WBD179 Audio Transcription

Bitcoin World #2 - Bitcoin Youth Programme in El Salvador with Michael Peterson

Interview date: Thursday 19th December 2019

Note: the following is a transcription of my interview with Michael Peterson, from Bitcoin Beach. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I speak to Michael Peterson founder of Bitcoin Beach, to discuss the project, creating a Bitcoin economy, custodial vs non-custodial solutions and the gangs and violence that plague El Salvador.

“I think the key for Bitcoin adoption is just getting people in the door. Once they see how well it works, then they are willing to put the effort in.”

— Michael Peterson

Interview Transcription

Peter McCormack: Morning Mike.

Michael Peterson: Good morning Peter.

Peter McCormack: Thank you for having me in El Salvador.

Michael Peterson: Yeah, I'm stoked you're here.

Peter McCormack: That was a quick turnaround, from invite to here, what was it, a couple days?

Michael Peterson: Yeah, you're pretty crazy. I didn't expect you to take me up on it that quick. That was pretty cool.

Peter McCormack: Well, if you think about it, what was it? Two flights of about accumulative six hours and a layover. Whereas, if I'd tried to come from the UK, it would have been a lot longer and while I'm here, why not?!

Michael Peterson: Yeah! While you're in Latin America, you might as well hit it all.

Peter McCormack: Beautiful country and actually, I think I've really fallen in love with Latin America while I'm here.

Michael Peterson: Latin America just has a certain feel. The people just kind of live in the day and it's enjoyable. They're enjoyable to be around.

Peter McCormack: It also feels like there's a lot of unity amongst Latin Americans, while at the same time, a lot of division. They all feel like they're one, culturally, but then they have their differences politically.

Michael Peterson: Yeah definitely. It's hard to really explain why there's that dichotomy, but they have a lot of similarities. But then, there is some real huge differences, often violent differences.

Peter McCormack: So El Salvador's now you're home?

Michael Peterson: Yeah, we've been living here full time for six years, kind of part time for about eight years before that.

Peter McCormack: What was that like as a transition?

Michael Peterson: It was mostly rough on the kids. They were 9 and 7 at that age and so they had a lot of good friendships in the US. So for them to make that adjustment here, and not speak the language, and feel like an outsider. But now, they love it. Now, they have a great group of friends, they'll always be a little bit of an outsider, just because they look different from everybody else, and their accents are a little different, but they feel like this is home.

Peter McCormack: Well watching them last night amongst their friends, they didn't seem like outsiders. They just seemed one of the gang, especially your daughter. She speaks the language very, very well clearly and she seems very rooted with her friends. I guess maybe with newer outsiders, they seem like an outsider, but amongst their friends last night, I did see that.

Michael Peterson: I don't think they're friends even really view them as outsiders. I think sometimes they feel a little bit, just because they look different from everybody else. You have a picture and they're the one white person standing out in the picture. But amongst the local kids here, they've been really cool to them, and yeah, it's nice where we live too. They can just walk over to people's houses and play, so it's different than anywhere in the US where you have to drive everywhere.

Peter McCormack: Yeah, nice how everyone was just out late, playing and hanging out, I thought that was really cool. It did make me think back to home. It was like, "oh, if we were at home, we'd be sat on the couch watching TV, everyone looking at their phones" and here, everyone was out in the park and playing football.

Michael Peterson: Yeah, that's one of the nice things about most people not having cars. Most of life happens within walking distance. So whether you're in the US or Europe, we're used to being able to travel everywhere and our lives are really divided. Where here, most people's life all happens within walking distance.

Peter McCormack: So what came first? Did the choice to come live here come first or the idea of doing the Bitcoin project come first?

Michael Peterson: So definitely living here. We were living here for several years, before the Bitcoin opportunity came about.

Peter McCormack: Right okay. So talk me through that then, so what were you doing before the Bitcoin project? We never even talked about that.

Michael Peterson: So we do a lot of different things here in El Salvador, working with different missionaries and church groups that are running children's homes, orphanages, working with gang rehabilitation, working with victims of sex trafficking. So we kind of have an umbrella organization that helps all the small NGOs that are working in El Salvador.

Peter McCormack: Okay, I didn't realize. Let's talk about the Bitcoin project, then let's talk a bit more about El Salvador, because we talked about some of the gang problems yesterday and that was interesting. So for any of the bits you will want to talk about, we'll cover that. So you're here, you're helping the NGOs, and then suddenly the opportunity for a Bitcoin project. Were you already a Bitcoiner? Were you already aware of it?

Michael Peterson: Yeah, I've been following Bitcoin since the early days. A couple times I tried to buy it, I think in 2013, and then again 2015, but it was still too technical for me at that time. So I kind of gave up and threw up my hands. But then, I think in 2016, I actually started accumulating some Bitcoin, and really reading up on it, and following it. I'm a libertarian at heart, so it just kind of ticked all the boxes for me.

Peter McCormack: Yeah, because you were telling me last night... What were the two books? You got Atlas Shrugged and Fountainhead? You wanted to read those, at how old? Was it 13, or something?

Michael Peterson: Yeah!

Peter McCormack: Okay, so you already were a Bitcoin, you already bought some and then someone approaches you and said, "look, we've got an idea for a project." Let's talk that through.

Michael Peterson: Well actually, so I had another NGO to tell me that they'd been given a Bitcoin. They just happened to ask me, "hey, do you know anything about that?" They knew I'm kind of focused on financial aspects, and so I was super excited to hear that they'd been given this Bitcoin and was helping them think through different ways they could use it. After that, they said, "well hey, this guy has more Bitcoin that he's looking to invest in non-profit projects, and so would you like to meet him?"

And of course, I was super stoked, because you hear about these things happening, but I never had thought we would have that opportunity. So we actually met with the manager of this guy, who was an early Bitcoin investor and he basically just said, "I have made all this money in Bitcoin. I'm never going to be able to use it all myself and I want to use it to do good things in the world, but I also really believe that Bitcoin should be part of that.

