El Salvador’s Bold Leap into Bitcoin Mining: A Comprehensive Analysis

ByTim Russert

Jul 2, 2024

El Salvador’s Introduction of Bitcoin as Legal Tender

In 2021, El Salvador became the first country to declare Bitcoin as legal tender, equating its status with the U.S. dollar within its financial ecosystem.

This groundbreaking decision by President Nayib Bukele aimed to attract foreign investment, reduce remittance costs, promote financial inclusion, and achieve greater financial sovereignty.

The move also included the launch of a state-sponsored digital wallet, Chivo, to facilitate the everyday use of Bitcoin and educate the populace about its benefits and use.

Implementation and Public Response

The Bitcoin Law required all businesses to accept Bitcoin as a form of payment, echoing the controversial dollarization of 2001. Initially, this mandate faced significant resistance and skepticism from the public and experts alike.

However, as of early 2023, the initiative has progressed, including legislation to support Bitcoin-backed “Volcano Bonds” intended to fund sustainable Bitcoin mining operations using the country’s volcanic geothermal energy.

Bitcoin Mining and Renewable Energy

El Salvador is uniquely positioned with an active volcanic belt, providing a promising source of geothermal energy. This renewable resource powers substantial parts of the nation, including Bitcoin mining operations. The state-run power plant near Tecapa volcano, for instance, dedicates 1.5 MW of its 102 MW capacity to mining Bitcoin using around 300 specialized processors. This initiative is part of a broader strategy to harness renewable resources like hydroelectric, solar, wind, and tidal energy.

Environmental and Economic Implications

While Bitcoin mining is energy-intensive, El Salvador’s approach leverages geothermal power, which offers a more sustainable and reliable energy source compared to other renewables that depend on environmental variables like sunlight and wind.

The use of geothermal energy is seen as a critical move in reducing the environmental footprint of Bitcoin mining, which has been a significant concern globally.

The Lava Pool Project and Economic Benefits

The Lava Pool initiative, a public-private partnership begun in October 2023, aims to expand Bitcoin mining facilities using renewable energies, starting in Metapan. This project not only supports the global crypto community’s needs but also promises economic growth for El Salvador by creating jobs, fostering local business opportunities, and enhancing the adoption of Bitcoin as everyday currency.

The Road Ahead: Challenges and Opportunities

El Salvador’s venture into Bitcoin as legal tender and the mining sector represents a significant experiment in the integration of cryptocurrency into a national economy. This initiative is watched globally, as it could set a precedent for other nations considering similar paths.

The adoption of Bitcoin aims to streamline remittances, which make up a considerable portion of the nation’s GDP, traditionally burdened by high transfer costs. Moreover, by decreasing reliance on the U.S. dollar, El Salvador seeks to fortify its economic independence and provide its citizens with alternative savings and investment avenues.

Potential Global Impact

El Salvador’s Bitcoin strategy could influence broader financial and environmental policies worldwide. As the country harnesses renewable resources for energy-intensive operations like Bitcoin mining, it also positions itself as a leader in sustainable cryptocurrency mining practices.

This approach not only mitigates the environmental criticisms commonly associated with Bitcoin mining but also showcases the potential for renewable energy to power other high-energy-consuming industries.


El Salvador’s pioneering role in national Bitcoin adoption and mining powered by renewable energy sources like geothermal power presents a unique case study in economic innovation and sustainability.

While the long-term success of these initiatives remains to be seen, El Salvador’s journey into Bitcoin mining continues to offer valuable insights into the complex interplay between technology, finance, and environmental stewardship in the digital age.

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