Bitcoin: The Techie’s Refuge from a Collapsing Bolivar

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On any given month, Ricardo saves about half his income, never worrying about the triple-digit inflation all around him. He can buy anything he wants online from anywhere in the world, without a single CADIVI carpeta or worry about the government imposed “control de cambio” or “corralito”. He has zero government contacts, he doesn’t work for a foreign company, he isn’t paid in dollars. In fact, he works as a computer IT specialist at a midsize company. Yet he enjoys a level of economic freedom that is exceptional in Venezuela.

Why? Because he trades and mines Bitcoins.

In case you’ve been living under a rock, Bitcoin is a rather new digital currency free from Central Banks and any government control entity. By design, Bitcoin’s supply growth is predictable, capped at 21 Million, and it cannot be manipulated by any central agency. All you need to trade Bitcoin is your brain, fingertips, a stable source of energy, a PC, and a market created by other individuals.

In Venezuela, where the central bank has irresponsibly financed public spending by simply turning on the printing press and unleashing a vicious cycle of inflation, Bitcoin could be a blessing. It’ precisely the fact that the country flirts with hyperinflation that makes it so well suited for this novel currency. Venezuelans need alternatives to shield themselves from the damage inflicted by a reckless and irresponsible Central Bank. People deserve a choice of currencies and this new tool may provide that freedom of choice.

All that was missing, until recently, was a market. Not anymore.

I had the chance to talk to Ricardo on the phone not too long ago. He’s a 20-something year old, skinny, soft-spoken computer geek I’ve known for years.

The first thing I wanted to ask him is how exactly you go about turning bolivars nobody wants into Bitcoins everyone seems to want.

“There are brokers where you deposit your Bolivares and you get Bitcoins in your virtual wallet,” he tells me, “I do it through surbitcoin.com. They act as a middleman and trustee for the transaction to happen, and for that they charge a fee.

But doesn’t he worry that the government will come in and crack down on the trade?

He says it doesn’t work like that. “My bitcoins are 100% in my control, there are no banks or regulated entities to oversee or ‘take over’. They could try to clamp down on the exchanges from Bs to Bitcoin, but as long as people are willing to trade, it will happen. Even so it would be nearly impossible to stop us from mining, they would have to take down the internet!

I’m starting to see the appeal of this lifestyle. “But wait,” I wonder, “once you’re sitting on a hoard of bitcoins, what can you do with them?”

“I buy all the things that you can’t buy in Venezuela, and get them shipped here,” he says. I also save as I’m certain that even though Bitcoin is volatile, it’s not as volatile as bolivars. I’ve even paid back Bolivar denominated debt in Bitcoins. it was a very good business decision as the Bolivar has been losing value.”

Then came the obvious question: why invest time and money into this instead of the good, old-fashioned currency swap, from bolivars to dollars?

“It’s riskier. I’d have to pay a bunch of fees for wire transfers and deal with banks. Cash is too risky. But the most important reason is that it is very easy to mine, which is essentially converting Electricity to Bitcoins via software and hardware. Bear in mind that I pay the electricity at Corpoelec rates, with bolivars.”

He surely raised some good points, being less volatile and less riskier than buying dollars in the black market the most valid of them. But it sounds like you have to be a real techie in order to do all this, right?

“I think anyone can trade bitcoins if they already know how to purchase things online. I don’t think just anyone could mine. I bought a mining machine for the equivalent of $500 in bitcoins, installed the free software that exists for this, connected it to the internet and I simply keep it running 24/7, as long as there aren’t any blackouts, of course.”

And his return seems worth the trouble: Ricardo mines about 80 dollars each month, whilst paying about 200 bolivars for the electricity it takes to do so. “After 6 months I am now achieving a “theoretical exchange rate” of 2.5 Bs/$. It varies greatly since the USD to Bitcoin changes. My electric bill, on the other hand, doesn’t.”

And that’s if you don’t have the brilliant idea of purchasing a power generator that runs on essentially free gasoline, but in Ricardo’s eyes, this is sort of a Plan B: “I envision that this will happen if and when the government tries to clamp down on us OR if they keep destroying our electricity infrastructure.”

