Under the title "Anonymous Donor Transforms Small Beach Town into Largest Bitcoin Experiment in the World," Bloomberg Ashar reported that just before the tears began to fall in the hall, the dominant topic at this gathering was inflation. Jack Mallers struts across the stage like a religious preacher stirring the emotions of his audience, stating, "We are witnessing unprecedented monetary expansion by central banks right now," adding, "It’s incredibly frightening."
This scene conjures images of TED talks taking place in tropical settings, presented by a young man with tanned skin and wavy hair, dressed in a casual jacket with a cap. The 27-year-old appears as though the beach has thrown him onto the stage after a night of celebration. This moment was during the "Bitcoin 2021" conference, held for two days in Miami in early June, where 12,000 people gathered to discuss the future of Bitcoin. The crowd included a mix of electronic music fans, Wall Street bankers, and many cryptocurrency curious individuals.
Mallers, the founder of a startup specializing in Bitcoin transfers called "Strike," swiftly moved his speech from inflation and the farce of the U.S. Federal Reserve to the real topic of the event: financial injustice in the developing world. In El Salvador, he explained, a country that discarded its own currency for the U.S. dollar two decades ago, 70% of the population is unbanked and many earn their livelihoods from remittances laden with hefty fees. As Mallers noted, people in the country are left with the option of fleeing their homes or resorting to crime and violence. He continued: "If you could go back before these steps... if you could fix the money issue, you could fix the world."
**Financial Justice**
Now comes the tearful part; Mallers continues with a choked voice, saying that the reason for his move to a small town in El Salvador for three months was to help these people and to launch his company there. He recalls telling the young people: "I spoke to the young ones... I said, ‘We’ll take care of it, Bitcoin is here, we will solve the problem.’" When he mentioned working with the president of El Salvador and how he asked Mallers to help draft the law that made Bitcoin an official currency in the country, he was already crying. He displayed a video clip of President Nayib Bukele announcing the official law, then tore off his oversized jacket to reveal a soccer jersey of the Salvadoran national team underneath, a gift from the president himself, which drew cheers from the audience.
**Belonging to Bitcoin**
The transition to Bitcoin in El Salvador has been underway for some time and is ongoing. Bukele was discussing the use of cryptocurrencies even before he won office in 2019. The millennial politician, along with members of his political party "New Ideas," had owned Bitcoin for years, according to two government officials who did not wish to be named regarding the president's financial affairs. Bukele hinted at adopting cryptocurrency in 2017 when he was mayor of San Salvador, tweeting: "We will use Bitcoin."
The best place to observe the transformation in El Salvador amid all that is happening is the town of El Zonte, a surfing village located on the Pacific coast of the country. In 2019, a small team of local volunteers and American expats began converting the local economy to operate on Bitcoin. Workers are now receiving their wages and paying their bills in Bitcoin, and tourists can purchase a plate of pupusas using a Bitcoin payment app. Additionally, community projects are funded through Bitcoin donations. Jorge Valenzuela, a 32-year-old optimistic surfer and leader of the volunteers, states: “It has changed my town.”
**Bitcoin Beach**
In early May, a month before Bukele announced the adoption of Bitcoin in the country, I spent four days in El Zonte. To get there, I took a two-lane highway along the Pacific coast of El Salvador, then had to take a winding road past a metal fence, passing by street dogs sleeping under mango trees. Then the black volcanic sand began to shine before me, with powerful breaking waves that transformed this town of 3,000 people into a destination for foreign surfers. However, the most striking thing in the town now is the scatterings of the orange "B" (the international symbol for Bitcoin) easily seen on trash bins, near a dirt entrance to a pizza stall, and hanging on a wall next to a beachfront surf shack. The town, which has no bank, now has one ATM for buying and selling Bitcoin.