Bitcoin is going to be part of the thing that changes the world, especially in impoverished, poor nations that have had kind of poor rule of law. We're looking for projects that will actually utilize Bitcoin, not just convert it into fiat, that's not what we're looking for. We want them to use it in real ways." So for me that was like a dream come true to really think about how we could set up a Bitcoin ecosystem from scratch and have somebody that was willing to back that.

Peter McCormack: Okay, so you've got the kind of offer. The first thing is you have to come up with a proposal for an idea, you have to brainstorm an idea, or did you know straight away what you were going to do?

Michael Peterson: No, I had to go back and brainstorm. They made it clear they weren't looking for them to donate Bitcoin and you just to do a one off transaction, convert it to gift cards, or do a kind of one movement thing. They were looking for a project that would actually help Bitcoin circulate and so I thought about the communities that we work in already, and the lack of economic opportunity and jobs there and so how could we use this Bitcoin that was given to us to create jobs?

It was kind of a chicken of the egg thing. If we're paying people in Bitcoin, where are they going to spend it? But how are we going to get stores and stuff to accept Bitcoin, unless people are out there looking to spend it? So we kind of had to do the both at the same time. We started paying kids to work in different work programs in Bitcoin and at the same time, we worked with different stores to be able to accept it. There's been some hurdles along the way, but it's been a lot of fun.

Peter McCormack: All right. So we'll start with the kids first, and we'll cover the stores afterwards. So the goal was to offer them an opportunity to make money, like a little bit of pocket money. Are these kids that are still in school or have quit school?

Michael Peterson: We primarily work with kids that are still in school. That's one of the stipulations for our work program. We definitely want to make sure that they are not leaving school to be able to work, that this will be an addition to their schooling, just because that's the most important thing longer term in life, that they have an education.

So they'll work after school and on Saturdays and it is pocket money, but a lot of them actually will use it to supplement and help their families. These are families that are living on a couple hundreds of dollars a month, a lot of them and so for their kid to be able to make $100 a month, that makes a big difference in the family.

Peter McCormack: There's somebody yesterday made $100. Wasn't that in a week?

Michael Peterson: Yeah, that was some of the ones that have been working. I think they were being paid for two weeks at that time.

Peter McCormack: Okay, so the money is very helpful to them as well then?

Michael Peterson: Definitely!

Peter McCormack: What's the kind of work they're doing?

Michael Peterson: Mostly just community stuff. There's a big pollution problem in El Salvador. Historically, people have just kind of trashed the country, and so we're trying to change that culture, especially in El Zonte, where we're at. So we have the kids cleaning the river, picking up trash, they'll also do like road repair, minor road repair works in different areas where there's potholes and stuff like that and then working with some of the elderly in the community, doing outreach to them, seeing what kind of needs they have, and doing kind of little chores for them.

Peter McCormack: So fill in the gaps and things, just around here in El Zonte?

Michael Peterson: Yeah.

Peter McCormack: Okay. So when you first started recruiting the kids, you said to them, "look, we've got some work program here." Talk me through how you recruited them, what you were telling them.

Michael Peterson: So Jorge, who's kind of my right-hand man, a local guy that works with us, he has already really had a heart to reach out to the kids in our community. A lot of the kids are drawn into the gangs here in El Salvador and I'd say 90% of them grow up without ever even knowing their fathers.

Peter McCormack: 90%?

Michael Peterson: That would be what I would estimate. Most their fathers are either in jail, or in the gangs, or in the US working. So, it's a huge missing component and there's a lot of family breakdown here in El Salvador. So Jorge has really wanting to invest in the kids and walk alongside them and so when I told him we had this opportunity to actually give them some work and allow them to make some money, he ran wild with it. He came up with all kinds of different ideas of things that we could do. The kids have been super excited about it and we have more kids entering every week.

Peter McCormack: How many kids have you got now do you reckon?

Michael Peterson: I think we have about 25 kids in the actual work project and then we have other kids that we're sponsoring to go to university, and kids that we are... Every semester, the ones that get really good grades, they get a bonus in Bitcoin for that.

Peter McCormack: And the ones that around here, even here in El Zonte, they could easily get drawn into gangs here?

Michael Peterson: Yeah, it's pretty much everywhere in El Salvador, the gangs control a big part of life. Even where we live, it's definitely a gang controlled region and so that's a big thing, is just trying to keep them out of it. Even a lot of the gang members that are here, they don't want their brothers and sisters to continue in that lifestyle. So even the gang members themselves are excited about what we're doing.

Peter McCormack: Yeah, that was quite an interesting thing that you were telling me about that last night. Didn't you meet with and talk with one of the gang leaders and they wanted his brother, or somebody, or he wanted to support what you were doing?

Michael Peterson: Yeah, so Jorge was actually approached by one of the main leaders of the gang, here in town, and he asked if we would start this program in kind of the poorer part of town. We were doing it on the beach side, but he asked if we would do it kind of where more of the locals live. A lot of the gang members live in that area and he wanted them to have a program that they could walk to safely, and so that their brothers and sisters and kids would have a different life than the one they have.

Peter McCormack: Did that surprise you, when you heard that?

Michael Peterson: It did a little bit. But I do know in general, that the draw of the gangs is because there's not other opportunity and so the longer we're here, the more I realized that even the gang themselves, most of them don't want to see that lifestyle continue. They would rather have a better future for their own kids and siblings.

Peter McCormack: Do you think that's a recent thing? This is like a cultural change or...?

Michael Peterson: I think the gangs in El Salvador have probably been strong here for about 20 years and so I think you see some of the original gang members realizing that the life choices they've made were probably not the best, and there's been a lot of pain and grief and death and time in jail and they don't want that for the kids. Everybody wants the best for their kids.

Peter McCormack: It's strange that you say we're in a gang controlled area, because I haven't felt anything. In my head, I thought we would drive in, I would see guys with long blue shorts, high socks, big t-shirts and tattoos all over them and I've not seen anything to make me think this is a gang controlled area.

Michael Peterson: Yeah, I think that most of it happens behind the scenes. It's actually a lot less now than it has been in the past. We are definitely see things improving and I think part of that is just the opportunity that the kids have, the park that we built over in that region, and just the kids knowing that if they continue on the high school, there's an opportunity for them to go to university. So we're really seeing a cultural change even in our community.

