Bitcoin Banking for Communities: Lessons Learned from Bitcoin Beach
Blog - Andrew - November 10, 2021
"Revolutionary change is usually sparked by those too young and naïve to understand failure is possible."
Bitcoin Beach began as a simple experiment. A community, a beach town, a good idea, and genuine will to make it work. What started as youth programs evolved into a global Bitcoin adoption blueprint.
The experiment has yielded key lessons – applicable to any community seeking to use Bitcoin as money.
Lesson 1: Education is Paramount
Bitcoin is a completely new concept. Communities attempting adoption must provide in-person, on-site education to help new users understand how Bitcoin works. Community organizers are critical to success.
Key Insights:
- Face-to-face conversations are far more effective than email newsletters, YouTube videos, or Twitter threads
- Demonstration proves more effective than explanation. Show people Bitcoin in action. Let them try it
- Youth adoption accelerates when their parents participate. When children teach their parents, adoption compounds
- Consistent, in-person engagement is necessary. This is hard. It requires the right people with the right passion
Lesson 2: Lightning is an Accelerant
On-chain Bitcoin transactions work great for settlements between banks. But at a community retail level, they are too slow and expensive for day-to-day use.
Bitcoin Beach tried using on-chain payments for small purchases. Transaction fees were consistently higher than the purchase amounts. It didn't work.
The Lightning Network solved this problem. Instant settlement. Fees measured in fractions of a cent. Lightning is the missing piece Bitcoin needed to function as retail payments rails.
Key Insights:
- Don't try to build a payment system using only on-chain Bitcoin. Lightning is required for retail adoption
- Lightning solves the fee and speed problem that limits Bitcoin as a medium of exchange
- Consider implementing both on-chain and Lightning capabilities – use each for the purpose it's designed for
Lesson 3: Merchant Onboarding Fosters Circular Economy
A circular economy requires merchants to accept Bitcoin for their goods and services. Bitcoin doesn't gain velocity if it's only used to buy Bitcoin.
Bitcoin Beach learned from experience what makes merchant onboarding work:
Key Insights:
- Display both local currency and bitcoin price tags at point-of-sale. This helps customers understand the value proposition and eases them into thinking in Bitcoin
- Enable multiple payment methods: cash, Bitcoin on-chain, and Lightning. Don't force Bitcoin immediately
- Minimize the number of user actions required per transaction. Every additional step increases friction and friction kills adoption
- Design the flow so that customers intuitively know what to do
- Use QR codes. Make payment initiation a single tap/scan experience
Lesson 4: UX Must Be Developed Within Community Context
Bitcoin Beach is a real place with real-world constraints. Many areas have spotty cell service and internet connectivity.
Building in a constrained environment forced product development decisions that made the Bitcoin Beach Wallet highly resilient. What works in El Zonte works nearly everywhere.
Key Insights:
- Optimize for low bandwidth and intermittent connectivity. This can actually improve the user experience everywhere
- Implement on-device caching and queue systems for transactions during periods of connectivity loss
- Incorporate educational content directly into the wallet. Bitcoin Beach uses onboarding quizzes that reward users with sats
- During early adoption phases, use local currency as the primary unit of account. Let users get comfortable with Bitcoin before forcing them to think in sats
- Design for simplicity. Fewer settings. Fewer options. Bitcoin Beach users don't want a complex financial product – they want to send and receive money
Lesson 5: Community Custody is a Bridge to Self-custody
Many Bitcoin advocates believe that only self-custody ("not your keys, not your coins") is acceptable. While self-custody is a long-term goal, it's not a realistic starting point for community adoption.
Community banks have existed for centuries. They work. Bitcoin Beach extended this model into the digital age with a carefully designed custody structure:
Key Insights:
- Start with community custody using multisig wallets controlled by trusted community members
- Reserves are protected by multiple signatories, not a single point of failure
- As users mature and understand Bitcoin, they graduate to self-custody arrangements
- Provide education and tools to help users transition from community custody to self-custody
- Some users may never move to self-custody. That's okay. Different security models serve different use cases
Lesson 6: Start Small and Build Momentum
Bitcoin adoption doesn't happen overnight. It follows a predictable pattern: slow at first, then suddenly.
Bitcoin Beach started with a single beach town of 3,000 people. That small, defined community enabled rapid learning and product iteration.
Key Insights:
- Select a defined geographic area. You need to be able to iterate quickly based on community feedback
- Develop the product iteratively within the community. Release features. Get feedback. Refine. Repeat
- Growth initially is slow and requires constant engagement. Communities don't spontaneously adopt Bitcoin
- At some inflection point, network effects take over and growth becomes exponential. This is the "suddenly" phase
- The inflection point is hard to predict but it will come if the fundamentals are right: good UX, merchant adoption, education, and a community that believes
Now What?
Bitcoin Beach has proven that communities can build circular economies on Bitcoin. El Salvador's decision to adopt Bitcoin as legal tender was inspired by Bitcoin Beach.
Bitcoin Beach Wallet was open sourced as part of the Galoy Bitcoin banking platform. Developers and communities around the world are using Galoy to replicate the Bitcoin Beach model in their own communities.
Some new projects that have emerged recently: Bitcoin Lake (Guatemala), Bitcoin Ekasi (South Africa), Bitcoin Beach Brasil, Bitcoin Jungle (Costa Rica), and Bitcoin in Tonga.
We look forward to watching these communities build, evolve and eventually develop their own lessons and best practices that will benefit the next wave of Bitcoin adopters around the globe.
Recommended Reading
- Building the Bitcoin beach economy – A Bitcoin Beach presentation
- Bitcoin Beach: Building The Bitcoin Community – Jorge & Bitcoin Beach team
- Learn Bitcoin with Chris Hunter – Adopting Bitcoin 2020
- A Guide to The Bitcoin Beach Economy – Coin Monks
- Galoy Whitepaper – Galoy – Bitcoin Banking for Everyone