On The Widespread Adoption of Cryptocurrencies — Venezuela’s Opportunity
Over the last few months, there has been an ever-increasing hype about the rise of blockchain technology (Web 3.0!)
To predict when mass adoption of any blockchain technology might occur we have to be able to understand what problem we are trying to solve and how this technology solves that problem.
Venezuela has a real problem. The Government. Outdated policies, corruption and incompetence create significant conflicts of interests and a myriad of issues so complicated that even the locals who endure them every day and scholars who dedicate their time to analyse them can have a hard time articulating.
While Blockchain technology has created communities with no national borders, the truth is that countries like Venezuela, Switzerland and Singapore are at opposite ends of the ecosystem. The former with most of the problems that the latter two are trying to create solutions for.
This disconnect results in ‘investors’ (early adopters and supporters) of blockchain projects wondering when mass adoption is going to occur. They know how revolutionary the technology is, the sheer size of the problem it addresses, the scope for real change. They are just waiting for it to magically happen.
For mass adoption to occur, we need to get our hands dirty. Spread the technology where it is needed the most. Take the less travelled route to Caracas.
Blockchain technology is not unknown to Venezuelans. Due to the meagre electricity prices, the country has become one massive cryptocurrency mining farm.
Mining is ethically and morally questionable because electricity subsidies are costing the nation billions of dollars per year. But as it provides an income for everyday people whose capacity to earn money has been obliterated by left-wing economic policies, then it is justified. Currency and price controls have bankrupted most businesses the only thing left to export is ‘cheap’ electricity.
Window of Opportunity
Over the last week, the Venezuelan government has introduced a range of additional measures that severely limit the economic freedom of individuals and corporates alike by targeting the use of local bank accounts. Now corporations can only transact a maximum of $2000 (two thousand US dollars) per month.
Individuals need to prove their source of income or face having their accounts closed by the bank and being referred to government authorities for prosecution. Their alleged crime? Receiving remittances from their hard working family abroad.
The objectives are as simple as they are sinister. Force anyone wanting to do business to be aligned with the government or face bankruptcy. Only those who are well connected (‘enchufados’) will be allowed to transact unlimited amounts of money. The more businesses they bankrupt with unfair laws and regulations, the more new companies will appear led by the communist capitalists.
This measure affects the vast number of people receiving remittances from their family abroad as exchanging dollars in the black market is illegal. Even if the government allows people anywhere to send money to Venezuela using their own cryptocurrency ‘Petro’*, it is subject to international sanctions and makes anyone overseas liable, risking the cancellation of their visas and deportation.
Solution: a Cryptoeconomy.
Cryptocurrencies have been gaining popularity as a way to send remittances among some of the three million Venezuelans who have fled in recent years and are now supporting their families back home. As the use of the troubled local currency (Bolivar) becomes more complicated and risky, we expect to see significant shifts.
The first is a significantly higher number of Venezuelans abroad sending money to their family using cryptocurrencies instead of traditional fiat currencies.
The second is that increasingly, people will stop exchanging their digital currencies for bolivares. Instead, they will start paying each other and acquiring goods and services directly with cryptocurrencies.
The major digital currencies projects such as Dash, Decred, and SmartCash News are already present in the region assuming significant education and marketing campaigns, partnering with local exchanges and sponsoring education and entrepreneurial initiatives.
We will also see the rise of crypto marketplaces such as NeoPlace, bitboost, OpenBazaar where people can buy and sell anything without restrictions and and freelancing platforms such as CanYa that enable people to pay and get paid directly with digital currencies such as Bitcoin and Ethereum.
Venezuela is a country that ought to be on everyone’s radar. It is deploying all the tricks in the Authoritarian Handbook, yet it is facing the unprecedented rise of blockchain technology as a tool for resistance.
Venezuela is becoming the first country in the world with mass adoption of digital currencies and dApps — decentralised applications running on blockchains, taking power away from the government and back to the people.
(*) Petro is irrelevant. The Government is too busy trying to raise easy money while real projects are tackling real problems with real solutions. The Government has had absolute power for over a decade, they are solely responsible for the current chaos. They do not need crypto to start reviewing and changing their policies. Crypto is for the people, it is the only hope they have.
AVB is the founder of Mango Markets, a digital currencies exchange in Venezuela, and a contributor to several blockchain based projects in the region with a focus on positive social impact.