Bitcoin Beach: The Cryptocurrency Experiment In El Salvador’s El Zonte

Last week, El Salvador’s legislature voted to become the first country in the world to adopt Bitcoin as legal tender. While the U.S. dollar will still be El Salvador’s official currency, all businesses in the country will have to start accepting Bitcoin barring extenuating circumstances (like lack of technological resources), and citizens will be able to pay their taxes and debts with the cryptocurrency.

The government is hoping that this futuristic economic policy will attract investment from cryptocurrency businesses, provide transformative financial resources for the 70 percent of El Salvadorans who are unbanked, and facilitate remittances, which amount to about 20 percent of the country’s gross domestic product. And, true to the madcap spirit of the Bitcoin community, El Salvador’s President Nayib Bukele has already directed a state-owned geothermal electric firm to start constructing Bitcoin mining facilities that will be powered by heat from the country’s volcanoes.

At the same time, critics have pointed out that the plan is very light on details and that Bitcoin is notoriously difficult to use as a day-to-day currency partly due to its volatility. In addition, there’s a good chance that a large swath of businesses in the country won’t even be able to feasibly accept the cryptocurrency; El Salvador has lowest rates of internet penetration in Latin America. Bukele, however, has been pointing to a small Salvadoran beach town called El Zonte where residents have been using Bitcoin for nearly two years as evidence that the cryptocurrency could help power the economy nationwide.

El Zonte is a village on the Pacific coast that has a population of about 3,000 people and is popular for surfing and fishing. While a beach town might sound affluent, El Zonte is not: According to Reuters, “El Zonte is visibly poor, with dirt roads and a faulty drainage system,” In 2019, an anonymous donor in the U.S. reportedly began sending Bitcoin to nonprofits in the area with the aim of finding ways to build a sustainable cryptocurrency ecosystem in the community.

Then nonprofit workers in El Zonte, in consultation with the donor, launched Bitcoin Beach, an initiative that injected the cryptocurrency into the local economy, set people up with digital wallets, and helped businesses set up systems to accept Bitcoin payments. Residents use a Venmo-like app payment system for exchanging Bitcoin, which was developed by a tech company in California called Galoy Money. Using the app, people can see which businesses accept Bitcoin and look one another up by username.

“This was just the perfect laboratory,” said Chris Hunter, co-founder of Galoy, of El Zonte. Hunter says El Zonte was a prime location for test-driving a Bitcoin payment system because of the lack of regulatory and tax burdens, the fact that most merchants and people don’t have credit cards, and dollarization of El Salvador’s economy. (El Salvador is one of around a dozen countries and territories that use the U.S. dollar as their official currency.)

He admits, though, that trying to get cryptocurrency systems up and running for an entire country is going to be exponentially more difficult than doing so for a 3,000-person village, and expressed skepticism that the government will meet its goal of getting the infrastructure in place by early September. “To support millions of people not just holding Bitcoin but spending it too, it’s certainly technically feasible. But to figure that out in 90 days is a pretty tight timeline,” Hunter said.

Although there has been some success in integrating Bitcoin into El Zonte’s economy—about 90 percent of families in the town have made a crypto transaction, according to Bitcoin Beach, to pay for things like groceries, utilities, and medical care—the project has not been without its obstacles. Reports indicate that some residents have struggled to access the payment system because of limited data plans and lack of access to more advanced smartphones.

Hunter claims that most people in the town seem to have lower-end Android phones that can support Bitcoin transactions, though he admits developers did run into some issues with getting the lower-resolution cameras on the devices to detect QR codes at local businesses. He also said that the local cell network in El Zonte is good enough for transactions.

But the reasons why crypto investors were drawn to El Zonte do not hold true throughout the country. Only 45 percent of the population in El Salvador has internet access.  It remains to be seen how exactly the national government thinks it will improve connectivity, particularly in rural areas, and get powerful enough devices into peoples’ hands to support a bitcoin economy. Bukele has floated the idea of building a network of satellites to improve coverage, but that obviously would take quite a while to implement.

Volatility remains a concern as well. In May, Bitcoin prices took a 30 percent dive after China implemented new digital currency restrictions and Tesla announced that it would no longer be accepting the cryptocurrency as payment. Around that time, Hunter says there was a corresponding decrease in the number of Bitcoin transactions in El Zonte. By all appearances, people were waiting for the value to go up again before using it.

Steve Hanke, professor of applied economics at Johns Hopkins University and director of the Cato institute’s Troubled Currencies Project, worries that average consumers and business owners won’t want to constantly engage in this sort of speculation when deciding whether to use their money. “Businesses tend to unload Bitcoin as fast as they can because of the fluctuating exchange rate. If you receive it in the morning, it could easily be down 5 or 10 percent by the close of business,” said Hanke. “Are you running a business in which you’re speculating in Bitcoin, or are you running a business where you’re selling clothes or shoes?”