Venezuelans like Ricardo are the early adopters of a technology that is bound to be a widely used. Look at what is happening in Argentina. In a recent ranking of countries best positioned for Bitcoin adoption, Argentina is first on the list and Venezuela second.

It’s no coincidence that that in all these cases, the Central Banks had enacted foreign exchange controls. In Venezuela and Argentina a parallel exchange system has sprung up to get around strict forex controls while the government uses the central bank to finance deficit spending. The results are predictable: a currency’s value is a function of trust in the institution that issues it.

Ricardo’s way of conducting business is one of the two ways of doing things: there’s mining, and there’s exchanging your currency per  Digital Markets (surbitcoin.com – registration required).

Bitcoins can be exchanged into most currencies, check out all exchanges around the world.

As I write this, you can buy a Bitcoin for BsF 364,000. The value is driven (my hypothesis) by the exchange between USD and Bs in the black market. Once there is a free market of products and services using Bitcoin the true relationship between USD and Bolivares may in fact be reestablished.

Of course, the dollar will likely remain the first choice for holding hard currency, and that may be true for the few who have access. But here’s the key: Bitcoin’s advantage is the lack of the need for a bank. In other words, Venezuelans who don’t have the means to move outside of its borders to open bank accounts, can trade with a currency that is accepted in any country and is quite literally a click away.

If this is so great, then why isn’t everybody doing it? The real hurdle is knowledge. The ability to trade in Bitcoin comes with the ability to use the Internet effectively. But given the rise of millennials, especially given Venezuelan demographics, this hurdle is less of a problem by the day.

We are at the stage, where most of the active people in the market are those who Mine, who in turn are faced with two options:sell their Bitcoins or just hold them hoping for it to go up in value. As more and more people turn to it, the more you will see it shift towards trading goods and services as well. Hopefully in doing so, we can move closer to reestablishing economic freedom for Venezuelans.

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76 COMMENTS

  1. Sup Chubeto? It’s good to see someone from “el Juan XXIII” around here.

    I have been wondering how come the mining rate (in the order of Exa-hashes these days) keep going up since mining stop being profitable since around the beginning of 2014 (maybe except for those who pay no energy bill and/or can produce their own ASIC miners).

    • Carlos, as you point out the arbitrage from mining is an opportunity that will close over time. The true value of Bitcoin for Venezuelans or any other country with triple digit inflation and currency controls is that you can exchange your depreciating Bolivares to Bitcoins a lot faster and easier than to any other assets (e.g. to dollars for example) if you have the knowledge to do so.

  2. The problem with mining Bitcoin is that with time, it is exponentially more difficult to mining it, if you remains flat with your power mining it will be harder to get bitcoins each month, so you need upgrade your power to mantain a flat bitcoin production over time.

    ALso Bitcoins exchange rate are so volatile that in fact you cant predict a reliable model. Bitcoin in the last year has been in the 200$-450$ area ( right now it is 380$ x 1 Bitcoin ).

    Of course with the almost negligible electricity and internet costs in Venezuela and if you think the bubble in the black market will continue to increase……

  3. 80 USD a month? That guy must have a full room worth of servers and/or a bazillion ASICs!

    I have a couple of rather good pcs (not so good vidcards, Im afraid) and tried mining in 2014, I did it for a couple of weeks and my estimation was 1.5 USD per month. It wasnt worth it to push my machines too hard for that meager amount. I also calculated the ROI for a mining rig… absolutely not worth it… a whole year of mining just to pay off the vidcard.

    The money in the bitcoin business is in the exchange, trading for other, lets just say, exotic coins, and then swapping back to the good ol bit when the time is right. By doing so, you could easily make much more than by mining, although it would require considerable more work in ones part. That or selling your computer time for mining.

    • He uses specialized mining hardware, because CPUs and GPUs stopped being competitive for mining a long time ago. While you would indeed need an entire room full of computers to achieve that $80 per month, a few regular miners ought to do the trick instead depending on their models.

  4. The hashrate is still rising because there are countries like Venezuela where electricity is very cheap. You cannot mine profitable with older equipment in USA, but the same hardware can be profitable in Venezuela.

