The introduction bitcoin-backed “volcano” bonds in El Salvador’s legislative assembly was made possible by the submission of a measure authorizing the issuing of digital assets.
Today marks the first anniversary of the groundbreaking programme, which aims to draw cash and investors to El Salvador. Plans to issue $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, were made public. Proceeds from the bonds would be divided between a $500 million direct allocation to bitcoin and an investment of the same amount in the development of the area’s energy and bitcoin mining infrastructure.
Investors will be able to obtain citizenship quickly through the bonds, which will yield 6.5%. Once the first $500 million has been monetized, the government will distribute half of the additional gains to investors as a Bitcoin Dividend. The asset management platform of Blockstream will be used to distribute these dividends on an annual basis.
A sidechain is a separate blockchain that operates in tandem with another blockchain and enables the secure usage of tokens from the main blockchain while adhering to a different set of guidelines, performance standards, and security measures.
With a two-way peg, Liquid’s sidechain for Bitcoin enables bitcoin to move between the Liquid and Bitcoin networks. L-BTC is a symbol for bitcoin that is used on the Liquid network. The network’s users, known as functionaries, administer and secure the same amount of Bitcoin.
On September 7, 2021, El Salvador declared BTC to be legal tender and subsequently accumulated approximately 2,381 BTC worth roughly $39.3 million at the current market rate (at Bitcoin’s peak in November 2021 it was more than $100 million). The investment’s return was even put toward the construction of hospitals and schools during the bull market. However, 77.1% of Salvadorans want the government to cease “spending public money on Bitcoin” while the nation’s economy continues to deteriorate.