Venezuela’s worsening economic collapse has created something of a social experiment in the use of a digital currency as a de facto currency - a phenomenon that’s also playing out in troubled Zimbabwe.
According to TheNational.ae, bitcoin adoption in Zimbabwe is seemingly skyrocketing as the country’s economic situation looks bleak. So much so, that one bitcoin is trading at nearly $10,000 on the Golix.io exchange, while the global average is, at press time, of $5,642.00.
According to a local trader, bitcoin isn’t just being bought by individuals, but by businesses with bills to pay. The country adopted the U.S. dollar back in 2009 as its fiat currency, as the Zimbabwean dollar had lost nearly all its value.
At press time, LocalBitcoins Zimbabwe has people buying bitcoin at the global average, and some buying the cryptocurrency for cash for well over $10,000 in the country’s capital. Bitcoin, as every bitcoiner would expect, is helping people in the country survive times of economic uncertainty, as Zimbabwe has been embroiled in a crisis for years.
And as inflation in Venezuela has spiraled further out of control - by one estimated, it peaked above 2,400% in September - more Venezuelans are resorting to mining bitcoin, litecoin and other digital currencies as a means of coping with the country's out-of-control hyperinflation and surviving in a country where staples like food and medicine are scarce.
"Venezuela was one of the richest per-capita nations in the world... but now, hyperinflation is a very difficult thing to understand until you have to buy lunch..."
"The country has not yet dollarized... but there's not enough dollars in Venezuela for that to have happened..."
"Venezuela is becoming a cashless society... we are starting to see in Venezuela, the first bitcoinization of a sovereign state."
However, while cryptocurrency mining isn’t explicitly illegal, the country’s Sebin intelligence service has been known to raid establishments that show a suspicious spike in electricity usage. Electricity is heavily subsidized by the state in Venezuela, making mining a particularly lucrative prospect, despite the risks.
Bitcoin mining consultant Randy Brito estimates that about 100,000 Venezuelans are "mining," although it is impossible to have an exact figure because many are protecting themselves by using servers in foreign countries, AFP reports.
According to the LocalBitcoins portal, transactions in bitcoins amounted to $1.1 million in Venezuela in the last week of September.
One local who spoke with AFP said her mining rig is producing 20 to 25 litecoins per month.
"Each litecoin is worth $46, that's $920 a month," said Veronica - a fortune in a country where the minimum monthly salary is 135,543 bolivars ($40), supplemented by a voucher of 189,000 bolivars ($56).
AFP visited one office building in Caracas that has been converted into a clandestine mining operation, with more than 20 computers hard at work performing the cryptographic calculations necessary to unlock valuable blocks of digital currency.
Caracas (AFP) - Inside a locked room in an office building in Caracas, 20 humming computers use their data-crunching power to mine bitcoins, an increasingly popular tool in the fight against Venezuela's hyperinflation.
In warehouses, offices and homes, miners are using modified computers to perform complex computations, essentially book-keeping for digital transactions worldwide, for which they earn a commission in bitcoins.
While practiced worldwide, Bitcoin mining is part of a growing, underground effort in Venezuela to escape the worst effects of a crippling economic and political crisis and runaway inflation that the IMF says could reach 720 percent this year.
Having no confidence in the bolivar and struggling to find dollars, many Venezuelans, who are neither computer geeks nor financial wizards, are relying on the bitcoin - currently valued around $6,050, or other virtual currencies.
As international sanctions have left Venezuela starved for foreign currency, cryptocurrencies have provided one crucial means for the regular people of Venezuela - who arguably have been hardest hit by the sanctions despite marching in the streets and calling for the overthrow of the regime of President Nicolas Maduro - to avoid the consequences of the administration’s economic mismanagement. Now, the question is will Venezuelans abandon the worthless bolivar in favor of relying solely on digital currencies.
As we noted previously, one trader, John Villar, Caracas-based software developer, most eloquently stated "Bitcoin is a way of rebelling against the system." While the currency remained a niche form of payment in the country, many users purchased food and goods online through online marketplaces such as Amazon.com, albeit indirectly through gift cards purchased with the cryptocurrency.
Noel Alvarez, former president of the Venezuelan Federation of Chambers of Commerce, stated that “A maximum of one per cent of the population has access to it, but it is very useful in our situation.”
Bitcoin’s popularity in Venezuela continued to grow. It became the country’s leading parallel currency. Some vendors even begun accepting Bitcoin exclusively. A popular online travel agency, Destinia, cited that, due to the bolivar’s instability and the trouble many Venezuelans experience when attempting to leave the country, “Giving priority to Bitcoin as a payment method could be of help."
While Destina admitted that Venezuela is not a primary focal point for their company, they chose to prioritize Bitcoin payments in the Venezuelan market to facilitate the travel needs of the people in light of the persisting economic downturn.
With infrastructure in place, trading and mining becoming more popular, and the crisis escalating, Maduro’s government began to take notice.
Maduro’s War on BitcoinThe Venezuelan government began to crack down on the Bitcoin community, with police extorting citizens for “misusing electricity” or undermining the country’s economy. These grievances intensified over time, however, and the attack on miners became more apparent. In the largest raid, two miners were caught with 11,000 mining computers and were charged with cybercrime, electricity theft, exchange fraud, and even funding terrorism.
In Feb. 2017, following the incident, Surbitcoin, Venezuela’s most popular exchange went offline. The company encouraged users to withdraw their money immediately as Banesco, the company’s banking partner, was set to revoke the account associated with the exchange. Rodrigo Souza, the founder and CEO of Surbitcoin, noted that "When it was found that there were 11,000 mining computers consuming the energy to power a whole town at a time when there are severe electricity shortages, it triggered a reaction.” Souza went on to say that the company was not contacted by the government, but Banesco revoked their account as it did not want to be associated with such an operation. Surbitcoin resumed operations two weeks following.
We suspect it will not be long before Maduro takes further, tougher action against this 'subversive' behavior.
Article contains interesting info.
exchange.
It is possible venezuela and zimbabwe are a microcosm of what many nations futures will look like eventually.
I wish the media would cover more stories like this. To show the other side of crypto's character, that crypto isn't only used by criminals & how it can bring an elevated standard of living for many.
