By José Rafael Peña Gholam
Updated on July 10, 2018, 15:18 PM
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In Venezuela, Bitcoin Is a Lifeline


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Here in Venezuela, where we are in the midst of a political and economic crisis, cryptocurrency is not a game. It is a safeguard of value and protection against the hyperinflation of our own currency, the bolivar.


Venezuela is a complicated place, things function differently here. We have a populist government and a fragmented opposition, which means that the government has total political power. Venezuela is a “socialist country” with strict currency controls and multiple exchange rates. The government of President Nicolás Maduro is doing whatever it takes to control citizens and the market, regardless of the economic costs.


This economic vision has led to the rapid devaluation of our national currency, to the point that a loaf of bread you buy one week will cost considerably more the next. In early July, one cup of coffee could cost as much as 1 million bolivars (VEF). Asdrúbal Oliveros, director of a financial firm called Econoalitica, said in June that a family of four needed 545 million VEF just to pay for basic goods and services.


In Caracas, this macroeconomic disaster is evident on a daily basis. There is a huge gap between low-income people and the wealthy, with the middle class becoming extinct. In front of luxurious restaurants are people who live in the streets, digging for food in the trash.


Services are continuously deteriorating. In Caracas, buses used to pass through the main avenues every five minutes. Now, due to the high cost of spare parts, the refusal of the government to increase bus passage and a general shortage of cash, you will be waiting for a bus for 20 minutes at best. This has put a greater burden on the subway, which we are now literally allowed to ride for free. But subway service has deteriorated to the point that many users prefer to walk to their destinations.


It should be noted that I am talking about Caracas, the city that has the best services in the country. There are other regions with continuous power outages, intermittent Internet service, and no drinking water for a week. Just imagine public transport in those regions.


This is where cryptocurrencies come in, especially bitcoin. Hyperinflation has driven some citizens to safeguard the value of their money in foreign currency, goods and cryptocurrencies. In other countries, many people see bitcoin as a speculative and volatile asset. But in Venezuela, bitcoin fulfills its main function of being a currency that is not issued by a central bank nor controlled by a government, and thus is more trusted than the bolivar.


If you check localbitcoins.com in Venezuela, you can see a lot of offers for buying and selling bitcoin, probably more than in other parts of the world. LocalBitcoins is one of the most used platforms for trading bitcoin to bolivars. Given the demand for bitcoin, other platforms have that have also emerged. Uphold and LocalEthereum, for example, can be used for trading other cryptocurrencies.


Bitcoin was the first well-known cryptocurrency in Venezuela, growing organically, without advertising or marketing. It has the greatest liquidity and infrastructure for exchange into another currency, good or service. Though in our current situation, pretty much any cryptocurrency is well received here.


Venezuelan banks have put low limits on transactions between people. This makes the purchase of goods and services with cryptocurrencies more attractive. Examples can be found in an e-commerce platform such as Mercado Libre Venezuela, where several sellers accept cryptocurrencies as a means of payment.


On the website CriptoLugares you can find at least 180 places that claim to offer some good or service in exchange for cryptocurrencies. On social networks, several enterprises offer their products or services for cryptocurrency. At food fairs you can find locals accepting the cryptocurrency Dash, which has done considerable promotion in Venezuela. Another cryptocurrency, Byteball (GBYTE), has been trying to promote its cryptocurrency in universities. Venezuelans also try to earn cryptocurrencies by contributing with digital content to the social media Steemit, which runs on the STEEM token.


This does not imply widespread cryptocurrency adoption in Venezuela, however, given the economic limitations of citizens who do not have the purchasing power to obtain a smart phone or computer with which to buy cryptocurrencies. One can trade cryptocurrency by text message (SMS) and other means, but sadly these avenues are not widespread in Venezuela.


Cryptocurrency mining is also a big business in Venezuela, as the costs of electricity are very low. Still, mining is extremely risky if you do it without government permission.


For the moment, the Venezuelan government has maintained a “friendly” position on cryptocurrencies, even going as far as to legalize their use. Yet within the same government are people who oppose crypto and want to prohibit it. Meanwhile, the government is promoting its own cryptocurrency, the Petro, which is supposedly backed by petroleum reserves. Unlike bitcoin, a decentralized currency that is not tied to any one country, the Petro was the first cryptocurrency to be issued by a nation.


For now, non-state backed cryptocurrencies like bitcoin are a lifeline for Venezuelans. If the government does not improve the economic situation, it is likely to remain that way.


José Rafael Peña Gholam is a Caracas-based editor and writer for CriptoNoticias.


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