Laser Eyed Presidents | Market Monday
Dear Bankless Nation,
Bitcoin was approved as legal tender in El Salvador on June 8th 2021
This event is absolutely massive. Bitcoin, the world’s first and largest crypto asset is now the native currency of a nation state. This is a testament to how far this entire industry has come; from virtually nothing to legal currency of a nation-state in 12 years is a breakneck adoption speed.
El Salvador had its own native fiat currency called the colón from 1892 to 2001. But in 2001, the country ‘dollarized’ and adopted the dollar standard in an effort to stabilize inflation.
As a result, El Salvador has not experienced the rampant inflation that many other Latin American countries have (famously Argentina and Venezuela). Economists use the El Salvador transition to the dollar as an example of Gresham’s Law, in which ‘bad money drives out good money’. Put in other words, people spend the money that is losing value, while holding the money that is retaining value.
If you believe the narrative, we are about to watch this unfold again, except now the dollar is in the position of the former El Salvadoran colón, and Bitcoin is in the position of the dollar.
A nation-state adopting Bitcoin as its native currency is the manifestation of Bitcoiner gospel, touted in controversial books like The Bitcoin Standard.
According to President Bukele (when he spoke in Nic Carter’s twitter space last week), El Salvador has no plans to remove the dollar as a legal currency. It just wants its citizen to have a choice.
The dollar or bitcoin? El Salvadorans get to choose.
Which currency they prefer will be a key thing to watch over the coming years.
Is the Final Boss Awakening?
El Salvador adopting Bitcoin seems to have activated the attention of some high profile figures in government. It may be no coincidence that last week Elizabeth Warren decided to record her 7-minute tirade on why Bitcoin is bad.
Her facts were uninformed at best—many in crypto regarded them as intentionally malicious. As usual, Bitcoiners showed up to refute and defend:
More directly the IMF was compelled to raise their ‘concerns’ about El Salvador adopting Bitcoin, citing that it “raises a number of macroeconomic, financial and legal issues that require very careful analysis”.
Careful analysis. I don’t speak banker but is that a threat?
As a result of El Salvador adopting Bitcoin, foreign investors have demanded increasingly higher premiums to hold Salvadoran debt, signaling that the market is seeing increasing risk on the horizon for the country.
Success breeds haters. Bitcoin is now on the same field as Nation States. This is a game of Risk and Bitcoin just claimed El Salvador.
Now that it’s at Nation State scale (albeit a small country of 6.5M), it’s now on Nation State radar more than ever.
In some ways, this is good for Bitcoin. It’s finally found itself on the battlefield that it’s always wanted to be on. In other ways, this is going to be Bitcoin’s biggest test.
Is it ready for the Final Boss? Because ready or not, it’s now on a collision course.
The specific details as to how Bitcoin will be ‘rolled out’ to El Salvadoran citizens is yet to be fully understood.
What is known is that Jack Mallers, creator of Strike played a large part in working with President Bukele. Strike is a Bitcoin bank in an app, and has some interesting Bitcoin-enabled features that make it usable on a global scale, regardless of nation state and regulatory boundaries, and apparently is going to be helping onboard the El Salvadoran citizens to their first Bitcoin wallet.
Strike is a custodial Bitcoin wallet that is connected to both the Bitcoin mainchain and the lightning network. Two users of Strike can send BTC between them in the same way that two Venmo users can send USD between them.
It’s a centralized database, so payments are free an instant (but not bankless). Interestingly, users of Strike can denominate in dollars, even though the Strike collateral is Bitcoin. To accomplish this Strike uses a neutral trading strategy in the back-end to maintain solvency while allowing users to send synthetic dollars to each other while using BTC as the underlying collateral.
The main feature is that you can send dollars to other Strike users anywhere in the world, because Strike uses the Bitcoin payment network rather than any local banking rails. Strike doesn’t need to be hooked into the banking system—with the Bitcoin network it can bypass SWIFT (and bypass sanctions? 👀).
The approach seems a bit convoluted—why not just use crypto dollars?
Whatever. Baby steps.
The Skeptics Reply
All this sounds good, but I think we should be cautious before heralding this news as unequivocally positive for crypto.
Who is President Nayib Bukele?
Nayib Bukele once marched the military into the El Salvadoran Congress to force lawmakers to sign a bill that would approve a $109m loan for security equipment, including police vehicles, uniforms, surveillance equipment, and a helicopter.
He also removed 5 judges and the attorney general that would not support his regime, in an act that Nayib said was cleaning house…others called it a coup.
Nayib has been categorized as an authoritarian populist.
Should we join shoulder-to-shoulder with a man who doesn’t represent freedom and human rights? Are Bitcoiners okay with supporting individuals who espouse anti-crypto values and turning a blind eye to oppression, so long as its good for Bitcoin™️
A question to leave the reader: Is Nayib Bukele the President of El Salvador, interested in promoting the welfare of his citizens? Or, is he a card-carrying Bitcoiner, using his presidency to impose Bitcoin upon an entire country?
He’s got the laser eyes, after all…
If the president really wants monetary freedom for El Salvador, he should not have presented them with what, effectively, is a government handout for bitcoin hodlers and the companies behind the Strike app and other potential intermediaries. Instead, he should simply have repealed existing legal tender provisions and announced that people would be free to use whatever medium they prefer for their transactions.
Wait and See
There’s a ton of unanswered questions about this. Rob Paone (Crypto Bobby) summed up my feelings on this pretty well:
There’s a lot of moving parts with this story, and a lot of unanswered questions…
- Do El Salvadoran citizens actually want Bitcoin?