    • With the values of: bitcoins mined per day and amount of hashes mined everyday it takes more than a year just to GET BACK the price of a decent ASIC (and that’s assuming bitcoin’s being stable and also hashes mined everyday).

      No, not even for Venezuela it is profitable nowadays.

      • You can do the math yourself, Carlos. Check out popular ASIC miner prices on the Bitmain website, and calculate the time to ROI using the BitcoinWisdom mining calculator. It’s certainly less than a year, and it’s certainly profitable.

  5. I place BTC mining in the same category as high speed trading, raspacupos and other legal, yet immoral activities. To me anything that translates to cash from no value generation is immoral (perhaps a loose use of the term). That doesn’t even consider the society’s cost that brings Ricardo’s mining a profit. Sure, he isn’t to blame for the crazy cheap electricity prices. But in a country where the grid is already cripple, and that for each kW-h consumed, a hefty subsidy goes with it that is not spent in other areas that are in dire need.

    I would say the last point would be justifiable if value was being created. One could have a server farm actually doing work for others. Even storage. That’s a valuable service. But the author makes a horrible mistake here trying to convince the readers that mining bitcoins requires any type of intelligence. Let me tell you what you have to do. Buy a mining appliance such as:

    http://www.amazon.com/Antminer-S7-~4-73TH-Bitcoin-Miner/dp/B014OGCP6W/ref=sr_1_1?s=pc&ie=UTF8&qid=1454072938&sr=1-1&keywords=bitcoin+miner

    Then connect it to power and to the internet. Turn on. Congrats. You now find yourself consuming power, getting cash (diminishing amounts btw) and generating blockchains that really don’t do anything for mankind.

    Venezuela’s cheap power (even without subsidies) can be a competitive advantage for many things from Aluminum production to Hosting (if it wasn’t for the incredible bad networks) but to see that BTC gets a spotlight is a disgrace.

    • So the biggest trustless distributed global database seems something of no value to you? Thats a very uninformed opinioin.
      Blockchain is the future on public secure record keeping.Big bank firms are doing research on this subject.

          • In particular, there is a lot of profit to be had by bleeding dry idiots that thing something has value when it is worthless. Which is about 100% of the profit you can make of Bitcoins if you know how to. Similar to, say, Dutch tulip bulbs.

            Just try to jump BEFORE everybody else realizes it.

          • Currencies or bank notes are exchangeable for goods and services within a certain economy. If you need to buy something in the US you must first acquire dollars as you can’t use any other currency to acquire goods and services there. In Europe, the Euro. In Vzla, the Bolivar. Modern currencies are valued in accordance to the goods and services you can exchange them for (and its circulation).

            The only economy (or marketplace) for which you MUST use BTC is Silk Road which is a market place for all kinds of shoddy activities and last time I checked it was shut down by the FBI.

            Some people are willing to pay money for BTC. Some people are willing to pay for energy crystals and card readings.

          • Yeah, Rodrigo, that’s right. You can only use Bitcoin to purchase drugs and child slaves.

            Here, for instance, there’s a very wide selection of cheap child labor for a variety of tastes: https://www.dell.com/bitcoin

            You can also get yourself blood diamonds and grenades to play carnavál at the cota 905 with these guys’ gear: https://blogs.microsoft.com/firehose/2014/12/11/now-you-can-exchange-bitcoins-to-buy-apps-games-and-more-for-windows-windows-phone-and-xbox/

            Some of these gangsters even let you pay up in Bitcoin in exchange for favors from other, more specialized big gangs, which lets you partake in investments as diverse as hired assassins, meth kitchens, and the elusive but highly profitable trade of kidneys from kidnapped children: https://www.gyft.com/

            Seriously, get a fucking clue.

          • What exactly do you think the word «currency» means? It’s a means for exchanging value. The very definition of «currency» is to be the thing that’s «in between». Granted, you can also use a currency to store value if its valuation is stable enough, and Bitcoin certainly isn’t. A currency does not have to be a reserve currency to count as a currency, or to serve a practical purpose, or to provide «social value» — that is, to solve some problem for some population. Bitcoin certainly does that, and there certainly are people directly interested in owning Bitcoin as an investment rather than simply as a means of exchange, as evidenced by its market value. You simply lack a proper understanding of the dimension and diversity of the global Bitcoin trade.