On a breezy warm evening, Mallers gathered with an international crew of Bitcoin influencers while enjoying freshly caught red snapper at a restaurant on the rooftop of the modern luxury Hotel Garten, which boasts expansive views. Here, it is known that the seed of Bitcoin was first planted in El Zonte in 2019, by an anonymous American donor. The "Bitcoin Beach" project, as it has been called by its organizers since then, represents a controlled experiment testing an alternative currency, with charitable aims and a call for capital, all tinged with a savior complex.
Foreign staff members have come to the town either to observe the experiment closely or to learn how to export it elsewhere. Among them is Peter McCormack, a tattooed Brit who has intermittently lived in El Zonte since coming to investigate the project last year. McCormack is also the host of "What Bitcoin Did," the world’s leading Bitcoin podcast, and is making a long stop in the town before heading to Miles Suter in the U.S., where he helps manage Bitcoin-related business for Square's Cash App. This self-described "worrier" went straight to the town, hoping to learn the secrets of the Bitcoin Beach project so he could replicate it in the suburbs of Kingston, Jamaica, as he said.
**Existing Problem Solution**
During dinner, attendees shared stories of their disappointment with the global economic system, discussing the harsh criticism and polarization occurring among cryptocurrency traders on Twitter, as well as mentioning limited-value and what they call "shitcoiners," a term used by Bitcoin advocates to describe those trading lesser cryptocurrencies. These discussions mirror the contentious debates surrounding cryptocurrencies among those fortunate enough to be part of this burgeoning economy. Bitcoin operates on a system grounded in belief rather than a financial system.
In El Zonte, Bitcoin represents a possible solution to an already existing problem, contrary to what its critics say. In the U.S., for instance, it’s seen as a solution searching for a problem. It is not new for emerging economies to adopt new technologies ahead of more established economies. Brazilians were among the earliest adopters of mobile banking services, as they provided a faster method for transferring cash during periods of hyperinflation when cash quickly depreciated in value. Digital wallet applications flourished in countries like India and Kenya, where a significant portion of the population does not engage with banking services. Latin America, long afflicted by volatile currencies, is particularly fertile ground for these technologies. Three years ago, Venezuela became the first country to launch a state-backed digital currency called the "Petro."
**Real-World Experiment**
Suter from Square comments, "The difference about what’s happening here in El Zonte is the level of usage and rapid spread of these technologies you see spreading from family to family and along the coast from town to town." Suter, a former lacrosse player educated at prestigious universities, had previously been fired from his job as a stock trader on Wall Street due to his participation in the Occupy Wall Street protests. He has found a purpose for his skills in what Bitcoin could achieve, especially in countries facing financial difficulties. He visited El Zonte last year on his way to Argentina to see how the country used the currency. Suter continues: "Bitcoin traders around the world have found a country they can belong to." At that dinner, no one at the table was aware that El Salvador would soon become the first country to adopt Bitcoin as legal tender.
By evening, McCormack ordered a bottle of red wine while most of the hotel staff had finished work and left. The group began discussing Bitcoin Beach-type projects that could be applied and spread to other countries, perhaps in Venezuela or Lebanon, places where currency collapse had robbed people's savings. McCormack, glancing at Michael Peterson, a 47-year-old Californian acting unexpectedly as a father figure to the Bitcoin Beach project, remarked, "All we need to do is clone this guy."
**The Anonymous Donor and the Beginning of Transition**
The day prior, I visited Peterson's office in a yellowish-white two-story building located down the hill from the highway, where staff are now collaborating on the Bitcoin Beach project with employees of Mallers' Strike app. Peterson first arrived in the town 17 years ago on a surfing trip, long before El Zonte became a tourist attraction, and he fell in love with it. At that time, he was running a family food franchise business in California. During holidays, he and his wife Brittany divided their time between their home in San Diego and El Zonte.
The Peterson family supported missionary efforts they encountered through their evangelical Christian church in San Salvador and began funding small development projects while working with local churches and community groups. Then, in early 2019, Peterson was introduced to an anonymous donor by someone at the church. The proposal sounded like a scam: “An anonymous donor in California bought a treasure of Bitcoin, which is supposed to be worth a fortune now.” Through a consultant, the donor explained to Peterson that he wanted to create a local economy that operated on Bitcoin, with the only condition being that the Bitcoin should not be converted into fiat currency.