Bukele has said that the government will set up a $150 million fund so that people can immediately cash out their Bitcoin for dollars, thus shielding them from some of the volatility. The details of this part of the plan are also scant, however, and Hanke notes that there’s a danger in El Salvador establishing itself as a country with permissive financial regulations that’s willing to exchange dollars for Bitcoin at any time.

For criminals who are in possession of large amounts of Bitcoin, El Salvador could be an attractive place to cash out. In the worst-case scenario, Hanke says, “You could essentially have Bitcoin holders who want greenbacks that are in a position to basically vacuum up all of the greenbacks that exist in El Salvador, and the place would collapse without it.”

By Aaron Mak

Source: Bitcoin Beach: The cryptocurrency experiment in El Salvador’s El Zonte

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How This Impact Investor Is Generating Double Digit Returns Cleaning Up The Seafood Business

Last year, Amy Novogratz gathered a seaweed farmer, an oyster-hatchery owner, the creator of a chip made from dehydrated salmon skins, a grocery buyer, a restaurateur and a reporter for a dinner party in her Manhattan loft. As her guests savored arctic char poached in saffron with heirloom tomatoes and a pistachio pesto, she rose to explain the fish’s provenance: Matorka, a farm in Grindavík, Iceland, that raises its antibiotic-free fish on land in tanks using geothermal energy.

Back in 2016, when Novogratz’s Aqua-Spark fund invested $2.5 million in it, Matorka was producing just 50 tons of fish a year. By the time of that dinner party, it was selling 3,000 tons, including to celebrity chef Nobu Matsuhisa and U.S. grocery delivery service FreshDirect. When Covid-19 hit and Matorka’s restaurant sales dried up, Aqua-Spark helped out with a $750,000 bridge loan. “The brand is back to a good place now,’’ reports Novogratz, who sees it growing to 6,000 tons by 2022—a “really good sweet spot where you can keep production controlled, know your market, know your customer, really trace everything.” 

The 45-year-old Novogratz is herself in a sweet spot these days. A decade ago, she was diagnosed with a brain tumor doctors warned could kill her. A risky 20-hour surgery excised the tumor but left her with balance and mobility problems—on top of blindness in one eye from a childhood accident. Today, she and her husband, Mike Velings, 50, run Aqua-Spark, a Netherlands-based sustainable aquaculture fund that has attracted $148 million from 190 investors across 29 countries. They include ImpactAssets, a Bethesda, Maryland–based donor-advised fund (it enables individuals to park their contributions in profit-making impact investments before ultimately distributing the money to operating charities) and the Louis Dreyfus Company, the commodities giant controlled by billionaire Margarita Louis-Dreyfus. Novogratz herself has notable connections.

Older sister Jacqueline is founder and CEO of pioneering impact-investing venture fund Acumen and is married to TED Talks head Chris Anderson. Big brother Michael is a former billionaire macro hedge-fund trader turned prominentIn simple dollar terms, Aqua-Spark is a minnow in the $265 billion worldwide aquaculture industry, which now supplies more than half of all seafood produced for human consumption. Yet as the first and largest investing fund in the world dedicated exclusively to environmentally sound aquaculture, it is having an outsized influence. 

For example, in 2015, in its first investment, Aqua-Spark poured $3.4 million into Calysta, a Silicon Valley startup that makes a novel fishmeal. Calysta uses fermented microbes, derived from a byproduct of manufacturing natural gas, to create fish feed that is better for the environment than fish- or soy-based versions on the market. Aqua-Spark’s money helped pay for a pilot plant which in turn helped Calysta attract $150 million in additional investment, including from Cargill and BP Ventures. It’s now building a factory in China designed to produce 20,000 tons of feed a year—a potential game changer for the $40 billion global fish-feed market. “When I met [Novogratz and Velings], I said it could take 10 years,” recalls Calysta cofounder and CEO Alan Shaw. “They really do trust.” 

With its in-it-for-the-long-haul approach, Aqua-Spark has yet to sell a single holding. It expects companies in its portfolio to pay all employees a living wage and to prioritize transparency for scientific results. Several of its investments are in farms, which must minimize antibiotics and chemical use and limit polluting discharge. 

Novogratz and Velings visit Glitne, a Bergen, Norway based halibut farm they invested in 2016.
Novogratz and her husband, Mike Velings, visit Glitne, a Bergen, Norway based halibut farm they invested in 2016. Tory Williams/ Aqua-spark

Aquaculture “was seen as a very dirty, disease-ridden industry. They’ve shifted the mindset on it and made it investible,” says Lisa Kleissner, a prominent impact investor who sits on Aqua-Spark’s board. 

