Ensuring quantum-powered security for El Salvador's Bitcoin reserves
El Salvador made history in September 2021 by adopting Bitcoin as legal tender, with the primary objectives of providing better access to payment systems for the poor and offering a convenient way for Salvadorans abroad to send money home. The Bitcoin Office of El Salvador, the state's Bitcoin management authority, has been managing the country's Bitcoin reserves since then.
One unique aspect of El Salvador's Bitcoin management strategy is the use of a single, publicly disclosed address for storing the Bitcoins of the state's currency reserve and using it permanently for all transactions. This address, which previously held over 6,000 Bitcoins valued at around 700 million US dollars as of August 30, 2025, is the publicly disclosed address of the Bitcoin Office of El Salvador.
The practice of using the same Bitcoin address multiple times in transactions, known as Address Reuse, is employed by the Bitcoin Office of El Salvador. Although not provided for in the Bitcoin protocol, Address Reuse allows for easy tracking of when they add or sell Bitcoins from the reserve. When using Address Reuse, the entire original amount of the UTXO (Unspent Transaction Output) address is spent, but a new UTXO for that address is created in the blockchain as change.
It's essential to clarify that the amount of money sent to a Bitcoin address is not referred to as balance but as UTXO. A UTXO can only be used once and completely as input for a transaction - after the transaction, the UTXO used as input is always completely spent. In the case of common hierarchical deterministic wallets (HD wallets) such as Electrum, the remaining amount of a UTXO after a transaction is automatically transferred to a previously unused address, known as a change address.
However, Address Reuse, especially with paper wallets, was a common practice before the advent of deterministic wallets. Before the advent of such wallets, Bitcoin wallets were collections of independent keys and addresses, and a new backup had to be created immediately after generating a new address.
The Bitcoin Office of El Salvador has divided the accumulated Bitcoins into smaller chunks of 500 Bitcoins each to protect the state's Bitcoin reserve from potential future quantum computer attacks. This division was implemented as of August 30, 2025.
Concerns have been raised about El Salvador potentially becoming a money laundering paradise due to the traceability of Bitcoin transactions but unclear ownership of addresses involved. However, the use of a single, publicly disclosed address for the Bitcoin reserves and the practice of Address Reuse can provide a level of transparency, making it easier to track additions or sales of Bitcoins from the reserve.
Despite these concerns, the adoption of Bitcoin in El Salvador continues to offer significant benefits to the country's economy and its citizens, particularly those who lack access to traditional banking services. The practice of Address Reuse, while not conventional, provides a unique approach to managing the Bitcoin reserves and enhances transparency in transactions.
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