How Bitcoin Beach is Transforming El Salvador’s Economy and Empowering Local People – Crypto Projects to Watch 2023

This means that the majority of Salvadorans are unable to save, invest or access credit. Local businesses—including those that cater to tourists—are unable to qualify for merchant accounts, making credit card payments impossible.

Remittances make up over 26% of El Salvador’s gross domestic product (GDP), but the cost of sending money to the country consumes up to 50% of the transfer value. Recipients then incur additional costs of time and money when traveling long distances before queuing to pick up physical cash.

Mike Peterson runs a successful catering business in California selling desserts and barbecue. One of the company’s best sellers is chocolate-covered bacon.

“It actually tastes pretty good,” Peterson said. “The key is you have to fry the bacon really, really crispy, so it’s kind of like a chocolate-covered peanut—salty and sweet together.”

Twenty years ago he bought a house in the small town of El Zonte on El Salvador’s Pacific coast; a “surfing mecca of the world,” according to some. El Zonte has a sparse population of about 3,000. Many of its residents are either poor or on the brink of poverty—national GDP per capita is just over $4,500 (US GDP per capita is about $70,000). But the beaches are great, attracting recreational surfers like Peterson who became involved in 30 to 40 faith-based charity projects in El Zonte more than a decade ago.

In 2019, the charitable work Peterson and others were doing caught the eye of an anonymous donor who had collected a large sum of bitcoin (BTC). The donor wanted to fund the efforts of Peterson, who had teamed up with El Zonte locals including Roman Martinez and Jorge Valenzuela. There was just one catch – the donation would be in bitcoin and the donor didn’t want the bitcoin converted to cash.

“I was already a bitcoiner, so I thought, ‘Wow, this sounds amazing!'” Peterson recalled. “I mean, who else would entertain a crazy idea like this? And so we came back to them with a proposal and said, ‘Hey, we’re going to inject this into our ongoing programs that we have, and we’re going to try to create this circular the bitcoin economy.’

The home of the circular economy – an economy where BTC becomes a standard medium of exchange – is now known as Bitcoin Beach.

Peterson splits his time between El Zonte and California today. The Bitcoin Beach team has grown to 15 contributors and over a dozen more volunteers. They’ve nailed bitcoin adoption down to a three-part process.

The first phase involves injecting bitcoin into the local community. This is done by encouraging local businesses to accept payment in BTC and establishing social programs that also pay participants in bitcoin.

For that to happen, locals need to download a wallet, get some BTC and make their first transaction. Peterson says that’s the toughest part of the whole process.

“The biggest hurdle is just getting people to make their first bitcoin transaction and helping them get to that lightbulb moment of ‘Wow, this is so much better, it’s so much cheaper, it’s so much easier!’ Peterson explained. “It takes a lot of hand-holding and going out and spending time with the people to get them to make their first transaction.”

The second phase deals with the meat of the matter – promoting consistent bitcoin use. This is where a circular economy is actually created.

Given how central remittances are to the lives of so many Salvadorans, one way to create consistent bitcoin use is to transition families from a traditional to a bitcoin-centric remittance infrastructure.

Enter Strike, an app that runs on the Lightning Network, a layer 2, or companion, scalable blockchain system that enables cheaper and faster bitcoin transactions. Funds sent from abroad via Strike can be received as local currency in the recipient’s bank – free of charge. Compare that to traditional transfer providers like Western Union who take a large portion of the transfer value, make you stand in line and require an hour-long bus ride that costs $2.

But it doesn’t stop there, the residents of El Zonte are now using bitcoin to pay their utility bills and buy lunch for their children.

Peterson estimates that more than 70% of families in El Salvador have at least one internet-enabled smartphone in their household. Data from the World Bank shows that only 55% of Salvadorans have internet access.

“With bitcoin on the phone, they can zap it back and forth,” Peterson explained. “If their child is at school and wants to buy something for lunch, they can text their mom and say, ‘Hey, can you send me 20,000 [satoshis] so I can buy lunch?'”

The third and final stage of the adoption process – the point of it all – is when bitcoin facilitates the creation of jobs, tourism and technology start-ups.

“Bitcoin is a tool. The end goal is not just to get a bunch of people using bitcoin,” Peterson said. “For us, the end goal is really empowering the youth and seeing change of opportunity happen in El Salvador. Of course we think bitcoin is a critical part of that, but really for us it’s the social change that’s most important.”

Bitcoin Beach has now gained over 3,000 bitcoin users across more than 500 families and 120 businesses. The project has expanded 3 hours east to Punta Mango, another popular surfing destination.

Galoy, a bitcoin fintech firm, created the Bitcoin Beach Wallet in 2020 to help fuel the project’s goal of establishing a bitcoin economy.

But perhaps the project’s most impressive distinction was planting the idea of ​​making bitcoin legal tender in El Salvador – which was finally achieved on September 7, 2021.

Peterson and crew had trained young locals to become lifeguards as a way out of the dark underworld of Salvadoran gangs. The youths were internationally certified, and then paid in BTC for their services.

“El Salvador had never had professional lifeguards as part of the civil protection service,” Peterson said. “Every year there would be 200 to 300 people who would drown on the beaches.”

The Bitcoin Beach lifeguard program certified 80 youth, and El Salvador’s tourism minister took notice. The government adopted the lifeguard program and rolled it out nationally. It was a resounding success and Bitcoin Beach became a bit of a media darling.

All along, Peterson and his team had been quietly advocating for the government to make bitcoin legal tender—after all, El Salvador had already abandoned its traditional currency, the colón, in favor of the US dollar in 2001.

While it’s not clear how much influence Bitcoin Beach had on El Salvador’s decision to become the first country in history to make bitcoin legal tender, it’s hard to deny that the project played a key role in the decision.

“I don’t know how much it affected things — obviously it helped,” Peterson said. “But the government, they’re the ones who had the courage to decide to do what’s best for El Salvador and take that leap.”

It’s not a stretch to say that Peterson and his team at Bitcoin Beach made a small dent in the universe. Not bad for a California surfer who sells chocolate covered bacon for a living.