The mainstream media and Bitcoiners have been very interested in recent news about El Salvador. What will ordinary Salvadorans do with bitcoin? This is the most important question. Is it possible to secure bitcoin in less privileged communities?
It is clear that most people are not tech-savvy and don’t have the time or patience to learn all about Bitcoin. They only need tools that work. It’s not surprising that Salvadorans have used a majority of accessible mobile apps such as Strike and the Bitcoin Beach wallet.
These wallets are great for lightning onboarding and locals receiving low-fee payment. However, they do have a downside: privacy and security. While ten dollars is not a huge deal, it is a problem to use these wallets for family savings.
Fintech is not the only thing
El Salvador has a population of 6.5 million. There has never been such a massive push to adopt bitcoin on a mass scale. It would be disastrous for Salvadorans to misunderstand bitcoin as merely a financial technology thing. You can download an app and you are good to go. It is essential to understand Bitcoin (the uppercase), at least the basics. It is best to learn how Bitcoin works in its true form. You can handle the recovery seed and perform some chain transactions.
Some people will start saving some sats if bitcoin is a regular part of daily commerce. Users will then need to move from hot wallets to cold storage.
Use of Hardware Wallets in Poor Communities
Bitcoin will become the most popular thing to steal as it spreads across the globe and becomes widely recognised. Bitcoin is liquid, fungible and tradeable in a peer-to-peer fashion. It is also a bearer asset (i.e. In a practical sense, the owner of the keys is the one who owns them. Self-possession is crucial without compromising privacy or security. No matter how large bitcoin may be at stake, this is true. If a family has the means to keep it safe for many years, a small bitcoin stash could be life-changing.
Similar to Lightning wallets, users need simple, battle-tested solutions to take control of their bitcoin. Open-source hardware wallets tick all the boxes.
El Salvador is far from a wealthy country. El Salvador’s annual GDP per head is just $9,140. This compares to the $68,000 in the U.S. Popular hardware wallets can be expensive, starting at $70, and going up to hundreds of Dollars for those living in poverty. It would be unreasonable to expect Salvadorans buying hardware wallets in large numbers. We may see a new approach if hardware wallets are used. One device could be shared with a trust circle, such as a family. Although this may seem like a risky option, the privacy and security risks are easily mitigated if the right features are utilized.
It is possible to share a hardware wallet with your family without having to compromise privacy or security. The secret is passphrases. Passphrases create a new wallet in the device that can’t be accessed by anyone except the person who has the passphrase. Family members can set up their own passphrases, which allows them to keep their transaction history and amount private, even though they share the device. If the correct passphrase has not been entered, it is impossible to see any details about the wallet once the user has finished using Trezor.
In such a situation, how should the recovery seed be handled? Relying on one guardian can be dangerous. Even if they are trusted, an individual could lose the sheet of paper with a mnemonic seeds or be robbed. Passphrases will still protect your bitcoins from theft in such cases. With Shamir Backups, wallet backups can be managed within a trust circle. Shamir backups are a sharing plan in which the recovery seed can be divided into multiple shares (upto 16) and a threshold to recover the wallets in future. For example, a family of 10 could have ten Shamir shares. However, the threshold would be six. Six family members would need to meet together to recover their wallets in the event of an unfortunate incident. Redundancy is another great feature of Shamir backups. In the above example, four shares could be lost without compromising integrity of the backup. This is due to the threshold being less than the total number of shares.
It is possible to share a hardware wallet within a circle of trust without compromising the privacy or security of any individual user. Each user should use only her hardware wallet. Individually owned hardware wallets might not be an option in low-income countries. A hardware wallet that is part of a trusted circle is better than a hot wallet with bitcoin, especially if you are familiar with the technology.
It will be difficult to adopt bitcoin in the poorer areas. It is important for people to be able to see the importance of their keys and understand what is at stake. To avoid being swindled or stolen, they must respect their privacy. We are currently investigating the best way to support educational activities that focus on cold storage. One part of this will include a donation of Trezor devices to local educational groups.