Peter McCormack: Do you feel maybe a weird sense of protection from the gang? Do you feel they would protect you?

Michael Peterson: I think that they like what we're doing in the community and I think that if there was going to be harm coming to us, and they knew about it, that they would probably step in and do something about it. Just because they like what we're doing in the community, and so I don't think they want that to stop.

Peter McCormack: Amazing! Okay, so when you first recruited your first set of kids, talk to me about explaining Bitcoin to them.

Michael Peterson: Yeah, so that was a little bit of a learning curve. We got a little too technical in the outset and trying to explain to them about holding your keys and all the different attributes and how it fluctuates and goes up and down. You could just see in their eyes, they were just kind of overwhelmed.

So we kind of scaled that back and just set up a phone wallet for them and helped them make their first transaction and when they did, it was like a light bulb went off like, "oh wow, I just moved money from your phone to my phone just like that!" So we found that's the important first step is to show them how to do it, and then try to teach them more of the technical aspects behind it.

Peter McCormack: I guess historically, they wouldn't have had debit or credit cards. So they never had electronic money, everything would have been cash?

Michael Peterson: Yeah, you do have some. But most of the kids in the village would never... and the people, their families, most of them never would have had those. So they know they exist in theory, but most of them have never interacted with them. So for them, this is the first time for them to see money be able to move electronically.

Peter McCormack: Yeah, I guess that is a kind of wow moment!

Michael Peterson: Yeah, I mean definitely some of the stores that are part of our project now, they're roadside stalls that don't even have electricity and they're taking mobile payments in Bitcoin on their mobile phone, it's just crazy! These are places that would never be able to take credit cards, but now they can take payments over the phone.

Peter McCormack: Well, if you think about it last night, I had to buy something, I don't have cash. The one thing I didn't have was cash. The warnings on the websites were, "don't get out cash at the airport, or street ATMs, because these are the places where people will see you and follow you. The place the best place to do is inside a mall." So we didn't get a chance to go to a mall, so I don't have any cash on me, yet I was able to buy for dinner with Bitcoin, because I had it.

Michael Peterson: Yeah, how awesome was that? That you're in this rural village in El Salvador and you can use Bitcoin, when you can't even do that, a lot of times, in the UK or the US?

Peter McCormack: It was just amazing that I could actually pay. It was actually a solution and that was not something I expected to see. Okay, so first, if anything, it was just like an alternative currency to them? There was nothing about how the technology works, you didn't bother with that? It's just, "here's a currency, it's on your phone and you can spend it."

Michael Peterson: Yeah, that's how we initially introduced it to them. Then as they've gotten more into it, we've kind of started to share with them how they can save in it and why we think this is long term a better asset to save in, and so we're trying to encourage some saving programs. That's what is nice about the conference we were just at in Uruguay, was learning some of the solutions for saving and investing through Bitcoin. So we're going to be rolling that out with a lot of them.

Peter McCormack: There isn't a culture of saving, right? You told me that last night.

Michael Peterson: No, most of people here just in survival mode. When the average family lives on $200, $300 a month, literally, they're just living hand the mouth and so the culture of saving is something we're trying to instill in the kids, because if they can accumulate capital, then they can have businesses, they can participate in the growing tourism industry here in El Salvador and so that's what we want to make sure that they're able to participate and see a brighter future. That they don't feel like they have to try to sneak into the US, or leave their family and home to go somewhere else, but that they can enjoy their dreams here.

Peter McCormack: Is it working? Are any of them saving?

Michael Peterson: We have seen a few of them yeah, they've been saving up. I don't know how long term that will be, but they're saving up even to buy Christmas presents for their family and things like that, that they've never been able to experience before.

Peter McCormack: And they have an option of both the Bitcoin base layer or Lightning for payment, right?

Michael Peterson: Yeah, we started out with Bitcoin, but we've kind of converted everything over to Lightning, just because of the fees and how quick Lightning is able to transact.

Peter McCormack: Okay, so we'll talk about that for you guys as a business. But in terms of the next level of education, how did you explain Lightning to them?

Michael Peterson: We basically just told them it was the same as Bitcoin, but that it was cheaper to use and faster. So yeah, just a different application that they could use for that.

Peter McCormack: And they got around to that okay?

Michael Peterson: Yeah, they learned on the other application, so it was a little bit of an adjustment. But once they start using it, they're like, "okay, this is better."

Peter McCormack: We also had that kid yesterday, who still didn't want to receive his payment in Lightning, didn't he. He's like, "still pay me..." Even though he knew the fees were higher.

Michael Peterson: Yeah, he was just used to using the other one and I think there's a little bit of a reluctance around, "what if I do something wrong, or if I screw it up?" But I think, even as we were talking to him yesterday, he realized what the benefits were.

Peter McCormack: It's funny, I've historically preferred the base chain, I don't know why, I just have. But I've often thought, "well, what's the actual use case for Lightning?" I understand the use case is you get faster and cheaper, but I use the base chain all the time for invoicing and I very rarely use Lightning. It made sense yesterday, when I was here, because you don't want to sit away for six confirmations if you're going to the store. If I was buying dinner, I don't want to wait for an hour for her to confirm I've actually paid her, so it kind of made sense. What it made sense to me is this little circular economy that you've created.

Michael Peterson: Yeah, it definitely makes it possible. We have people that are literally doing 25 cent transactions, buying tortillas for their mom. You can't do that on the base chain. It's just really, really challenging to be able to do that. The more we got into it, the more we realized that Lightning was going to be the solution.

Peter McCormack: Have you gone to the next step of starting to teach them about saving their private keys? Because when I go back here last night, one of the things I was thinking about is about key management. I was like, well most people, they'll either write them down somewhere, or they may get something like a bill folder, and have it stamped out and then they'll hide one in the safe in the loft of their house and maybe one at their parents. Or I was thinking, here, there's people who are living in essentially huts, right? They don't have the same kind of security we have. So key management for somebody living either in poverty, or in a developing country, is going to be a very different scenario from a wealthy Western speculator.

