January 18, 2022
Two Weeks of Bitcoin in El Salvador

Two weeks ago, El Salvador officially began using Bitcoin as legal tender.

Since then, I've seen stories on Twitter of people using Bitcoin to buy breakfast, clothing, and more, but most of those anecdotes seem to be from journalists and tourists who travelled to El Salvador for the launch of their Bitcoin legal tender bill.

I wanted a deeper understanding of how real people in El Salvador are interacting with Bitcoin, so I went off in search of other success metrics.

The Lightning Network is private by design, making it difficult to accurately assess payment volumes and the flow of funds between various wallets and exchanges.

Still, I managed to collect a few related metrics that can give us some indication of how El Salvador's citizens are interacting with Bitcoin so far.

Let's start with El Salvador's government-issued Chivo Wallet.

Chivo Wallet User Growth

Below is a timeline of Chivo Wallet adoption to date:

After two weeks, Chivo still holds the top spot on El Salvador's iOS App Store and Google Play Store, beating all the most popular social media apps like WhatsApp, TikTok, and Instagram.

By onboarding over 1.6 million users in just two weeks, Chivo is likely the most popular Lightning Network app in the world today.

This level of success is clearly a positive signal, but it's worth reminding readers that Salvadorans all had a $30 incentive to sign up for Chivo and spend their free money.

The next question to ask is whether or not people are actually moving money through Chivo.

Chivo Node Growth

Just like every other participant on Bitcoin's Lightning Network, Chivo runs a Lightning node. Since Chivo is a custodial wallet, all Lightning payments that Chivo users send to and from other Lightning wallets will transfer liquidity to and from Chivo's node.

Right now, Chivo's node has 12.7 BTC of public capacity, which ranks 83rd among public Lightning nodes. Capacity has also been growing steadily since Chivo's launch. It is a good sign that Chivo's public node is among the 100 largest on the Lightning Network and that it's growing, but the daily capacity fluctuations are noisy metrics at best.

Over time, significant public capacity growth could signal high payment throughput, as profit-seeking routing nodes add new channels in search of additional revenue.

However, two weeks isn't enough time to make conclusions about payment flow, and there are unrelated factors that could increase or decrease public node capacity without necessarily indicating a change in payment flow.

Either way, it's worth keeping an eye on Chivo's node to monitor its capacity growth and connections to the rest of the Lightning Network.

Chivo's node is listed here if you want to explore it further.

Bitcoin Apps In El Salvador

A common critique of Chivo is that because the government created it and incentivized users to sign up, its adoption metrics cannot be taken at face value. This much is true.

However, extrapolating that point to downplay the organic adoption of other Bitcoin apps in El Salvador would be extremely misguided.

In fact, Salvadorans are already showing strong preference for Bitcoin apps over banking and remittance apps on a national scale without additional government incentives.

Take a look at the top 20 Finance apps on the iOS App Store and Google Play Store.

Not only are Bitcoin apps responsible for 9 and 13 of the top 20 apps on the respective app stores, if you look closely you'll see another trend emerging.

Salvadorans are actually happier using Bitcoin apps than their banking apps.

Most of El Salvador's banks and payment processors have user ratings of 2-4 stars, while Bitcoin related apps have user ratings of 3-5 stars.

Specifically, El Salvador's largest bank, Banco Agricola has among the worst user reviews on the top 20 charts. El Salvador's leading mobile money transfer platform, Tigo Money, has reviews that are just as bad.

Aside from Chivo, which had a number of issues and outages in its first week, Bitcoin apps are getting great reviews so far in El Salvador.

And again, nobody is incentivizing Salvadorans to use Bitrefill, Strike, Bitcoin Beach, or apps built by any other company.

Could it be that Salvadorans simply prefer Bitcoin because it solves a real problem that improves their lives? Early user reviews seem to indicate the answer is yes.

If these early user reviews prove to be true, there are enormous implications for Bitcoin and the billions of people around the world who still rely on slow, expensive fiat payment processors.

After all, the millions of Salvadorans that have already been onboarded to the Lightning Network aren't Silicon Valley nerds or early tech enthusiasts. They're regular people that are making a conscious choice to use the Lightning Network because it saves them time and money.

It won't be long before billions of other people recognize that the Lightning Network can meaningfully improve their lives too.

The Fall of Remittance Platforms

Interestingly enough, equity markets could already be pricing in the possibility of the Lightning Network disrupting traditional remittance platforms.

The most clear illustration of this can be seen in the stock prices of Western Union and MoneyGram.

Since June 4th, the day before Jack Mallers announced El Salvador's plans to make Bitcoin legal tender, Western Union's stock price is down 20.1%, and MoneyGram's stock price is down 23.8%. Meanwhile, the S&P 500 index is up 3.9% and Bitcoin is up 17%.

If that's not a clear indicator that Western Union and MoneyGram are losing their stranglehold on remittance markets, I don't know what is.

Final Thoughts

El Salvador has already onboarded over a million people to the Lightning Network in just two weeks, and early indications show their citizens are enjoying and actively using many apps in the Lightning Network ecosystem.

As millions of new users create stronger network effects for Lightning, traditional remittance platforms are starting to see their business dissolve before their eyes.

More importantly, strong network effects and user growth will serve as a catalyst for developers to build new applications on the Lightning Network.

Millions of new users dramatically increases the addressable market for app developers, who will then create even better apps for new users to discover.

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