What they are?
They're security tokens representing El Salvador's sovereign debt (bonds). El Salvador started this eruption a couple years ago, and they're currently building their mining infrastructure and their independent mining pool. This mining pool is named ES Pool. It should surpass 1.3 EH/s, giving them around 1% of global hashpowerâthe equivalent of sniping 1.5 blocks per day on average. I'd expect some indie basement or garage hashpower to join for no reason other than being sympathetic to their cause. ES Pool will be powered by a 240-megawatt renewable energy park being built to support it. The $1B to build this park, to acquire the 15,000 mining ASICs, and to engineer the pool, came from 13 investors, the largest being Tether ltd. The annual revenue split is 23% to El Salvador, 27% to investors, and 50% reinvested in mining and energy. It was an equity deal, not debt.
Now we must summit the caldera and stare into the pyroclastic flows. Volcano Tokens will be issued by Bitfinex Securities and live on the The Liquid Network. Let's discover the role of each platform:
Bitfinex Securities—
Yeah these guys. Bitfinex Securities is a subsidiary of iFinex, which also owns Bitfinex and Tether. They're all vertically integrated, but play a global game I call distributed jurisdiction. The Volcano Tokens were originally going to be issued by STOKR (a Luxembourg based securities platform that facilitates the raising of capital for those seeking to have their tokenized securities publicly traded on blockchains). In order to buy-sell-trade tokenized securities, you must be registered to do so first, and STOKR handles that, just like Etrade or RobinHood do when you sign up. STOKR has had jurisdiction issues with the America's though. And thusly iFinex, realizing the opportunity, started a company named Bitfinex Securities in 2021, which is like STOKR, and will be the agent issuing the Volcano Tokens. So you'll have to register an account with Bitfinex Securities, then you'll be able to acquire them on that platform for custody, or on any exchanges they're offered on, and you'll be able to buy-sell-trade them with any whitelisted addressee 24/7. Or you can just get them where they actually live: The Liquid Network.
Liquid Network—
Liquid is a federated sidechain of bitcoin founded by Blockstream in 2018. To use Liquid, you simply download any wallet that supports the Liquid Network, like Blockstream Green, which I happen to use as my mobile [BTC] hot wallet. The BTC used within Liquid is called L-BTC, a two-way 1:1 bitcoin peg mechanism, and it's pretty seamless to peg-in and peg-out using the app. The Liquid Network has experience with various security tokens, with three listed there already, the most famous being the BMN (Blockstream Mining Note) which gives owners the equivalent of 2000 TH/s worth of hashpower per token, and pays holders in bitcoin whatever that hashpower mines on average every 36 month maturity. Current price of one BMN? $136,000. The BMN is issued by the registration agent STOKR, which we discussed above. None of that matters though! Just remember that Volcano Tokens will be available on Liquid for those registered with Bitfinex Securities. The Volcano Tokens' notional value (face value) is $100, so with just $100 you can own a piece of the RepĂșblica!
Specific steps you will take to acquire the Volcano Tokens on Liquid when they're available:
- Download Blockstream Green
- Add an AMP account and record your AMP ID
- Register with Bitfinex Securities and provide your AMP ID
- Your AMP account is now whitelisted, this is where your annual yield will be paid each January
- Acquire Volcano tokens with L-BTC or L-USD (Tether)
Note: AMP stands for Asset Management Platform
Now let's cut the crap and houseclean some of the volcanic ashfall, some of which is dark:
The first tranche of tokenized bonds issued by El Salvador will be $1B. There will likely be several more tranches afterwards, contingent upon their going concern đ
. For the first $1B tranche, $500M will be earmarked to build the religious sounding âżitcoin City and its geothermal energy infrastructure. The remaining $500M will be used to buy bitcoin outright, which will be locked up for 5 years. The bonds themselves have a 10-year maturity.
