Venezuelans Adapt Bitcoin Mining, Over $1 Million In New Capital Sources Help
Innovation, Investing, Opinion, Regulation | June 10, 2019
By: Dominic Hrabe, Co-Founder of EVOLV Events, Published in Block Tribune
Venezuela has fallen into a state of socio-economic decline since the advent of Hugo Chavez’s presidency. The country had relied heavily on its oil revenue, making it inevitably susceptible to the market. When oil prices plummeted five years ago, the whole country suffered, dipping into economic depression.
The country has declined into a state of hyperinflation since 2014, reaching an all-time high of 2,688,670 percent in January of 2019. Experts have been estimating the inflation rate could reach 10,000,000 percent this year.
The living conditions are getting worst for Venezuelans. Life resembles an old newsreel: long lines, empty shelves, cashiers weighing stacks of bills.
As the country suffers its worst meltdown in history, with inflation skyrocketing and basic necessities hard to find, many Venezuelans have taken to bitcoin mining in a bid to survive.
Adaption Bitcoin Mining
A key aspect to that adaption is managing, somehow, someway, to set up a steady flow of revenue in a currency that’s better than the state-produced Bolivars. It’s the only way for residents to keep up with inflation.
So if it’s not collecting remittances from family members living abroad, it’s crypto mining. This particular segment is booming, and it’s not odd to see.
A mining operation hinges on two main factors: bitcoin’s market value and the price of the electricity needed to run the powerful hardware.
Electricity is one thing most Venezuelans can afford: Under the socialist regime of President Nicolás Maduro, power is so heavily subsidized that it is practically free.
In a country where the minimum wage is about $5 dollars USD monthly and power costs are almost non-existent, the profitability of bitcoin mining is almost 100% of the amount mined.
A Venezuela expat and the CEO of Bitmining Market, Gabriel Rodriguez Parisi, told us that a person running several bitcoin miners can generate a small fortune in Venezuela. He also adds that some Venezuelans are already mining enough to feed a family of four and purchase vital goods online. Most web retailers don’t ship directly to Venezuela, but some Florida-based delivery services do.
Rodriguez-Parisi, owner of the first worldwide physical store dedicated exclusively to cryptocurrency mining and consulting, shared his experience of the recent growth of miners in Venezuela.
“People are visiting the store now more often. Every day I get a handful of prospects walking into the store, looking for bitcoin equipment. Most of them are from South America, specifically Venezuela.” An affiliation with Power Block has enabled them to finance approximately $1 million in new mining equipment and cash flow needs.
Bitcoin enthusiast Randy Brito estimates that about 100,000 people in Venezuela mine cryptos, although it’s impossible to accurately gather the data, since the majority of miners avoid attracting the attention of the government.
New Capital Sources to Help Miners Keep Their Operations Streamlined
While Venezuelans strive to make their lives better through mining, capital sources empower them to take the initiative.
Aaron Tilton, CEO of Power Block, said “It feels very good to do something in a part of the world where help is needed. Running a crypto mining operation is a capital-intensive venture. In countries like Venezuela, where the native currency is worth nothing, the cost of hardware and maintenance can be a big drain on a crypto mining business’ resources. It can be very difficult for a miner to find capital for those needs because of the instability of the country. Also, crypto owners have a long-term view on their mined cryptocurrency. Miners don’t want to sell it. We provide an answer to all of those problems in a secure, legally compliant non-bank loan.”
After taking out a certain portion from their earnings for day-to-day expenses, miners plan to hold their crypto assets for better returns in the future. However, the current circumstances in the country force Venezuelans to sell their crypto for USD to buy new hardware or update old equipment.
To address this situation, Power Block tied up with Bitmining Market, a Florida-based brick-and-mortar crypto mining store, to offer a crypto-backed loan to the miners in Venezuela so they can purchase and update the mining equipment while maintaining the ownership of their cryptocurrency.
The intention is to enable Venezuelans to essentially mine crypto at a current difficulty while ‘selling it’ at future prices. When they lock it in as collateral for a fiat loan, they instantly gain access to the purchasing power of their crypto while keeping it for future profit.
For miners in Venezuela, using the crypto earned from their operations as collateral to manage the upkeep and maintenance cost of the machines will help to store the value of their assets. They get back cryptocurrencies as soon as the loan is repaid. If the spot price goes up during this period then it’s a double-win.