Peterson thought about it, grew intrigued by the idea, and decided to agree. He states, "It allows everyone from the poorest to the richest to participate in the same playing field... I really felt this was something that could transform El Zonte entirely." Peterson confirmed that he still does not know the identity of the donor.
**An Economy with a New Financial System**
By mid-2019, Peterson had crafted a plan to create a Bitcoin-based economy, having hired a small team of town residents and worked with them and his wife Brittany for years. After an unsuccessful attempt to convince the older generation, they targeted the town's younger and more tech-friendly residents by paying teens in cryptocurrency to collect trash along the river. Valenzuela, the project coordinator, then convinced one store in town to accept Bitcoin as payment.
However, what ultimately launched the project was the COVID-19 pandemic. As the tourism industry in El Salvador collapsed, Peterson began monthly transactions of about $35 in Bitcoin to 500 families across the town using the Satoshi Wallet app, one of many smartphone apps developed to handle small transactions in Bitcoin that is often criticized for being impractical—costly and slow—for daily purchases.
With an increasing number of stores inquiring about how to accept Bitcoin transactions, Peterson realized that El Zonte needed its own app. Indeed, the Bitcoin Beach Wallet app was launched last September, featuring technology that enables small transactions. It also shows users their Bitcoin holdings, its dollar value, and where they can spend it. Local stores price everything in dollars, regardless of whether the payment is made in Bitcoin. For example, a cappuccino always costs $3.50, no matter how high or low Bitcoin's value may fluctuate. In this way, Bitcoin serves more as a digital voucher than a currency.
The town’s embrace of Bitcoin becomes evident through the app. As Peterson scrolls through his iPhone, the screen lights up with red dots, each representing one of the 48 businesses accepting Bitcoin as payment in the community. These points appear like red stains spreading from Peterson's office throughout the town and along the coast. Peterson notes that after 18 months of the project’s launch, approximately 90% of families in town are now regularly interacting with Bitcoin, adding, "The rapid spread that Bitcoin has gained is a kind of madness."
**Local Residents’ Experiences**
Businesses are also using digital currency to pay their bills and accept payments. Residents utilize Bitcoin through the Strike app to execute transfers, at ATMs, and for peer-to-peer transactions, moving between Bitcoin and cash. There’s also a local woman who has turned into a market maker; she buys Bitcoin from residents when they need cash and then sells it to investors enthusiastic about the currency, many of whom come from San Salvador, where buying cryptocurrency was, at the time, impossible.
For some in El Zonte, the benefits of Bitcoin have gradually increased, at best. Many business owners describe Bitcoin as comprising a small part of their sales. While about 85% of families in the town have access to smartphones, many still live in cramped houses with dirt floors and tin roofs. However, for others in town, it's clear that Bitcoin has transformed their lives. A construction crew chief is now able to pay dozens of employees with Bitcoin after growing tired of wasting half a workday each month during payroll day to retrieve their money from the nearest bank, located an hour away by bus.
Adrian Torres, 62, a crew member, told me he fixed his teeth with money saved from Bitcoin, and he is now saving to buy a cow. Maria Del Carmen, a mother of six, recounted her skepticism about keeping money on her phone. However, despite her misgivings, she reluctantly began accepting digital currency payments for her small restaurant, run from her kitchen in front of her home. Bitcoin now accounts for nearly half of her sales, which are about $45 a day. Four of Del Carmen's children have migrated to the U.S., where about 2.5 million Salvadorans live, sending home $4.5 billion annually in remittances. Now, instead of receiving money from her daughter in California as usual, Del Carmen has sent $2,000 of her Bitcoin savings to her daughter, while still holding around $2,000 in her digital currency account.
