Venezuela, a nation mired in an economic crisis and hyperinflation, is beginning to informally adopt the crypto-currency bitcoin.
After opposition parties won control of the national legislature, socialist President Nicolas Maduro at first tried to have the courts seize the legislature’s powers. When that didn’t work, he instead staged a new rigged election for a “constituent assembly,” which has again seized the legislature’s powers and entrenched Maduro as a de-facto dictator.
After years of economic mismanagement under Maduro and his predecessor, Hugo Chavez, what was once one of Latin America’s most prosperous nations has been reduced to shortages of toilet paper and riots over lack of food.
The government responds with only more crackdowns. When millions of voters signed a petition to recall Maduro, a crony-stacked elections commission refused to accept the signatures as real.
The Venezuelan bolivar is nearly as worthless as the Weimar Republic’s mark
The Venezuelan currency has become increasingly worthless. Officially, the exchange rate is set at ten bolivars to one United States dollar. In reality, the black market exchange rate is currently 27,651 bolivars to the dollar, and continues to spiral out of control.
In the past, some countries suffering from hyper-inflation have simply abolished their own currency altogether, and switched to using more stable U.S. dollars. But Venezuelans have found a more attractive option to evade the dictates of their government: cryptocurrency.
Although illegal, bitcoin is becoming increasingly widespread in Venezuela
The use of bitcoin, though still illegal, has become increasingly widespread. The online peer-to-peer currency has many advantages. As its value can still suffer from wild swings, Venezuela is one of the few countries where it is actually more stable than the official currency.
More importantly, bitcoin is reliably anonymous and secure. That allows micropayments, being easily divisible into very minute amounts. Venezuelans are using it to buy necessary everyday staples that they can’t find on the bare shelves of state-run grocery stores.
Even the process of creating more bitcoin has become big business. Bitcoin mining uses computing power to unlock new chunks of a complex mathematical encryption formula, releasing new amounts of the digital currency.
Electricity is artificially cheap and heavily subsidized. The result is that just by plugging a computer into a socket, Venezuelans can make a profit. It hasn’t just been done on a small scale, either. The government has repeatedly raided warehouses with massive banks of computers dedicated to bitcoin mining.
The end result is that, by necessity and out of desperation, Venezuela could end up being the first country in the world to bitcoin-ize its entire economy.
(Image of a physical Bitcoin via Pixabay.)