Michael Peterson: Yeah definitely! That's been something we've wrestled with from the beginning and how early do we introduce that? Initially, we're talking about small amounts of money, and so we've tried to keep it simple. We found that if you try to load too much right away, it just confuses them. Over the next months, we'll be focusing more on key management. It'll be a learning process for us too, for them, in the situation they're in, what is the securest way? From what we've seen, usually the way people lose money is by losing their password or losing their keys. That's the thing we're kind of most focused on down here.

Peter McCormack: What if they lost their phone? That would be a problem, right?

Michael Peterson: Yeah, we basically told them it's like having cash in your wallet. If you lose it, it's going to be very hard to recover.

Peter McCormack: But it would be nice for them to have a way of storing their private keys. I know my key management solution, but it's very much a Western based home scenario and it's designed around Western base lifestyle. It wouldn't work living in the same arrangements they have here. A lot of people talk about, "banking the unbanked." Okay, if we're going to bank the unbanked, usually the unbanked tend to be in the third world or in developing countries, have we really thought through key management in those scenarios? I can't think of a time where somebody has now. It's almost something I've thought of in this last 24 hours.

Michael Peterson: Yeah we're not teaching them how to use a Ledger Nano and they're holding most their stuff on their phone apps right now is the solution we're using, just because we want to keep it simple. But I think going forward, probably the best solutions, and I know it's unpopular to say, but I think the best solutions for this group will probably be custodial options and even working with, like your sponsor BlockFi, where they can be investing some of their money and getting interest on it and not so focused on the key management side of it.

I think that we can learn a lot from working in the developing world of what is going to take Bitcoin mainstream, because us in the Bitcoin community, we're so focused on the technical aspects, but if we really want to hit the mainstream, we've just got to make it easy and people not have to really think about it. I think what we're seeing here is you've just got to keep it simple for them.

Peter McCormack: Yeah, the custodial versus non-custodial does come up a lot. I understand the people who are anti-custodial, that it's antithetical to Bitcoin, "not your keys, not your Bitcoin."

Michael Peterson: Yeah, I totally understand too.

Peter McCormack: I totally understand it, but I'm with you in the scenario, meaning the kids last night, what is best for them. Do they memorize their 24 word seed? Do they have it on a piece of paper hidden in the cracks of the wall? I don't know. Or is a better scenario for there to be some kind of custodial wide solution and they maybe have to sacrifice that part because it is not possible for them to... The combination of cultural, educational, technical home life, it's a far safer solution for them to put their trust in a third party, which I know will piss a lot of people off, but I can see why that might be the solution.

Michael Peterson: I think it doesn't have to be the long-term solution. I think as they get further along and as they're able to learn more about it and have a better understanding, then we can move them over to non-custodial. But I think the key for Bitcoin adoption is just getting people in the door. Once they see how well it works, then they're willing to put the effort in to become more familiar with all the aspects of it. But if we put all these walls up to begin with, they just will not even want to enter in.

Peter McCormack: Yeah, it's almost like a scenario my father... He doesn't have Bitcoin, he's thought of buying it a couple of times. He has three options. I buy and manage it for him, which means I can steal it. The second option is he uses an exchange, a Kraken or a Coinbase, and they custody it for him and he trusts them, but "not your keys, not your bitcoin." Or he custodies it himself. The third solution is a terrible one for him.

He can barely work a remote control and he will almost certainly make a mistake and lose it. This is a guy who for my entire life, I've had to program TVs, fix his computer and teach him to email. He still doesn't understand the difference between a search engine and the browser. It doesn't matter how many times I explain it, he can't tell the difference. So in that scenario, somebody like that, perhaps there's lower risk in a custodial situation, which I know is antithetical. We keep having to say this.

Michael Peterson: Yeah, but I think sometimes we can focus too much on that aspect. I mean, of course we understand what Bitcoin stands for and what it allows and the fact that it allows us to not have to ask permission to use our money, there is no third party intermediary, but there also is real risk of people losing their Bitcoin and I think that happens much more often than people being blocked by a third party or a custodian. I think we need to find the balance there, especially if we want this to go mainstream. I think the solution right now for Bitcoin and everybody having to hold their own keys and manage their own Bitcoin, it'll probably only take us to a very small percentage of the population in the world.

Peter McCormack: I guess El Salvador being now a dollarized economy, they're not at risk of Argentinian levels of inflation deflating their currency. They don't have bank accounts, they don't have the risk of a current leader where people can access their money. This really is actually just an opportunity, I guess it's its economic growth, right? It's an opportunity to earn and spend and you've created the circular economy that allows that. So the thing we need to probably add to that is then talk about the stores, because I put this stuff up on Twitter yesterday and got lots of great feedback, some kind of negative comments. One person said, "well, where are they going to spend it?"

Michael Peterson: Well that's why we've worked to develop the economy here. We have a number of stores that are accepting it and then we're helping those stores set up their own accounts. Sometimes they will need to convert it back to fiat to pay their suppliers and that's fine. It's a chicken and the egg thing. You have to prime the pump and get it moving within the community. We have a number of places they can spend it. They can also use apps like Bitrefill, they can buy phone credit for their phones here, all the carriers allow for that, the major supermarket here, they can get credit for the supermarket through Bitrefill.

So there are lots of options. They can buy plane fare for relatives that are coming to visit. The real holy grail of what we're trying to do is get people to start, who have family members in the US that send them money every month, to have them start sending that in Bitcoin. El Salvador has about $5 billion a year that comes in and remittances from the US and Western Union and the other money service agencies. They siphon off like 5% to 10% of that. So that's a huge chunk coming from the poorest of the poor. So if we can get them sending that in Bitcoin and have that going into their pocket instead of the big companies, it can make a huge difference here.

Peter McCormack: So the stores who now are accepting Bitcoin, let me ask a question on that. So they take the Bitcoin, are these family businesses or will they have staff?

Michael Peterson: They're family businesses, but some of them will have staff also.

Peter McCormack: Do they have the opportunity to convert that back to dollars if they need?

