BITCOIN ENTREPRENEURS IN VENEZUELA
Over the past few weeks there have been several articles published about Bitcoin miners being arrested in Venezuela. This peaked my curiosity in wondering why would a Bitcoin miner be arrested. A closer look revealed that Venezuela has some very creative and industrious entrepreneurs as opposed to a mafia like gang.
THE VENEZUELAN SITUATION
As you probably know the economic situation in Venezuela is bleak. Government has strict controls on the currency. Food along with medical supplies and other basic living essentials are hard to come by. Many think that the deteriorating economy is due to the drop in oil prices. However the Venezuelan government still heavily subsidies electricity rates for the country.
HOW BITCOIN OPERATES
One of the basic elements of the Bitcoin network is its peer-to-peer support structure. Meaning that there is no big Bitcoin machine or bank running and producing Bitcoin. The network is supported by “miners” from all over the world running the same application to support the network. These miners are rewarded for their efforts by payment of transaction fees and newly created Bitcoin. The biggest expense that these miners have, besides the cost of their computer, is the price of the electricity they need to run their machines on a continuous basis.
THE BITCOIN SOLUTION
A sense of opportunity and desperation fueled some crafty entrepreneurs to come up with a very clever solution to helping them create a better life for their families. By taking advantage of Venezuela’s cheap electricity rates these entrepreneurs started their own Bitcoin mining operations. Running a mining operation is relatively simple and entails installing the Bitcoin application and connecting to the Internet. While the profit from their mining is limited, the extra $70-$80 USD in Bitcoin they earn each month creates an opportunity for them to provide some essentials for their family.
HOW DO THEY USE BITCOIN TO BUY PRODUCTS
Without the ability to use Bitcoin to buy products in their own country these Venezuelan entrepreneurs looked to the global marketplace for a solution. One supplier that they use is Amazon. By purchasing products from Amazon and paying in Bitcoin with the assistance of a third party they can have these products delivered to specialized shipping companies for forwarding to their homes and offices in Venezuela.
GROWTH OF BITCOIN IN UTILIZATION
There has been a steady increase in Bitcoin transaction volume in Venezuela from 2014 to present. In 2014 the average weekly Bitcoin volume was about equal to $2,500 USD. Today the weekly volume has risen to $355,000, an increase of 14,100 percent. Other countries abound the world have seen similar increases in utilization rates as Bitcoin becomes more openly accepted and easier to use.
While the Winklevoss Bitcoin ETF may have been initially denied by the United States Securities and Exchange Commission it does appear that Bitcoin has and continues to develop global acceptance and adoption.
Special Thanks to Jim Epstein for his insightful research and contribution to the topic.
Inquiries and comments can be sent to rbent@GlobalFiduciaryAdvisors.com