Is Venezuela Undergoing the First Bitcoinization of a Sovereign State?
An economic crisis, hyperinflation and authoritarianism could lead the nation towards a cashless society. A unique scenario, where the push towards the adoption of criptocurrencies comes from the bottom of society and is motivated by sheer need.
It is often discussed how Bitcoin could be a valid alternative for those countries where, for multiple reasons, the national currency is exposed to the risks of massive inflation. This is exactly what has been going on, for a while actually, in Venezuela, a country with a collapsing economy, where every protest attempt on behalf of the population is harshly repressed by the government, and where the Bolivar is undergoing a dramatic iperinflation.
This harsh conditions determined the exceptional popularity that Bitcoin is experiencing in Venezuela. Not only are many local businesses accepting Bitcoin payments, but many people in the Country have also started mining, with the help of extremely cheap electricity.
But what is that made Bitcoin that successful in Venezuela, so much that the situation has been described as “the first bitcoinization of a sovereign State”?
Daniel Osorio of Andean Capital Advisors has very efficiently explained to CNBC what is happening in Venezuela today. To understand what the hyperinflation the country is going through actually means, Osorio explained that in order to pay for a 5 dollar lunch you would need a backpack full of Bolivars. This is why many local business ask customers to wire them the payments, actually pushing not only towards a cashless society, but also towards “the first bitcoinization of a sovereign State”. A different path, argued Osorio, when compared with the one of countries like Estonia: not a revolution that is pushed forward by a technological elite for scientific purposes, but a change pushed by sheer need only.
The distinctive feature of what is happening in Venezuela, when compared with other countries that are experiencing the same financial and inflationary crisis, is that Venezuela lacks the access to enough american dollars to sustain what usually happens when the national currency undergoes such a massive svalutation, which is, using dollars as an alternative currency.
Subsequently, Bitcoin became the only possibility for many Venezuelans to store their savings without risking to see them burned down by inflation, and the only valuable option when in need of a currency stable enough to do business.
Another factor behind the Venezuelan case is the abovementioned paltry cost of electricity, which, thanks to the government’s socialist policies, is virtually free. These favorable conditions make mining a lucrative business in Venezuela, which allows to get up to a $500 monthly revenue, enough to support a family and say goodbye to the fear of watching your savings vanish because of dramatic inflation.
Despite alleged arrests, miners are not intentioned to give up on such a remunerative business, and they keep working undercover, in the grey area of an absent legislation, mining Bitcoin and other cryptocurrencies that mean higher risks as well as higher revenues.
This article was originally published on the blog of Spidchain