Michael Peterson: Yeah, so we will help them provide a liquidity solution to convert them back to dollars. We will either buy it back from them, or right now, we're working with Athena ATM, Bitcoin ATMs. They're going to put a Bitcoin ATM here in El Zonte and so they'll have that option also. But there's also, whether it's Bit Kit, BitPay, or there's a few other companies we've been talking to that they can set up accounts for, and just send it, and they'll automatically convert it for them.

Peter McCormack: Are they happy receiving Bitcoin? How do they feel about it? Have you talked to them?

Michael Peterson: Yeah, they've been really happy. One, it's additional customers, a lot of these were kids and other customers that didn't have the funds before, and so they've seen a huge uptick in sales. But they also said, just on the security front, it's been a lot better for them, because now they're not holding all this cash, not having to run to the bank all the time to deposit it and so it's actually much easier for them to handle.

Peter McCormack: Oh wow, that's interesting! Okay, so the big question, and you we talked about this yesterday, we should talk about it here. What about the volatility?

Michael Peterson: The volatility is definitely been an issue. Not so much for the kids in the program, the different people we're paying in Bitcoin, they're usually spending it on a fairly good rate, and so they're not holding a lot, so the volatility hasn't really hurt them. For the stores, it's definitely an issue. To make sure they don't get a bad taste in their mouth right off the bat, we have agreed to help mitigate any losses they might face in the first few months of the program, until they can kind of learn to balance the currency risk. So during these three months, if there's a really down week, we will goose up their accounts so that they're even. But then they also have to see when it rises and the potential with that.

Peter McCormack: Do they have to pay you back when I rises?

Michael Peterson: No, they're in a win-win solution.

Peter McCormack: Yeah. So I guess ideally, you'll eventually get them to a situation whereby any Bitcoin they have this automatically converted to dollar?

Michael Peterson: We'd like to have them maybe saving half of it and have that as long-term savings program, but keep that in Bitcoin, but then convert maybe half of it that they need to pay their suppliers and that sort of thing. So they can kind of still benefit from what we feel will be the long term appreciation of Bitcoin, but be able to carry on their... They obviously have to pay for the goods that they're selling and so they need a solution for that.

Peter McCormack: How many stores do you have signed up?

Michael Peterson: Right now, we have two stores, a pupuseria, which is kind of a local fast food restaurant in El Salvador, we have a haircut place, a place that does nails, and then we have a coffee shop that will be starting next week and that's where we're going to put the Bitcoin ATM.

Peter McCormack: Nice, so it's growing. You have got a good kind of like circular economy here?

Michael Peterson: Yeah, we haven't had any complaints from the people. They have plenty of places to spend it. Most of these are kids that don't really leave the community anyways and so these are the natural places they'd be shopping anyways.

Peter McCormack: So what are the challenges you're running into with this? What are the difficult side of it?

Michael Peterson: One of the initial challenges was the size of the transactions that we're doing, they're really small. So when we were doing everything on chain, obviously the fees were a component of that, and the time that it would take for to receive confirmations. I've been in the Bitcoin space for a while, but I'm still definitely learning and I'm not an expert.

One thing that surprised me, that I hadn't realized was an issue, was when you accumulate a bunch of small transactions and then you try to move those out of your wallet, I guess the size of that transaction is super big and it's very expensive to move and so the stores that were receiving all the transactions, when they went to move them, they took a big hit on those fees. So that was something we had to find a solution to and that's why we moved everything over to Lightning.

Peter McCormack: Are there any other challenges or any other observations you have of Bitcoin, as somebody who's creating a community around it, that maybe others aren't aware of?

Michael Peterson: I think that you're always going to have a natural scepticism to promises of what Bitcoin can achieve. And I think specifically in what we're doing, because we're employing the youth, and there is always worry that maybe this is a scam or maybe we're seeking something out of it for ourselves. But I think the longer term, they see obviously that we're not personally benefiting from this and that this is something just for the community. So that just takes a little bit of time and trust to overcome those things.

Peter McCormack: Education and I guess the magic moment of first receiving, first spending, because it seems all natural for them now.

Michael Peterson: Yeah, once they make a couple transactions, it's like they've been doing it their whole life. Initially, we planned to work more with the parents. But we found that it's much better to start with the kids and allow the kids to teach their parents about it. That's how I learn about technology things, from my kids, so I totally understand.

Peter McCormack: I just told you about my dad and there is a fair and solid argument that people would say, "well, you could have done this with dollars."

Michael Peterson: You could, and that's something that we've been very cognizant of from the beginning. But we think, because the economy in El Salvador is so dependent on money sent back from the US, that there's a huge competitive advantage in that if they can start receiving that in Bitcoin, they'll save all the money from that. You also have the security aspect of it, for both the stores and the individuals. They're not walking around with a bunch of cash.

They're not worried about getting robbed in that way. So we feel that's beneficial. Then also, these people don't have any banking solutions and so this is opening them up to being able to have a savings account that earns interest, being able to have a vehicle that they could one day possibly even get loans in and so it's opening this whole new world to them that they couldn't have if they were just dealing in US dollars.

Peter McCormack: I guess also, though if we're fair, if you end up building a Bitcoin economy here, rather than walking around with dollars, they may be walking around with Bitcoin and people would be aware. There's a lot of security fears with Bitcoin. Have you had any of those kind of worries that people will come in and try and extort the Bitcoin rather than cash?

Michael Peterson: It's obviously always a concern, but I think that cash is always the easiest thing to steal from somebody and even though it's still possible with Bitcoin, it does take another level of sophistication and it's a little bit easier to trace. Cash is basically untraceable and so we think that while it's not perfect, it definitely is an advantage to cash.

Peter McCormack: Does the government regulate cryptocurrencies?

Michael Peterson: The government here, from my understanding, is still kind of in a wait and see mode. I think they're waiting to see what the rest of the world does. They did issue something on ICOs two years ago, that those aren't allowed, which I think was a good thing. But with Bitcoin, they're kind of in a wait and see mode. We'll see what happens when we bring the ATM in.

Peter McCormack: Okay, because it was interesting that Bolivia was the first country I visited where it was banned.

Michael Peterson: Oh, really? I didn't realize it's banned there.