Novogratz is the sixth of seven siblings whose U.S. Army colonel dad expected them to be up by 6 a.m. on weekends. After studying theater at New York University, she did a stint in Washington, D.C., researching policies affecting teenage mothers, then went to work with her brother-in-law, heading up the TED Prize, the annual award given to an individual behind a single change-the-world idea. That’s how, in the spring of 2010, Novogratz found herself on a research ship in the Galápagos for a trip mixing ocean-conservation lectures and scuba diving. On that trip she met Velings, a Dutch serial entrepreneur who started his first business at age 18. 

Their relationship blossomed over the next seven months, but then Novogratz started having worrisome seizures. By October, she had received her brain tumor diagnosis. After the surgery, Velings proposed at her hospital bedside. She accepted but said she needed time to get her life back—she had to learn to walk again. Within a few months, Novogratz was back working at TED. “It was way too early,’’ she admits now. “I didn’t know how to stop pushing. It was my identity.” Finally, she says, a TEDx conference scheduled for Doha, Qatar, made her take a step away. “I couldn’t even walk on sand, and I had agreed to lead workshops in a desert. It was nuts.” She bought a ticket to the Netherlands, where she and Velings started to build a life and company together. 

Icelandic farm Matorka raises arctic char and steelhead trout in land-based tanks run on renewable energy.
Icelandic farm Matorka, which raises arctic char and steelhead trout in land-based tanks run on renewable energy, is one of Aqua-Spark’s 19 portfolio companies. Oli Haukur Myrdal

The duo picked aquaculture because few investors cared about this big and troubled market. Some fish farms were actually compounding the problem of overfishing in the wild by using wild fish as feed. More sustainable farming operations, to the extent they existed, “were selling to really small upscale markets at a premium” and had little access to outside capital, Novogratz says. They had met with dozens of potential investors in Silicon Valley and Europe and were eyeing a September 2013 formal fundraising launch when tragedy struck again. Novogratz gave birth to their first child in July 2013, and the infant died just a month later. The launch was postponed—but not for long. By the end of 2014, Novogratz had given birth to a second child (she and Velings now have three healthy kids), and the couple had commitments for more than $8 million from 26 investors. They covered initial operating costs with $4 million of their own money. 

The two of them aim eventually to have 60 to 80 companies in the Aqua-Spark portfolio, more than three times their current roster. Early on, they worried there might not be a big enough pipeline of investable businesses; now they’re actively tracking at least 1,550. 

Despite her disabilities, Novogratz has thrown herself into searching out prospects, climbing down boat ladders in Vietnam and walking on feeding platforms above crocodile-infested waters in Mozambique: “Sometimes I back away, but mostly I push myself through it.” 

Although the pandemic currently prevents them from making such on-site visits, Novogratz and Velings are undeterred, doing their due diligence remotely. “Everything that is behind us is pushing us forward,’’ she says.

Amy Novogratz is featured in the latest edition of the Forbes Impact 50. Click here for the full list. Follow me on Twitter or LinkedIn. Send me a secure tip

Chloe Sorvino

Chloe Sorvino

I cover all things food and drink as a staff writer at Forbes, from billionaires and ag tech startups to CPG entrepreneurs and wine. I head up the 30 Under 30 Food and Drink list, as well as Forbes’ 25 Most Innovative Ag Tech Startups list. My reporting has brought me to In-N-Out Burger’s secret test kitchen, had me trekking through drought-ridden farms in California’s Central Valley and even sent me to a chocolate factory designed like a castle in Northern France. I gravitate towards the intersection of food and mass manufacturing. I also cover beauty and personal care. Send tips to csorvino@forbes.com. 

How Much of the Ocean Is Actually Fished – Ed Yong

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How much of the world’s oceans are affected by fishing? In February, a team of scientists led by David Kroodsma from the Global Fishing Watch published a paper that put the figure at 55 percent—an area four times larger than that covered by land-based agriculture. The paper was widely covered, with several outlets leading with the eye-popping stat that “half the world’s oceans [are] now fished industrially.”Ricardo Amoroso from the University of Washington had also been trying to track global fishing activity and when he saw the headlines, he felt that the 55 percent figure was wildly off. He and his colleagues re-analyzed the data that the Global Fishing Watch had made freely available…….

Read more: https://www.theatlantic.com/science/archive/2018/09/wait-so-how-much-of-the-ocean-is-fished-again/569782/

 

 

 

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