El Salvador's "pawn to e4" move, according to the whistleblower, will put pressure on other countries to adopt bitcoin. The game-theoretic aspect of Bitcoin acceptance may soon begin to manifest itself in global geopolitics. Edward Snowden, a well-known whistleblower, tweeted about it yesterday, emphasizing that Bitcoin rewards those who adopt it first, putting pressure on countries who are lagging behind.
On September 7, Snowden tweeted, "Today Bitcoin was formally accepted as legal tender in its first country." "Beyond the headlines, there is now pressure on competing countries to buy Bitcoin—even if only as a reserve asset—due to its design's tremendous early adoption incentives."
Snowden's tweet referenced another from Aaron van Wirdum of Bitcoin Magazine, who is now in El Salvador, and revealed that the journalist could use the Lightning Network to pay for his McDonald's breakfast using bitcoin. When Bitcoin became legal tender in the Central American country, Van Wirdum said he wanted to see if he could buy ordinary items with bitcoin at a mainstream, global chain.
"But lo and behold, [McDonald's] printed a ticket with QR [code], which directed me to a webpage with Lightning invoice, and now I'm enjoying my typical desayuno," van Wirdum tweeted.
When compared to well-established monetary products, a young form of money's purchasing power grows steadily as its adoption grows in society. The ability of a new currency to assume different and more practical use cases is strongly tied to its adoption. A monetary good with limited acceptance has limited power and hence lacks the attributes of full-fledged money.
New money has always started out as a collectable object. Even yet, when more people accept and use it, the new monetary product becomes a store of value, then a medium of exchange, and finally a unit of account. In principle, the last stage requires that the money be widely accepted over the world — with such a high degree of adoption and monetary preference that its volatility is reduced and it is suited for that use case.
Bitcoin was first viewed by the general public as mostly a gimmicky collectible, but the narrative has since shifted to include use cases such as a store of value and digital gold. El Salvador, on the other hand, has already aided Bitcoin's transition from a store of value to a medium of exchange by recognizing it as legal tender. Although widespread use of Bitcoin as a medium of trade will require a significantly greater global acceptance rate, the groundwork is being laid.
As the Salvadoran population and economy benefit from Bitcoin's increasing purchasing power as a store of wealth and begin to demonstrate genuine use as a medium of exchange, game theory predicts that other countries will follow suit in the long term. Fear of being left behind, as well as the obvious opportunity cost, will push competing countries to store Bitcoin as a reserve asset or embrace it as a legal tender.
It's unclear where Bitcoin stands in the adoption cycle right now, but it's evident that the vast majority of the globe still doesn't know what it is or how to use it. The action by El Salvador legitimizes Bitcoin's usage as a medium of trade, as well as providing the currency with the geopolitical push it needs to become a global player. El Salvador's successful implementation paves the way for Bitcoin acceptance to rise as other countries follow suit, scared of being left behind. "Latecomers may regret hesitating," Snowden said in his post.
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