El Salvador’s Bitcoin City

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    In Context

    • El Salvador is planning to build an entire city based on the largest cryptocurrency Bitcoin.
    • In September 2021, El Salvador became the first country in the world to adopt bitcoin as legal tender.

    About El Salvador’s Bitcoin city

    • Bitcoin city will be laid out in a circle (like a coin) and there will be a plaza in the city centre that will be host to a huge Bitcoin symbol.
      • There would be residential areas, malls, restaurants and a port in the Bitcoin city. 
      • In addition, the country will have access to “digital education, technology and sustainable public transportation.
    • The city would be funded with the issuance of a $1 billion Bitcoin Bond.
    • The city will be located along the Gulf of Fonseca near a Conchagua volcano to take advantage of the country’s geothermal energy— to power both the city and cryptocurrency mining (an energy-consuming process of solving complex mathematical calculations day and night to verify and add crypto coins to the Blockchain network).

    • Significance: 
      • The city would be built with attracting foreign investment in mind.
      • The move aims to  spur the country’s economic growth and investment

    What are Bitcoin Bonds?

    • It represents the start of a reformation of capital markets, built on Bitcoin and layer-2 technologies like the Liquid Network. 
    • Dividends can be distributed to investors instantly, with built-in cryptography to maintain confidentiality. 
    • Bonds can be traded 24/7 with other assets like stable coins, using protocols that help eliminate the need for trust.
    • Dividends will be paid easily to bondholders using tools deployed on top of the Liquid network. 

    El Salvador

    • El Salvador, the country of Central America. It is the smallest and most densely populated of the seven Central American countries. Despite having little level land, it traditionally was an agricultural country, heavily dependent upon coffee exports.
    • El Salvador is bounded by Honduras to the north and east, by the Pacific Ocean to the south, and by Guatemala to the northwest. Its territory is situated wholly on the western side of the isthmus, and it is, therefore, the only Central American country that lacks a Caribbean coast.
    • Currency of El Salvador:
      • El Salvador fully ‘dollarized’ its economy in 2001 to-
        • take advantage of the stability that it offers and attract investments.
        • get linked to the monetary policies of the FederalReserve in Washington.
        • prevent hyperinflation in the economy

       Image Courtesy: Britannica

    Bitcoin

    • Bitcoin was launched in 2009 by Satoshi Nakamoto.
    • It is a type of digital currency in which a record of transactions is maintained and new units of currency are generated by the computational solution of mathematical problems, and which operates independently of a central bank.
    • It is the first and biggest of decentralised cryptocurrencies, which are online payment systems. 

    Source: IE

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