At "Point Break Cafe", owner Enzo Rubio states that his strategy for handling all payments in Bitcoin is to treat it as a savings account he does not plan to touch. Last November, Rubio accepted his first Bitcoin payment for an order worth $10. By the time I visited the town, that amount had risen to $30 and now hovers just above $22. Rubio has successfully navigated these volatility spikes by focusing on Bitcoin's moving average, describing his strategy towards cryptocurrency as "holding the trade," or (HODL) in Bitcoin-speak, meaning "buy and hold."
**Significant Volatility**
El Zonte's experiment with Bitcoin is among the longest-running of its kind, but it remains largely untested in practice. McCormack, the British podcaster, expressed, "I would be very interested to see what happens if we enter a bear market... If you're a shop owner and you’ve got $50 a day in Bitcoin sales, and suddenly it shoots up to $60, that would be great. But what happens when the price drops to $40 or $30?"
On May 12, Elon Musk, the owner of Tesla, tweeted that his company would no longer accept Bitcoin payments due to concerns about the environmental impact of mining, leading to a decline in Bitcoin's value. Musk’s tweet was surprising, given that just months earlier, he stated Tesla would accept Bitcoin, which caused the cryptocurrency's price to rise at the time. Ultimately, the price dropped to a low of $30,000, resulting in what could be described softly as disruption. Since then, the price has rebounded to around $40,000 as of June 14, driven once more by Musk's remarks.
Volatility is one of the many risks posed by Bitcoin in a setting like Bitcoin Beach and soon, across all of El Salvador. Following the president's announcement on June 5 about making Bitcoin legal tender, the 39-year-old went to Twitter to explain how the town of El Zonte influenced his decision, stating: "You guys have shown that entire communities can genuinely benefit from Bitcoin, and now we’ll present it on a national level." Two days after El Salvador passed the law officially adopting Bitcoin as a parallel currency, the International Monetary Fund was already pressing, warning that "cryptocurrency assets could pose significant risks."
**Spreading the Experience Nationwide**
Since the legislation was passed, Peterson has reported being inundated with requests from banks, telecommunications companies, and others all seeking information about the project and Bitcoin in general. The download rates for the Bitcoin Beach app and the Strike app have become among the top three financial apps for iPhones in El Salvador, with transactions on the Bitcoin Beach app increasing tenfold, reaching approximately 8,000 transactions per day, according to Peterson.
Peterson’s plans have also changed. Eventually, he intended to reduce the amount of Bitcoin he was sending to some small projects ($5,000 for a lifeguard training program and $1,000 a month for a scholarship fund for students) to allow the government room to complete the work and see if others could operate independently. Now, Peterson envisions himself assisting in rolling out the model he created across various cities throughout the country, aiming to build capacity using a locally controlled version of the Bitcoin Beach model, acting as a kind of online community bank for Bitcoin. Peterson noted in a phone interview just days after the bill’s approval: "There has been significant interest in Bitcoin in the past few days... We want to help build capabilities and bring Bitcoin-related jobs to El Salvador. That has really been our goal all along."
However, as the experience grows, so does the loss of control over it. Residents have felt their share of panic related to Bitcoin, particularly during the initial price drops, according to Peterson, who has tried to reassure them by explaining market cycles of rises and falls. His team is preparing residents to handle an extended downturn in Bitcoin by converting some assets to U.S. dollars or making large purchases during price hikes.
Hugo Contreras, who snaps shots of surfers, has even raised his photo prices if paid in Bitcoin.
After an hour past sunrise on my last day in El Zonte, I walked to the beach entrance next to a community skate park. About twelve surfers paddled their boards toward a surf break for decent-sized waves, while Hugo Contreras stood shirtless on the shore, a twenty-something man with a long lens camera, capturing photos of the surfers. He would later show them a series of the best shots for about $20. Contreras told me surfers sometimes ask if he would accept payment in Bitcoin. He said he had done so in some cases, but price drops had severely hurt him. Then he told me, "Now, I’ll tell them that if they want to pay in Bitcoin, the price will be $25." He continued, "You never know when it will drop."
