TORONTO (Barrio) – It appears that the launch of El Salvador’s national Bitcoin wallet, referred to as Chivo, has been a flop, with the majority of users having ditched it already, according to a paper published last month by economists at the National Bureau of Economic Research.

The study by the nonprofit, based in Cambridge, Massachusetts, surveyed 1,800 households in cities and rural areas. Where Chivo may have had minor unexpected success is in banking the unbanked. Researchers say that those who continue using the Chivo Wallet are using it to hold and transfer dollars, El Salvador’s official currency, similar to how one uses any digital wallet or bank. Some respondents told the researchers that they use the app as a debit card for dollars, with 20% of Chivo users saying they now spend less cash.

“There is no experiment where a currency was introduced with such strong incentives and still failed,” Fernando Álvarez, an economist at the University of Chicago and one of the study’s authors.

Chivo was rolled out in September 2021, when President Nayib Bukele made El Salvador the first country in the world to make Bitcoin legal tender.

Things have not gone to plan, though. Chivo’s launch was plagued with functionality and security issues. Though around half of the Salvadorans surveyed have downloaded Chivo to date, with 40% of those downloads happening in September 2021, around 61% of those have abandoned it after withdrawing the $30 dollar sign-up incentive, the National Bureau of Economic Research found. 

Meanwhile, many living in tourist hot spots on the Pacific coast, where Bitcoin usage is highest, have transitioned to other crypto wallets, such as the privately developed Bitcoin Beach.

Carolina Reyes, who sells snacks to tourists in the surf village of El Palmarcito. “It’s not secure, so I’m not going near it.” She said that she is one of at least 1,000 people who logged into the app in September last year, only to find that their identity had been used to steal the $30 dollar sign-up bonus.

Chivo download numbers have been negligible in 2022, suggesting that the push has run out of steam. Some of those who have stuck with the application are using it for transactions unrelated to Bitcoin.

Source: Rest of the World