This week on 60 Minutes correspondent Sharyn Alfonsi traveled to “Bitcoin Beach,” a small coastal town in El Salvador called El Zonte that has created a bitcoin economy. El Zonte is one of the first places in the world where bitcoin cryptocurrency can be used to pay for just about anything.
American Mike Peterson, a former financial planner who moved to El Salvador, is the man behind the initiative. He told 60 Minutes his vision was for suppliers to accept the currency and then pay their employees with it, which the employee could use to pay for things like utilities electronically.
“It was the goal, [a] circular economy with bitcoin, and everyone said we couldn’t do it,” Peterson told Alfonsi. “But, you know, you’re here and you see the results.”
To achieve this, Peterson needed to involve the locals in his plan. He got help when, out of the blue, someone offered to launch a bitcoin wallet app designed specifically for El Zonte. That someone was Chris Hunter, a tech entrepreneur who saw an opportunity to provide a faster, cheaper way to transact with Bitcoin using the new Lightning Network.
Before connecting with Peterson and El Zonte, Hunter says he bought his idea from venture capitalists, who told him he was five years ahead of his time.
“They acknowledged the technology existed, but they thought it was just academic or unusable for people in the real world in 2020,” Hunter said.
After being rejected by every venture capitalist his company approached, Hunter said he read an article about Peterson in Forbes. He cold called Peterson and told him that his company, Galoy, would create a bespoke wallet app for El Zonte and do it for free.
Peterson accepted Hunter’s offer. Hunter and his Galoy team knew the wallet needed to be an easy-to-use experience that, at its most basic level, helped people save and spend their money with bitcoin. About 70% of Salvadorans are unbanked and most businesses do not have credit card terminals.
“In a cash economy, bringing something new like bitcoin into a wallet there, you need to have a good user experience for them to actually adopt it,” Hunter said. “Otherwise they’ll just push him aside.”
The result was Bitcoin Beach Wallet. Prior to the Hunter app, bitcoin transactions in El Zonte were both slow and expensive. They relied entirely on the bitcoin blockchain, which Hunter says took about 30 minutes for final settlement. This means that someone who bought a coffee with bitcoin had to wait half an hour for their funds to be transferred to the merchant’s account.
Instead, Hunter’s new wallet app took advantage of the Lightning Network overlaid on Bitcoin’s blockchain, a technology that speeds up the transaction process. Bitcoin alone can process around seven transactions per second. When the Lightning Network is included, that figure approaches 1 million transactions per second.
“Lightning is a layer on top of bitcoin that enables these effectively free instant settlements – something that is actually faster than a credit card transaction,” Hunter said.
Hunter’s Bitcoin Beach Wallet is different from the state-backed Chivo Wallet in El Salvador, which launched in September 2021. That’s when President Nayib Bukele put a law into effect. forcing Salvadoran businesses to accept bitcoin, making El Salvador the first country in the world to make cryptocurrency legal tender. Unlike Bitcoin Beach, Chivo is not open source.
Bitcoin Beach Wallet is now the most popular way to use bitcoin in El Zonte. The user experience resembles Venmo or Apple Pay. Even if users pay with bitcoins, the wallet displays the equivalent value of the transaction in any currency, so they know exactly how much they are spending. It also includes a map that shows users which providers accept bitcoin.
This all might sound very high-tech for a beach town with no paved roads. But Hunter and Peterson are betting that if the bitcoin economy works in El Zonte, it could be a sign of things to come everywhere else.
“It’s a proof of concept,” Hunter said. “It’s a postcard from the future.”
The video above was produced by Brit McCandless Farmer and Will Croxton. It was edited by Will Croxton.