Peter McCormack: No, I didn't realize until about a day before I went! I met somebody there and they said, "look, people use it. Nobody cares, but you can get arrested for it, if you have got it." Which was quite interesting. Are you aware of other Bitcoin communities in El Salvador? Is there anything else going on?

Michael Peterson: There's a Facebook group and there are some people, but it's not a huge community. Definitely, what we're doing here is ground zero for it. We're hopeful! We just had a new president elected here last year, Nayib Bukele, who's in his mid-30s, very forward looking and technology focused, so we're hoping that he will be the one of the first presidents that really embraces Bitcoin. Also, because El Salvador uses the US dollar, they're not worried about protecting their own currency, so if they really embrace Bitcoin, it would give them a big competitive advantage.

Peter McCormack: You were telling me he's very popular. What was it, 88% approval rating?

Michael Peterson: Yeah, 88% approval rating, right now! It's unheard of.

Peter McCormack: Could you tell me about his campaign?

Michael Peterson: Yeah, El Salvador has a real history of corruption in the political sphere, from both parties, both on the right and the left. So he came in as an independent, and I can't remember the exact wording of his platform, but it was along the lines of, "there's plenty of money to develop the country if you guys would just stop stealing it." So, that was the gist of his campaign slogan.

Peter McCormack: Let's talk about locally, El Zonte, your program, what's stopping you expand this to 100 kids, to 500 kids?

Michael Peterson: Mostly just time and resources, we're in the early stages of it. So we actually have another town, that's three hours from here, that we're getting ready to roll the program out in also, so we'll kind of be on both ends of the country seeing this happen. It's also a tourist destination, so that's another key component that we think, is that if tourists know that they don't have to convert money and they can come in and just have that Bitcoin on their phone, that's another great use case of them not having to try to find an ATM or kind of like you said, they arrive here and not be able to buy anything. They know that they can go to these communities and just use Bitcoin.

Peter McCormack: Okay, I'm trying to imagine your grand plans here, because you must have thought ahead? So you've got two cities. Is your grand plan for the whole of El Salvador? Are you even thinking about other countries, thinking about Nicaragua, Honduras? What's the big plan?

Michael Peterson: The sky's the limit really, but we are focused on El Salvador. I have a tendency to go in too many directions sometimes, so I'm trying to keep my focus here. What we'd really like is for the government to see the positive impact that this could have and to see the Salvadoran government get behind this and instead of being known for a high murder rate, for being known for this country that's really pushing technology and embracing Bitcoin. We'd like El Salvador to be known as the crypto coast of Central America. So that's why I've called our project Bitcoin Beach.

Peter McCormack: Have you reached out to the government at all?

Michael Peterson: I've tweeted at the President several times, but he has not responded yet. We'll keep trying!

Peter McCormack: If anyone knows the president of El Salvador, please ask him to get in touch with Mike, we'd really appreciate that. Okay, so when I bumped into you into Uruguay and you said, "would you like to come to El Salvador?" I was like, "murder capital." First thing that came to mind. Just before I went to Bolivia, I was like, "Bolivia is really dangerous, cocaine." That's what I thought about, because you have these natural clichés that you've heard about.

Then I've read the reports on Bolivia, both for La Paz and Santa Cruz, "don't go out at night, use approved taxis, don't have a watch if you're attacked." I was quite nervous going there and nothing happened. Honestly, I felt as safe as I felt in central London. Coming out here, I had the nervous excitement of coming to a country I've heard so much about. I've watched about the gangs, I've watched about prisons in the country, I feel perfectly safe. I know it's not the same as Bolivia, but is the reputation of El Salvador fair or is it also frustrating?

Michael Peterson: I think it's both. I think it is a very dangerous place for a lot of the Salvadorans to live, especially if they're in a gang controlled area. A lot of the families with young kids, their kids come to a certain age, and a lot of times, they're forced to either join the gang or be killed. I don't want to downplay just the tragedy that is playing out here, but we are seeing huge positive changes. In the past year, the murder rate has dropped by 50%, which is obviously huge.

Peter McCormack: Why do we think that is?

Michael Peterson: I think a lot of it has to do with the new president. He's been both offering positive opportunities and economic growth for the young in the society. So they're choosing that route rather than the gangs, but he's also been firm with the gangs and is trying to really crack down on them. Especially in the prisons, where they control a lot of the activity, he's isolated a lot of the leaders, he's taking away their cell phones. So he's kind of coming at it both with sticks and carrots. So that's been a big positive change. El Salvador is just a beautiful country, you see it here!

Peter McCormack: It's unbelievable! Honestly, it's stunning!

Michael Peterson: So the tourism opportunity is huge and they have great surfing, the waves are amazing here, and so they're really focused right now on developing tourism, specifically around surfing and that crowd.

Peter McCormack: Okay, so I'm going to talk a little bit more about the gang side of things. Before I came, my assumption was the gangs would be drug based gangs, because it's South America. I assumed there would be local drug dealing and also the trafficking of drugs from certain countries through El Salvador up into the US. But that's not the business of the gangs, right?

Michael Peterson: No, El Salvador is not on the main drug route. You'll have some drugs that come through, but the main focus of the gangs here is extortion and it's primarily of small businesses.

Peter McCormack: So as I said to you yesterday, it's kind of like a tax.

Michael Peterson: Yeah, basically. Anything from somebody selling tortillas on the side of the road to the person walking around selling used clothes, depending on the community that they're in, they'll be paying some type of protection money to the gangs. It's really sad because it's really held back the economy in El Salvador. A lot of people who could grow their businesses, choose not to because they don't want to become on the radar of the gangs. We've known a lot of people who they've been extorted and they've just decided to shut down their business rather than to kind of face that risk.

Peter McCormack: Because the amount they've been extorted for is too high to make it operationally profitable?

Michael Peterson: I think both. I think some of them, just as a matter of conscience, they don't want to be paying into the system that they don't agree with. There's always fear that if they extort you once, they're going to come back for more. So some people have just decided they'll move somewhere else or they'll just go get a job somewhere rather than have a business that'll be a target.

Peter McCormack: And saying no is risky?

