Recent reports indicate Algorand is truly underpinning the entire Bitcoin experiment in El Salvador. We have the details.
- Koinbanx, Algorand, and El Salvador
- Chivo Wallet And Lightning Network
Koinbanx, Algorand, and El Salvador
Koibanx is the Latin American fintech firm running on top of Algorand’s Layer-1 that signed a landmark deal with the El Salvadoran government in September of 2021 to integrate Algorand’s tech into official government infrastructure. That was a significant step for both Algorand and El Salvador.
However, more news is leaking in terms of Algorand’s involvement in the country’s nascent Bitcoin experiment. As we reported on in December, Algorand has a very close relationship with El Salvador. As obvious as that may be, considering that they officially partnered with the government, there is more to the story than meets the eye.
On Wednesday, the CEO of Koibanx Leo Elduayen participated in a Twitter Spaces talk which detailed what exactly Koibanx and Algorand are doing in El Salvador and Latin America in general. The details all but confirmed our breaking story, which went viral in December. While Koinbanx stated they are not directly involved in the “transactions” on the Chivo wallet, Algorand and Koibanx are playing a criminally underrated role in El Salvador’s Bitcoin dispensation.
According to the CEO of Koibanx, 6 commercial banks in El Salvador are using Wrapped Bitcoin on Algorand. “Three are already on mainnet (launched). Three more will onboard by June.” According to trade.gov, “commercial banking services in El Salvador are provided by thirteen institutions: eleven private banks and two state-owned banks.”
That means that nearly half the commercial banks in El Salvador are using Algorand to utilize Bitcoin at an institutional level. This news is far more consequential than what we reported in December. Why? Because banks are by default the fulcrum of fiscal activity in any given nation-state, everything flows downstream from the banking sector, as unfortunate as that may be as it stands today.
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Koinbanx elaborated further on their involvement stating: “Koibanx is working on an end-to-end system that allows businesses to receive fiat to crypto payments across borders.” He noted, “currently, some banks from El Salvador and Guatemala are using it, and an Argentine national bank will adopt it in near future (implementation will take close to 3 months).”
This is an example of just how undervalued a crypto asset such as Algorand can be when only accounting for mere DeFi TVL (total-value-locked).
We reported in our aforementioned story that the founder of Algorand Silvio Micali met with the Mayor of Buenos Aires (the capital of Argentina) during his Lat Am business trip in December. Considering that, it is not a surprise that an Argentine “National Bank” will be implementing Algorand in the near future. Moreover, Micali met with the Uruguayan President that same week; a major press outlet in the country dubbed Micali “the Rolling Stone of Blockchain.”
It was a pleasure meeting the Mayor of Buenos Aires, @horaciorlarreta! https://t.co/ND0WvvP1nG
— Silvio Micali (@silviomicali) December 8, 2021
It is important to understand the nuance of what was reported on Wednesday. While Algorand is not “directly involved” in the Chivo wallet per se, they are providing the underlying infrastructure to the major banks in the form of wrapped Bitcoin on Algorand. Clearly, to quibble about the Chivo wallet versus Algorand’s now validated banking involvement is splitting hairs.
Chivo Wallet And Lightning Network
Again, while Algorand is not “directly involved” in the Chivo wallet, it is underpinning the entire banking implementation of Bitcoin in the country as a whole. This is far more relevant and significant than previously imagined. Why is this the case? Simply put, Bitcoin is too slow and limited at the base layer (without layer-2 help) to make institutional adoption anything more than a function of digital gold. After all, addressing this issue is why the lightning network exists in the first place.
So why not lightning? There are many unreported flaws and bottlenecks as it pertains to the lightning network, which are detailed in a recent Investopedia article. According to Tadge Dryja, MIT alum and a creator of the lightning network, “forced expiration of many transactions may be the greatest systemic risk when using the Lightning Network. “If a malicious party creates numerous [lightning] channels and forces them to expire at the same time, which would broadcast to the blockchain, the congestion caused could overwhelm the capacity of the block.”
This could easily lead to stolen funds, according to Dryja. It is a technical argument, but it is rather obvious that there is a clear reason El Salvador is using the bulletproof tech of an “alt-coin” like Algorand rather than the easy, PR-proof choice of the highly-lauded, Bitcoin native lightning network. It just goes to show that “alt-coins” can help Bitcoin without sucking at the “affinity teat” of Bitcoin itself. Frankly, it is sophomoric to knock Algorand for their assistance in Bitcoin adoption in El Salvador.
What cannot be disputed, according to President Bukele’s actions, is Bitcoin and Algorand can co-exist in a symbiotic relationship. This story is another case study proving that Bitcoin maximalism is naval gazing for shortsighted ideologues. As the saying goes, “no one can whistle a symphony. It takes a whole orchestra to play it.” – H.E. Luccock
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The post BREAKING: El Salvador Banks Are Using Wrapped Bitcoin on Algorand To Transact appeared first on CryptosRus.
This content was originally published here.