El Salvador Plans ‘Bitcoin City’ Powered by a Volcano, Financed by Bitcoin Bonds

"In a rock concert-like atmosphere, El Salvador President Nayib Bukele announced that his government will build an oceanside 'Bitcoin City' at the base of a volcano..." reports the Associated Press. "A bond offering would happen in 2022 entirely in Bitcoin, Bukele said, wearing his signature backwards baseball cap. And 60 days after financing was ready, construction would begin." The city will be built near the Conchagua volcano to take advantage of geothermal energy to power both the city and Bitcoin mining — the energy-intensive solving of complex mathematical calculations day and night to verify currency transactions. The government is already running a pilot Bitcoin mining venture at another geothermal power plant beside the Tecapa volcano... The government will provide land and infrastructure and work to attract investors. The only tax collected there will be the value-added tax, half of which will be used to pay the municipal bonds and the rest for municipal infrastructure and maintenance. Bukele said there would be no property, income or municipal taxes and the city would have zero carbon dioxide emissions. "Invest here and earn all the money you want," Bukele told the cheering crowd in English at the closing of the Latin American Bitcoin and Blockchain Conference being held in El Salvador. CNN adds some interesting details: Likening his plan to cities founded by Alexander the Great, Bukele said Bitcoin City would be circular, with an airport, residential and commercial areas, and feature a central plaza designed to look like a bitcoin symbol from the air. "If you want bitcoin to spread over the world, we should build some Alexandrias," said Bukele, a tech savvy 40-year-old who in September proclaimed himself "dictator" of El Salvador on Twitter in an apparent joke. El Salvador plans to issue the initial bonds in 2022, Bukele said, suggesting it would be in 60 days time. Samson Mow, chief strategy officer of blockchain technology provider Blockstream, told the gathering the first 10-year issue, known as the "volcano bond", would be worth $1 billion, backed by bitcoin and carrying a coupon of 6.5% [the annual interest paid on a bond]. Half of the sum would go to buying bitcoin on the market, he said. Other bonds would follow. After a five year lock-up, El Salvador would start selling some of the bitcoin used to fund the bond to give investors an "additional coupon", Mow said, positing that the value of the cryptocurrency would continue to rise robustly. "This is going to make El Salvador the financial center of the world," he said... Once 10 such bonds were issued, $5 billion in bitcoin would be taken off the market for several years, Mow said. "And if you get 10 more countries to do these bonds, that's half of bitcoin's market cap right there." The "game theory" on the bonds gave first issuer El Salvador an advantage, Mow argued, saying: "If bitcoin at the five-year mark reaches $1 million, which I think it will, they will sell bitcoin in two quarters and recoup that $500 million."

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