- Will the Lightning Network actually have its debut?
- Will the Final Boss bite back?
- Is Bitcoin going to serve as a gateway to DeFi?
- Are we on a path to hyper-bitcoinization?
We’re bringing Nic Carter on tomorrow’s State of the Nation live stream to help get to the bottom of these important questions.
This is a historic moment in crypto—don’t miss it.
Scan this section and dig into anything interesting
Market numbers 📊
- ETH drops -4% to $2,580 from $2,690 last Monday
- BTC jumps +13% to $40,200 from $35,500 last Monday
- TVL dips -5% to $59.6B from $62.6B last Monday
- DPI slips -11% to $333 from $377 last Monday
- DAI stability fee on ETH steady at 5.50%
Market opportunities 🤑
- Win the Beacon Book by participating in the Bankless raffle! (details here)
- Borrow against your ETH with alETH: self-repaying ETH
- Trade Tornado Cash’s native token (TORN) on Binance (why tho?)
- Track DAO treasuries with Boardroom’s 0xMultiSafe integration
- Build a project on Aave for the Hack Money hackathon (registration ends today)
- Trade Gitcoin’s GTC on Binance (that was quick!)
- Borrow up to 40% of your BTC holdings from Coinbase (expanded support)
- Swap tokens on Curve V2
Yield Farming 🌾
- ALPHA: Earn 45% APY in SUSHI by providing liquidity to the BANK/ETH pool
- Another wave of Balancer V2 rewards just hit the market (yields are crazy)
- Ribbon Finance proposes new liquidity mining program
- PoolTogether launches Sushiswap market (20% APY rn)
- Comparison on yields between Alpha Homora, Aave, and Compound
- Circle introduces Circle Yield
What’s new 📰
- El Salvador makes BTC legal tender (first domino has fallen)
- Bitcoin implements Taproot (better privacy + smart contract capabilities)
- Alchemix launches alETH 🔥🔥🔥 (watch our AMA w/ Alchemix)
- SoRare releases official French national futbol team player cards (tactic here)
- InstaDapp raises $10M
- International Monetary Fund worried about El Salvador’s BTC move
- Dapper Labs unveils FUSD—native stablecoin for Flow
- Unbound Finance raises $5.8M led by Pantera and Michael Arrington
- 0x and Polygon partner together to bring liquidity to Layer 2
- Blockdaemon raises $28M in Series A
- Curve releases V2 (lots of math)
- Divergence completes $2.8M round to build volatility derivatives
What’s hot 🔥
- Fed explores once in a century bid to remake the U.S. dollar (well well well)
- Yearn crosses $5B in value locked
- PleasrDAO purchases the original Doge meme
- Coinbase partners with 401K investment provider (boomer accounts coming)
- Alien CryptoPunk breaks sales records for over $10M (congrats SillyTuna!)
- El Salvador starts mining BTC with volcano energy
- Yearn teases Ultra Sound Money vault
- Dominos are falling in Latin America (who’s next??)
- Amazon looking to hire blockchain staffers
- MicroStrategy looks to acquire another $400M in BTC (like a true degen)
Money reads 📚
- The Brilliance of Yield Farming, LP, and Valuing Crypto - Mark Cuban
- Writing & publishing code should not be a crime - CoinCenter
- Why NFTs will have a key role in cultural memorabilia - Andrew Kang
- Bitcoin is dollarization, Ethereum is de-financialization - Zerohedge
- How Ethereum has solved the biggest problem with the internet - Brantly
- Proof of Humanity in the Age of the Machines - Accelerated Capital
- How to grow decentralized communities - Pet3rPan
- Academics advising on DeFi policy decisions - World Economic Forum
- Balancer governance vote to introduce Tier 4 rewards
- Uniswap proposal to reduce proposal submission threshold to 2.5M UNI
- MakerDAO vote for parameter changes, includes raising USDC debt ceiling
- Index Coop discussion and FAQ on Treasury Funding Committee
- Index Coop proposal to launch BED index passed! (new Bankless DAO product!)
- Sushiswap proposal to launch Wasabi: crypto casino
- Gitcoin proposal for Gitcoin Round 10 pool allocation
- Yearn proposal to integrate cover options into Vaults
- Aave proposal to add FEI
WHAT I’M DOING
Check out a few cool things we’re capturing right now in crypto
- Ryan: Still busy farming in Polygon. Getting ready for layer 2 summer.
- David: Unpacking after my move. All of my plants made it (I think).
- Lucas: Farming on Balancer V2! New liquidity mining program is in gear and there’s a lot of attractive opportunities on the protocol. Allocated my GTC airdrop to the 80/20 pool and it’s now earning 130% APY in BAL :)
WHAT YOU’RE DOING
- @investindigital didn’t panic sell
- @NextAlpha2 explored the DAO ecosystem
- @AnalyserOver commissioned a new profile pic for himself
- @Shegenerates voted on Gitcoin governance proposals!
See the rest here!
Extra Credit Learning
- (Beginner) An overview on Sovryn: BTC lending & borrowing
- (Intermediate) MEV in Eth2
- (Intermediate) Ethereum London upgrade overview (includes EIP 1559!)
- (Intermediate) TokeMak shares TOKE economic details
- (Advanced) Arbitrum in less than 10 mins
- (Advanced) Uniswap V3: The Universal AMM
Some recent tweets…
Who do you think would win in a fight? Banks or a few lines of code…
- Execute any good market opportunities you saw
- Listen to Asking the Questions | Preston Pysh