Just a week after this cryptocurrency is legal tender in El Salvador, after being quickly approved under such a controversial situation, I detail some generalities regarding its use and existence that are very important to take into account.
The increase in internet transactions has made it necessary to create new types of currencies that can be used globally and are not tied to financial systems. This gave rise to cryptocurrencies, which are created through special algorithms that guarantee that they are unique, cannot be forged and can be transferred through the web.
The value of the coin
Through the ages and civilizations there have been different ways to exchange goods, the main rule of which has been based on the concept of value. That is why, the more scarce a good is, the more precious and its value is determined based on the benefit that is perceived.
In modern times the monetary system was created with gold and silver coins. Later these were replaced by paper and their support was gold, initially. Over time, the value is directly related to the stability and wealth of the governments that issue it. For example, the United States dollar (USD) is backed by the United States government; likewise, the euro (EUR) whose value is backed by the European Union.
In 2009, BITCOIN (BTC) was created by Satoshi Nakamoto, pseudonym of the anonymous author, who created the algorithm on which the generation of Bitcoin (BTC) is based. This is free to use and can be used by any interested person who wants to generate them, giving rise to many entities and people, called miners; who allocate technological resources for their generation.
In order to avoid the loss of value, the algorithm is designed to emit a maximum of 21 million Bitcoins (BTC) and its generation is reduced by half, year after year. This guarantees its scarcity; which, consequently, maintains its monetary value.
The value of Bitcoins (BTC) is directly related to the security of its technology, which is extremely difficult to hack and has full backup detail of each of the transactions that are carried out using bitcoin. Its value, being decentralized, is determined directly by supply and demand and has managed to increase its value in dollars from $ 1 to $ 64,000, according to Coindesk, a newspaper specialized in bitcoins and cryptocurrencies.
Currently, despite daily fluctuations, Bitcoin (BTC) is the most valued cryptocurrency on the world market; ranging between 11 and 64 thousand dollars per bitcoin over the past year.
Arrival in El Salvador of Bitcoin
El Salvador is the first country in the world to approve Bitcoin (BTC) as legal tender, which implies that all commercial entities are obliged to accept this form of payment.
To mitigate the loss generated by the exchange rate differential that may arise due to the volatility of this currency, and to support transactions in real time, a 150 million dollar trust was created through the Development Bank of El Salvador (Bandesal). This trust will allow the immediate conversion of transactions carried out in BITCOIN (BTC), using the official Wallet created by the government: Chivo App.
As of the entry into force of this new law, the approval of the regulations and the release of the App, Salvadorans will have the opportunity to use cryptocurrencies as part of our day to day life. It is important to be good users and spectators of these new commercial dynamics to really identify the benefits that the use of Bitcoin (BTC) will bring to Salvadorans.