Michael Peterson: Yeah, definitely saying no is risky, that's why the murder rate's so high here. A lot of the people that are killed are people who have said no to paying the extortion. But hopefully, we're seeing that change. I think we see even for a lot of the gang members, they realize that's not the road forward. They want something better for their own kids, for their brothers and sisters, and they want the economy to grow, they want there to be opportunity.

Part of it is you have had a real... There's a real chasm between the rich and the poor here and the gangs are somewhat of a reaction to that, of the poor being able to feel like they can fight back and take back some of that power from the rich. But the unfortunate thing is, is it's usually the poor that are most impacted. The rich have security and so they're not really impacted by it, so they wind up extorting their poor neighbors. Hopefully, we're going to see that change over the next several years.

Peter McCormack: Do you think, because you tend to find in developing countries, people don't have laptops, there's no wired internet, but they have mobile phones and they have access to a mobile internet, do you think a more connected world, where perhaps the youth in El Salvador are connecting with, or seeing the rest of the world, is making them want to live a different life? Do you think that has a positive influence? The reason I ask is when I've interviewed Thae Yong-ho from North Korea, he's the most senior defector, he said, "the most important thing for North Koreans is to see Western culture." Do you know if that's had any influence?

Michael Peterson: I think that has had some impact, but it's been both good and bad. I think you see some of the materialism creeping in and so I would say that's a negative thing. But you definitely see some of the other Western values, especially how women are treated and those sorts of things, you see that kind of changing within the culture, where there's historically been a machismo culture here that's been kind of degrading the women. But you see that starting to change as they see tourists come in, and they see women traveling by themselves, and so that's been a positive thing.

Peter McCormack: Yeah, because you also mentioned there has been a problem with sex trafficking in the country as well. Is that tied part to the poor treatment of women? Or is that just a side-line business?

Michael Peterson: I think that's more of a function of just the poverty. When people are desperate and they don't have a lot of opportunities there, they fall prey to predators and so a lot of people will come into communities, they'll promise jobs, they'll promise that they'll take them to the US, they'll promise all these things and then they basically kidnap them and force them into prostitution.

Peter McCormack: Okay, so talk to me about the future. What's coming up? Tell me about the project, what's coming up, the future of the project. You talked to me about expanding into lifeguarding?

Michael Peterson: Yeah, so we have a lifeguard program that we're developing here. We're in a coastal city, and there's at least a few people that drown every year here. So a lot of local kids are either fisherman or surfers, so they're strong swimmers. So we're going to do some lifeguard training with them and then actually pay them to serve as lifeguards on the weekends and during the breaks when we have a lot of people here on the beach. That'll obviously save lives, but it's also teaching responsibility and job skills to these young kids and we think will have a big impact on the future.

Peter McCormack: If somebody wants to help support the project? What do you need?

Michael Peterson: We need both people that will help us kind of think through solutions for banking, and as new wallets come out, some people that keep us informed on what the best solutions are for what we're doing. But also if people want to donate Bitcoin to what we're doing, we can always use funds for sure. We have a website that is more of a placeholder right now, because I haven't gotten around to build it out, but it's bitcoinbeach.com, which is the website and that's @BitcoinBeach, which also the handle on Twitter. So yeah, we would just love people to come down and visit El Zonte and see what we're doing here. If you have ideas for other projects we could be doing, we'd love to hear it.

Peter McCormack: Spend some Bitcoin?

Michael Peterson: Yeah, definitely spend some Bitcoin!

Peter McCormack: All right Mike, well listen, I appreciate you having me here. It's been a wonderful trip. I'm definitely coming back. I'm going to bring my kids I think as well. I wish you the best, this is probably one of my favourite, if not my favourite Bitcoin experiences so far.

Michael Peterson: Awesome, it's been great having you! Make sure your kids bring their Bitcoin, because that's all we take here!

Peter McCormack: Thanks Mike!

Peter McCormack: Hello Jorge.

Jorge: Hello Peter.

Peter McCormack: So you're working with Mike! It's great to meet you. It was great to meet you in Uruguay, I didn't realize that was your first time on a flight. How did you enjoy the flight?

Jorge: Good! It was my first time, but I really enjoyed the flight and the conference. It's amazing, everything, how I learned. So I'm ready to try to start to teach more kids about the programs.

Peter McCormack: How long have you known Mike?

Jorge: I've known Mike for almost 10 years.

Peter McCormack: Wow, okay! What were you doing before the project?

Jorge: Before, I am a surf instructor. I am working for make a big contest, like for surf competition, for the war. So I work making surf magazine, so this is the kind of job I have. So always surfing, surfing, surfing, but after a few years, I continued to surf, surf, but I feel tired always teach kids about surf. I'm thinking in my future, but I know one man, he always come and he asked me how I feel and how is my family, because I had my daughter in the first year when I met Mike. So he started to explain me about the life, so I can understand the life and he explained me one day, the family is more important in the life.

Peter McCormack: Yeah I've learned that too lately!

Jorge: So I stopped to continue make money and surf and I started to put more time in my family. After 10 years, I'm here. I changed everything kind of life and I started to continue to explain my buddy, family is the more important.

Peter McCormack: Well, and that's very important in El Salvador, because a lot of children do not have their fathers around?

Jorge: Yes. This is part of the kind of job I'm working, try to help kids in the communities. They not have, maybe fathers, or their fathers drink a lot of alcohol. So this is the kind of job I make, try to work with the kids and try to explain about the life. I explain it's very important to stay in school. Sometimes, we have a surf camp, I teach how they need to surf and we're working so they can stay lifeguard. So we have our surf lesson, skate lesson, bible studying, with the other, for lifeguard. So we are working with the kids, when they are in the school too, so I'm very focused to try to work in this community with every kid. We have almost 120 kids in the program.

Peter McCormack: Wow!

Jorge: We have almost [Inaudible] parents. When I see kids, their fathers' drink alcohol, I want to stay really cool friends with the son and then I go for the father. So now I start to work in construction, and the father for the kids, the father, the guy drink alcohol, they stopped to drink alcohol and they are working now, not for me, they work with me.

Peter McCormack: Okay great.