â ïž THE BONDS ARE DENOMINATED IN USD, NOT BITCOIN
The Volcano Tokens are...security tokens denominated in USD. You can look at them as bearer instruments with a ~legal claim on El Salvador's USD denominated sovereign debt in initial $100 increments. So if BTC is $30k today, and Volcano Tokens are trading at $100 today, and you swap your 1BTC for the Volcano Tokens, you get 300 Volcano Tokens. If BTC goes to $60k the next day, you don't have $60k, you have whatever the Volcano Tokens are trading for. Maybe they're worth over $60k, maybe they're not. Sounds like a hard pass, like the early investors of Coinbase who would've made significantly more if they'd just bought bitcoin. There are a few mitigating factors, let's continue:
The coupon (bond yield) will pay 6.5% annually for the 10 years. Using the rule of 72 (72 divided by the yield), which is used to calculate how long it takes to double your money, it will take ~11 years to double your money at 6.5% yield if we apply it to the bond's principal value. So the 10-year maturity for the bonds is about double your money. Also, after that $500M that El Salvador locked up for 5 years is unlocked, they will use it to pay the original $500M loan they earmarked to build Bitcoin City. Whatever is remaining of the stack after that deduction (we assume BTC appreciates in that time), gets paid to the Volcano Token holders as a dividend over the final 5 years of the bond's 10-year life. Lastly, holding these bonds fast tracks citizenship. $100,000 was the minimum originally for this, but it's likely to get lowered. Woof, lot's of layers of trust here.
How will they pay that coupon? Consumption taxes (sales taxes, etc) from Bitcoin City, mining, tourism, anything they can get from the IMF lol, which is probably one of the things the IMF is concerned about. But me, I'm thinking about âżitcoin City. I found this:
âżitcoin City is just a rename of ZEDES (Zone for Employment and Economic Development), which was a fully planned city in the same location that China wanted (wants?) to build as part of their Belt and Road initiative. China has a growing presence in Latin America, and recently offered to buy ALL of El Salvador's outstanding sovereign debt. There's a connection here that feels dark. I think this is how El Salvador is going to ultimately build that city. Also, I hope El Salvador avoids any pension games with bonds/btc, because more countries than I can count have gotten themselves in trouble with those.
I'm not shilling Volcano Tokens dear reader, I'm simply consolidating information that's been delivered to us in fragmented ways for expedient reasons. The first tranche of these tokenized bonds will probably be like the Dallas Cowboys tokenizing the organization on a social media platform and offering them to residents of Texas. They'd all be snapped up in under 24 hours for no good reason other than novelty. Frankly, I'm neutral about these Volcano Tokens. I'll buy one for novelty. But are they shitcoins? Should maxi's shun them? Why not just buy bitcoin and HODL? I'll list those reasons after the following image, which I always refer to when asking such questions:
- Cash flows
- Diworsification
- Ideological reasons, thinking that if this is successful it's a watershed moment that many countries will rush to recreate, and suddenly BTC is the reserve asset for sovereign debt
- They sound cool and are novelties
- Citizenship for tax strategy
- They can be traded, and if speculation drives up the price you can sell them at a profit.
- They're a slap in the face to non-money "crypto", which is vaporware proffering no legitimate product or service, with no nation state or obligation tied to them, and at large, DeFi is an orgy of swaps, wraps, burns, mints, and stakes, run by dapps that do nothing but optimize token interactions to keep the orgy going.
Also, over 90% of DeFi debt is stablecoins anyway. Nothing has established itself as money within those protocols other than stablecoins or wrapped derivative collateral like BTC. I'm ranting. None of this has anything to do with anything. Done.
Back to concerns with Bukele for some bitcoiners, ones who align more with the NYT on his Presidential actions heretofore, like me, sort of. I agree with some of the mainstream criticism, I justify my fragile support of Bukele by considering that since the 80s and their civil war, El Salvador has been mired in corruption, violence, and poverty. What options exist for them to escape? Nobody in the US would be talking about or investing money there without BTC perhaps. And I ponder if Bukele is like if Alexei Navalny got elected in Russia, then marched into the Kremlin, removed every Putin and oligarch appointee, then threw Wagner war criminals in prison. Would I complain? Maybe it isn't the same, some liberties taken there.
But yeah, that quasi Chinese waypoint called âżitcoin City. I feel like if you shoehorn Tether, Volcano Tokens, Bitcoin, Chinese debt, mining, a gold tied BRIC's currency, gambling, the CIA, MSS, cartels, tax havenry, and a citizenship free-for-all into a space that small, in relief of a huge honking volcano, it will make Pompeii— look modest, and end at least as tragically.
Anyway that's it, are Volcano đTokens shitcoins? Will you buy them? Why or why not? Please correct anything I got wrong. Sats for replies, as always.