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The Big Story
Just two months after making Bitcoin its legal tender and becoming the first country ever to do so, El Salvador is ready for its next big step in the crypto world.
It's now planning to build an entire city based on the world's largest currency.
Enter Bitcoin City
The revelation comes during Bitcoin Week—a week-long promotional event for the cryptocurrency—where President Nayib Bukele first made the announcement to a bunch of fellow Bitcoin enthusiasts. Bitcoin City, which will be built along the Gulf of Fonseca, will be laid out in a circle (like a coin) and will host a giant Bitcoin symbol in the central plaza.
It will include everything devoted to Bitcoin—commercial and residential areas, museums, entertainment, services, bars, airport, restaurants, port, and rail…you name it! The entire project will be funded with the issuance of a $1 billion Bitcoin Bond.
Ok hol' up, WTF is a Bitcoin Bond?
Also known as 'volcano bonds,' they're basically US-dollar denominated 10-year bonds backed by Bitcoin which will pay investors 6.5% via the Liquid Network—a sidechain that helps speed up large-volume, bitcoin-based transactions.
Half ($500 million) of these volcano bonds will be used for infrastructure and Bitcoin mining powered by geothermal energy, while the Central American nation will use the rest ($500 million) to purchase more Bitcoins. Following a five-year lock-in period, Samson Mow, chief strategy officer of blockchain technology provider Blockstream, said that the Salvadoran government will start selling its Bitcoins and pay extra dividends to investors.
In hopes of democratizing access to these bonds, Mow further added that users all over the world will be able to invest in small amounts as low as $100. Of course, all this positing that Bitcoin's prices continue to rise.
The government will start issuing these bonds next year, and the construction of the city—which will be built near the Conchagua volcano to supply the much-needed energy to the metropolis—will begin 60 days later.
But one thing that got everyone’s attention was this:
In his presentation, Bukele stated that Bitcoin City will have no income, property, capital gains, or payroll taxes. The only tax that residents will have to pay would be a 10% value-added tax to fund city construction and services.
Back in June, Bukele, who likens his plans to those of ancient Macedonian ruler Alexander the Great, made headlines when he offered "immediate permanent residence for crypto entrepreneurs."
That tweet alone resulted in a temporary surge in interest among people checking real estate in El Salvador. The 40-year-old also said that he's planning to build a satellite infrastructure to facilitate decent internet access and connect to the Bitcoin network in rural areas and places with poor connectivity.
Looking back, these are really some big promises. But if Bukele successfully delivers on them, it will make El Salvador the financial centre of the world. That said, it all relies on the premise that Bitcoin prices will increase robustly in the future. But due to the massive volatility of cryptocurrencies since last year, it's tough to predict. And while Bukele is a popular president, his aggressive crypto-heavy stance has caused division within the country, with anti-crypto Salvadorans protesting against the government's bumpy introduction of Bitcoin as legal tender.
While Bitcoin City certainly looks like the promising future for cryptocurrencies, historically speaking, such ambitious plans have fallen by the wayside. Last year, legendary R&B musician Akon also unveiled his plans to build a $6 billion futuristic, Wakanda-inspired citadel in Senegal, called Akon City, powered by its very own cryptocurrency, Akoin. However, one year later, the construction is yet to start.
So, will Bitcoin City live up to the hype or will it turn out to be yet another failed crypto movement? Let us know what you think down below!
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