Can Crypto Save Zimbabwe Yet?
Viability of Dai Adoption in Abusive Economies
At any point in modern history, there have been areas who suffer under extreme currency inflation and financial uncertainty. Today’s examples are Zimbabwe, Venezuela, and Argentina. Citizens lose the ability to accumulate or even preserve their wealth; banks become increasingly constrained and start limiting withdrawals; and if it gets bad enough, food disappears from the shelves.
If rapid inflation causes such widespread hardship, why does it continue? It comes down to brutal game theory and economics. He who prints the money chooses who gets it (i.e., spends it) first — gaining friends, influence, prestige, or other forms of wealth. Free money! And because it hasn’t really hit the economy yet, he spends it at the old, not-yet-inflated price.
As the new money trickles down, the economy “feels” the presence of new money, and the value drops steadily. Those at the bottom of the economy get it last, and by that time it’s lost all the extra value it seemed to have at the top. The prices of grocery store goods raise first; then the employees get a “bigger” paycheck.
Those who print money have no reason not to do so, and those who suffer the negative consequences have no power to stop it. In a world of fiat, your best bet is to move somewhere the money isn’t so abused. Assuming you can get a visa. If not, tough luck I guess!
Fortunately, we don’t exactly live in a world of fiat anymore.
A Heroic Dream in Crypto
A core principle of cryptocurrency is that it’s not controlled by anyone. This means any economy built on crypto would be immune to such an unhealthy combination of incentives: there’s no one “at the top” who has any power to print more money.
For years, this has fueled a powerful dream within crypto: one day, news like that seen about Zimbabwe, Venezuela and Argentina will be a thing of the past, just a story we tell our kids after we’re done telling them about walking uphill both ways to school.
Getting Closer
In two important ways, crypto has recently come much closer to making this dream a reality.
Dai and Other Stablecoins
Citizens in a failing economy want, above all, financial stability. They want a given amount of money to buy roughly the same amount from the store today as it will in one month or one year.
For most of its history, crypto has been unable to provide this, making it a pretty hard sell: if you trade your inflating currency in for Bitcoin, you’re actually less able to predict how much that wealth will be worth in a month or a year. Some potential moon-shot, years in the future, is nowhere near relevant enough to overcome such a downside if you can barely afford bread today.
But this has changed. For over a year now, Dai has dependably united the benefits of crypto with the stability of the US Dollar, with the price of Dai staying firmly between $0.95 and $1.04 since it started.
Now crypto has a much more attractive offer: If you can get a hold of 200 Dai now, in a week or a year it will still be worth $200, regardless of anything your government does.
Unstoppable Exchanges
Okay, so Dai could conceivably attract the people of the failing economy. But as soon as the trickle of conversion starts resembling a flood, any inflationary regime worth its chops will see this as a direct threat to their free-money machine. They’ll attempt to shut it down as surely as they’ve protected their position to inflate the currency in the first place.
And historically, they’ve had an easy way to do just that: they shut down the exchanges, the Achilles Heel of crypto. Zimbabwe did just this in May of last year.
But this, too, has changed. Today we have two young exchanges, Bisq and DAIHard, that have been built specifically to resist any regulatory attempts to shut them down. They achieve this resilience in quite independent ways, but both are fully permissionless gateways into crypto — doors that cannot be shut even by the people that created them. I’ve written more about these exchanges (and their rough edges) here.
With unstoppable exchanges, crypto can’t simply be shut out the moment it bares its teeth. Adoption of cryptocurrency within a jurisdiction is no longer a matter of negotiation with the local government. It’s a matter of demand.
A Matter of Demand
Two questions follow then.
- Why is there no demand for Dai today in failing economies?
- How could we increase demand for Dai in a failing economy, such that the inflated currency is largely abandoned?
As part of the market research for DAIHard, I spent two months in Zimbabwe, investigating these questions. The answer to the first question can be boiled down to two themes.
Crypto is Difficult and Punishing
I once told my friend to install Metamask. I was referring to the browser plugin, but didn’t make this clear. He found “Metamask” on his mobile app store (this is before Metamask actually had a mobile app). He failed to see all the negative reviews, and it turned out to be a fake app that stole everything he put on there, over half his stash. This is a great example of two problems:
With a conventional bank, it’s not really conceivable that a user would simply lose his money, which is a very real risk with crypto. Backing up keys is not something I’d trust my mom with, and promising ideas like social recovery wallets have not yet grown into public apps.
If that’s not bad enough, there is a vast multitude of tools for crypto, many of which are in or recently out of beta. Where a bank has a single website, canonical offices, and a single mobile app, crypto today is irreducibly more complex.
I’m confident we will overcome these issues, but it’s not going to happen tomorrow.
No Awareness
There are quite useful things a Zimbabwean can do with Dai today, even without any adoption from his community. He can grow his money via DeFi, pay a South African contact via Hatchlet, and accept remittance from relatives with smaller fees.
Tragically, these opportunities simply are not obvious to Zimbabweans. And without someone undergoing a marketing campaign, it could stay like that for some time.
Our Proposal
With all this in mind, we are pleased to begin circulation of The ZimDai Whitepaper: A Blueprint for an Economic Jailbreak. This is a proposed way to move forward with Dai adoption in Zimbabwe that is open, decentralized, and state-proof.
It addresses the first problem (crypto is difficult) by proposing a network of “ZimDai Agents” that operate the technology as a service to wide networks of customers.
The paper itself is a first definite step toward a cohesive plan the community can coordinate around. We hope to quickly move to a funding round to begin a marketing campaign to address the second problem: no awareness.