Jorge: We're working together. I work in the life, I teach, you don't need to drink a lot of alcohol to feel better, feel good. So they start to work in the construction. So now, they are working in the construction and the kids are working too, they just... Not work, it's more like they help in the community and we help with Bitcoin donations, for they can continue the school. So if the fathers are working the construction, don't drink anymore alcohol, the kids are learning surf, Bible, skate, swim and making money, so the kids is super cool.

Everything is good. The father is super happy, because he is working. Now he feels good, because he is employed now. So I think the more happy is the mum in the house, when the father is not drinking anymore alcohol, the son is making money and learning about a lot of different areas in the community. So when I'm back in the night to my house, I feel super happy when I know a lot different thing is happening, changing in this community.

Peter McCormack: That's great!

Jorge: This is part of the my life. So I continue to surf, because I have my daughter, she surfs, my wife surfs, and I have now my son, he needs to surf.

Peter McCormack: I've never surfed.

Jorge: Wow, you need to try. It's super easy!

Peter McCormack: Okay, so I'm going to come back in the summer with my kids and you can teach me to surf.

Jorge: Yes, please!

Peter McCormack: What did you first make of Bitcoin when Mike introduced it to you?

Jorge: This is a super good question. When I started my program, when I started with the kids, I always teach kids how they need to learn to surf. I explained they needed to learn to speak in English, I explained they needed to learn to swim, it's very important. So I explained they needed to continue the school, not stop, they need to continue.

But the thing is, I have a friend, he's in 9th grade, he finished the local school, so he needs to go to the city. But if he go to the city, he needs money. I help every kids in different area, but I don't have money to help kids. So this is when my program, the program we have with Mike, for me, I feel like it stop. Because they want to continue the school, but we don't have money and he is not my son, so I can't put my money in these kids.

So I feel super bad. This is the first year. A few years later, Mike explained to me about the Bitcoin and I say, "wow! What do you think we can try to help and support kids with Bitcoin?" He said, "we need to see how everything work in the past of this year and maybe in the future we can." But now, we have six kids in the university.

Peter McCormack: Wow!

Jorge: Another group is in the other school. I have all other man, he works with us. He drives every day, for the kids to the school and we have the other program, with almost 120 kids in the ministry. We work in different area, they can stay lifeguard, they can surf, we have other kids that start to learn English now and we have other problems to help the community. For example, if we have a family, they not have money, their life is super hard and maybe for the dinner they don't have nothing for dinner.

So they need to go to the bell, but I know there's a kid there, maybe they're hungry in the night. So how you think I feel when I need to help. I feel like I need to help, but it's not possible. So with Bitcoin, the kids start to select the family, have this kind of program, and they start to buy food with Bitcoin and they go and put the food in the different house, but Bitcoin pay for this program too. So it's amazing how Bitcoin start to change this community.

Peter McCormack: Okay. In some ways, it is a charity, right? It's kind of like a charity program?

Jorge: Yes, yes.

Peter McCormack: So it relies on the help and donations of Bitcoin coming in to pay for the program. But I guess one of the good things is, if the government could see this program, perhaps they would provide finance towards helping support lifeguards, supporting cleaning up the environment?

Jorge: I think with the government, this will never happen, because you need to make and design one really good program, and they can see, they think it work, they want to help. But you're not going to start to work with kids, so they say that you need paper documents and everything. So it's hard for this program. So, I can and in the beginning, I started to think that I wanted to work with the government.

But I see, this is maybe 10 years past and never make nothing. They say, "next year, next year." So, I think with the guy who helped this community to put money and Bitcoin for the programs, he made a big difference in this community. I hear the government, they can start to hear about the problems, so one of the things I'm thinking maybe one day they say, "hey, you cannot use Bitcoin for this problem." But I won. I'm excited to hear, because I don't know if they want to support this program.

Peter McCormack: There would be an option to do this program with dollars rather than Bitcoin. Is there any reason why Bitcoin is better than dollars?

Jorge: Yes, because one of the thing is, every kid in this community, they have funds. So they can have the money in the blockchain, they can save money, they don't need to put in the house, or another area maybe they lose. They have the fund, they have the money. They are in the school, they can lose it. So this is one.

The other kids, I started to hear, they are very excited to continue to trying to find a job. So this is good, they are starting to think about how they can make a future. I think Bitcoin is super easy and fast to use it in this community. The store, they started to accept Bitcoin. So for the kids, if they are on the beach and they pass in front of the store, they can buy Coke, or a drink, or something, they have money in the moment.

Peter McCormack: I guess this would be great if this kind of program could be rolled out across El Salvador, because the country obviously has a lot of problems with youth being attracted to maybe follow a different path in life?

Jorge: Yes, this is one of my plan. Now the program, when I started the first time, we don't have Bitcoin. So we started to try to explain to kids, so these we have these in three different bits in El Salvador now. So one of my dream is to start to use Bitcoin in different areas in El Salvador and try to change a life in this community, in El Salvador.

Peter McCormack: Fantastic! Okay, just to finish out, because we've got to go in a minute, if anyone's listening to this and they wanted to help support the program, what kind of help do you need?

Jorge: I am very focused trying to help kids in the area for education, for university, because in the future, they can support. Maybe they don't have a sponsor in future, but they are the sponsor for the family, so they can save the family in different area. So an education is I think, one of the point, very important for me.

Peter McCormack: And if people want to help, how can they help you?

Jorge: Yes, please. I'm ready, we are open to hear, if people want to help the kids, or we have a lot of different area how they can help.

Peter McCormack: Maybe come down and visit El Zonte, as well?

Jorge: Yeah, please and learn to surf. Surf is life!

Peter McCormack: Well it's been great to meet you, it's great to meet you in Uruguay, great to meet you here and hang out with you in your home. I met your wife and two kids. The baby is very cute! So it was really great to meet them all. Hopefully I'll come back and we'll hang out again and you'll teach me to surf and talk about Bitcoin.

Jorge: Please! I'm ready, we're waiting for you and excited.

Peter McCormack: All right listen, thanks and take care.

Jorge: Thank you for come and visit this community and understand more about everything happening about Bitcoin!