests the token to be assigned to their UTXO.
Furthermore, because RGB is built on top of bitcoin transactions, it is also compatible with the Lightning Network. While it is not yet implemented at the time of writing, it will be possible to create asset-specific Lightning channels and route payments through them, similar to how it works with normal Lightning transactions.
Conclusion
RGB is a groundbreaking innovation that opens up to new use cases using a completely new paradigm, but which tools are available to use it? If you want to experiment with the core of the technology itself, you should directly try out the RGB node. If you want to build applications on top of RGB without having to deep dive into the complexity of the protocol, you can use the rgb-lib library, which provides a simple interface for developers. If you just want to try to issue and transfer assets, you can play with Iris Wallet for Android, whose code is also open source on GitHub. If you just want to learn more about RGB you can check out this list of resources.
This is a guest post by Federico Tenga. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
