San Salvador — The number of transactions using Chivo Wallet, the digital Bitcoin (XBT) wallet of the government of El Salvador, have fallen by 75% since their peak, when authorities granted a $30 subsidy to users to incentivize the download of the technology.
The wallet reached peaks of 20,000 transactions a day or more, but now users are making an average of 5,000, according to Leo Elduayen, co-founder and CEO of Koinbanx.
Elduayen refers to payments using Lightning Network (LN) technology, a favorable channel for making micropayments with Bitcoin thanks to its low commissions.
Elduayen said however that this decline is going according to plan. The Bitcoin Law came into force on September 7, 2021 in El Salvador and, at that time, financial institutions and companies were adapting their collection channels to accept payments in the cryptocurrency.
In addition, Salvadorans were receiving the $30 welcome bonus, which motivated four million people to download the application, according to Salvadoran government estimates.
“The adoption of Bitcoin in El Salvador has followed the expected normal course. Initially, with the Chivo Wallet airdrop, peaks of more than 20,000 Lightning Network transactions could be seen in one day,” Elduayen wrote on Twitter.
When this impulsive movement faded, “transactions dropped to an average of 5,000 per day”, the Koinbanx CEO said.
But Elduayen said he is not surprised by such behavior, as bitcoiners are distinguished by being holders, i.e. they hold their cryptocurrency for long periods of time, waiting for a substantial increase in value.
“We don’t use our bitcoin to pay for our credit cards, loans, utilities and bills. However, banks and institutions are forced to accept these payments,” he said.
Bitcoin vs Bank Cards
If Koinbanx’s calculations are compared with the number of transactions using bank cards, the daily movement of Bitcoin in the Chivo Wallet is equivalent to 2.4% of that of credit and debit cards.
According to the Salvadoran Banking Association (Abansa), in 2021 Salvadorans made 206,904 daily payments with their cards, an annual growth of 35.3%.
However, at its peak, the Chivo Wallet LN accounted for 9.66% of all plastic money transactions in the country.
Koinbanx has been working with the Salvadoran government in the implementation of Bitcoin in the country, and in August signed a cooperation agreement to develop blockchain infrastructure using Algorand technology.
To date, Koinbanx has positioned its platform to accept Bitcoin payments in real time, in three of the 12 banks in El Salvador.
“Once payments are received, we take advantage of Algorand to keep track and use it as a balance sheet for each bank, each user and each payment made,” Elduayen explained.
Since 2015, Koinbanx has been offering services to banks and financial institutions to integrate crypto into their operations, while connecting financial products using blockchain technology.
Algorand’s blockchain was founded by cryptographer and MIT professor Silvio Micali and focuses on processing transactions at high speed. It currently has 23.1 million active addresses, and charges a fee of $0.0006 per transaction.