Building Trust in the Bitcoin Network in El Salvador

By any measure, the Bitcoin network is still in its infancy. While the concept of digital money is decades old – most dollars today only exist on individual account holder’s computer screens and in centralized ledgers at banks – the idea of holding one’s wealth in self-custody without a third-party validator is new. Bitcoin is the first iteration of triple-entry accounting in the history of capitalism, and the first time that money and state have been separated so people can self-custody their wealth in a digital bearer asset. Many individuals have trouble trusting the system, because they have spent their entire lives transacting within the bank-mediated fiat system.

Jonathan Martin is a graduate of Stanford University, Georgetown University, and a student at The Wharton School, currently on leave immersing himself in the world of Bitcoin in El Salvador.

Here in El Salvador, passionate Bitcoiners are actively working to increase trust in the Bitcoin network among the local populace, through education. I met with a New Yorker named John Dennehy, founder of Mi Primer Bitcoin – My First Bitcoin – a company focused on helping provide curious non-Bitcoiners with their first exposure to the digital commodity.

Dennehy was drawn to Bitcoin for philosophical reasons. He has deeply-held criticisms of the unfairness of the centralized fiat system, based upon a personal experience early on in his career. His view is that the most powerful way to oppose a system is to walk away from it entirely, a concept first posited by the American philosopher Henry David Thoreau.

Dennehy moved to El Salvador just before the Bitcoin law was passed in September 2021. When he got here just two years ago, adoption was close to zero. In his estimation, the Bitcoin story in El Salvador is just getting started – and Bitcoiners on the ground get to help write it. During our hour-long chat, John emphasized that he is most passionate about decentralization, be that Bitcoin or in other forms, as his goal is to create better economic outcomes for historically marginalized groups. His goal is to address the disease – financial illiteracy – as opposed to the symptoms of financial inequality.

In Dennehy’s mind, Bitcoin is the world’s greatest financial literacy educator. Here in El Salvador, workers are paid every 15 days, and the bars are full that evening. Many of the unbanked Salvadorans spend a large portion of what they earn, because they do not have access to good savings technologies. We are all aware at some level that money loses its purchasing power over time (because of inflation) and we are incentivized to spend it. Once people understand that there is an alternative to fiat that is programmed to be deflationary and that they can self-custody on their smartphones, they become more incentivized to save and plan for the future.

Mi Primer Bitcoin holds monthly events at restaurants around San Salvador, with the goal of “orange pilling” both the restaurant owners and the attendees at the events. Dennehy gives out free satoshis to encourage attendees to make their first bitcoin transaction when buying food and negotiates with the store owners for slightly lower prices during the event. He shows both business owners and consumers how to use bitcoin. During the event, members of the Mi Primer Bitcoin team walk around to answer any in-depth questions that consumers might have.

Additionally, Mi Primer Bitcoin organizes a 10-week course for people who are curious about learning more about Bitcoin, and they receive a Bitcoin diploma upon graduation. Mi Primer Bitcoin does not mention Bitcoin until about halfway through the program, as the focus is primarily on financial literacy.

In Dennehy’s mind, the road to mass adoption is through the school system. Mi Primer Bitcoin has a new initiative with Bitcoin Beach and the Ministry of Education to implement the core elements of the Bitcoin Diploma more broadly, starting with 50 public school teachers from 25 different schools. The pilot will be implemented in three Departments (States) in El Salvador – Usulutan, La Libertad and Sonsonate – with the goal of going nation-wide by 2024. From there, the program could be implemented across Latin America.

Vertically-integrated bitcoin education

The first Bitcoin block was mined in 2009 by Satoshi Nakamoto, the anonymous founder of the Bitcoin Network. For the past 14 years, a new block has been added to the blockchain about every ten minutes, regardless of bitcoin’s current market price, news headlines or the current strength of the network’s hash rate.

The hashrate is the life blood of the Bitcoin Network, and it serves as perhaps the best proxy for adoption. It reflects the total amount of computing power – and, by extension, real-world expenditure of resources to generate electricity – that participants have allocated to securing their wealth contained within the network. The game theoretics are such that anyone who might consider attacking the network by spending billions of dollars to accrue 51% of the network computing power would be incentivized to instead participate in the generation of the next block, as their odds of receiving the next block reward would outpace any competitor. The Bitcoin network is complex and esoteric, and tiered education is central to incorporating more Salvadorans into the nascent Bitcoin economy.

Mi Primer Bitcoin is just the first step. I spoke with a former teacher at CUBO+, a coding academy that provides an technical understanding of Bitcoin to students. He goes by Alex (@AjelexBTC on Twitter) and he is very careful to reveal only certain details about himself. I was able to gather that he is originally from France, although he would not say which city. We chatted twice. I left the conversations mind-blown by his level of thoughtfulness about what to expect with the next Bitcoin bull run and adoption within the country.

Alex explained how there are now four pillars to Bitcoin education in El Salvador, with Mi Primer Bitcoin serving as the most basic. He recently left CUBO+ to create another program called Node Nation, with the goal of installing Lightning nodes in high schools and providing highly technical classes to talented teenagers. From there, students can apply to CUBO+, a sixsix-month long program that is highly selective. Next, students who want to become core developers can apply to Chaincode Labs, the highest tier of education currently available in-country. The curriculum is entirely open-source and decentralized.

The path to mass-adoption in El Salvador might take decades. In the words of Ray Dalio, the Great Reset and rotation to a new global reserve currency will happen slowly, then all at once. That gradual process is evident here on the ground, and, if Bitcoiners are right about the inevitable collapse of the U.S. dollar, Salvadorans will be well-positioned to survive the looming global economic catastrophe.