        • You’ve just shown you haven’t the foggiest understanding of the fundamental social and technical mechanisms that make Satoshi cryptocurrency networks economically viable in the first place, Rodrigo. You can’t drive adoption for a blockchain without incentives; blockchains are just a cheap and useless cryptography parlor trick unless they do precisely what cryptocurrencies do with them.

          This is what so many idiotic articles on traditional finance communities fail to understand when they attempt to present themselves simultaneously as insightfully educated on the value of blockchain technology yet show a complete pseudo-skeptical disdain for Bitcoin and digital currencies in general. It doesn’t work that way. You can’t have one without the other.

          Furthermore, your point about morality betrays a profound ideological immaturity typical of venezuelans with regard to the social interpretation of wealth and its dynamics. Mining cryptocurrencies implies an investment that certainly produces value: it’s the fundamental mechanism that drives their blockchain networks, which provide open-access, distributed financial services. To question such a system as immoral is repulsively close to the rhetoric of the venezuelan dictatorship and its destructive economic control machine. Corruptible as it may be, finance is not a fundamentally dirty occupation, and it is absolutely fundamental for the healthy operation of a modern productive society. To question it universally reeks of communism ideology; falta que digas que ser rico es malo.

          In any case, the moral character of an investment is absolutely independent of its technical complexity. So what if commodity mining hardware is easy to operate? There is no intrinsic value in obtuse technology that limits mining investment to some special-snowflake, blessed techie social class. On the contrary: it’s a great success of the Bitcoin industry that they’ve managed to simplify investment in mining so much. There is value in markets providing open access without huge, artificial and avoidable barriers of entry based on a tacit requirement of technical expertise. Does it make you angry that anyone can mine, not just tech-literate elitists like yourself?

          Investing in mining is not just about plug-n-play. Investing in mining is about investing: you take a huge burden of risk, and in return, you get, well, returns. Or maybe you don’t. Risk-taking investors make the network possible and provide open financial services to the world, and in return, they get some coin. Taking risk is a contribution to society, regardless of how it plays out in your third world economic justice narratives.

          • I have nothing against wealth or financial markets. I do think financial markets provide great services. I recognize that they aren’t perfect and some exploit those imperfections. Those exploits I deem as immoral.

            As whether it is easy or hard, I have nothing to say other than it is easy. My comment above intended to correct the author on its assessment as something hard. It is not. It seems like we agree.

            “regardless of how it plays out in your third world economic justice narratives.” This is just the typical fallacy that makes it so plain annoying to discuss. You must address the concern about whether there is value or not in mining, and you almost did. By mining you support the transactions, and in return, you get coin. Pretty fair. Except that why to mine at all? After al BTCs are mined then transactions can only be supported by fees. Why wait til then? The mining cap is arbitrary. And in fact, it may change, who knows.

            Is BTC the best implementation of cryptocurrency? Are decentralized currencies useful for anything other than “in-between” transactions? The thing is that at the end of the day you need to go to your bakery and pay in whatever currency circulates where you live. And even if a decentralized currency is adopted (States have no reason to) why BTC and not LiteCoins? Or the next one? When you start thinking about the actual implementations of it, it all seems futile.

            I wonder, do you see the lack of tracing as a feature or a flaw? I think the latter.

            My opinion remains unchanged in terms of taking energy and turning it into heat for no apparent reason.

      • You still have to acknowledge that you are using that energy for something that lacks value.

        You would remove the socials costs tho. Unless you generate your energy using our uber-subsidized diesel to run a diesel gen.

          • I responded that whatever doesn’t generate value (or perhaps social value is the appropriate term here) is immoral. Same as HST or raspar cupos. I said it above.

            I also said above that by generating your power you remove the social cost. Is it still a worthwhile enterprise? I say no.

            There are many sites that take BTCs, but that doesn’t mean you must have them. A site in Europe will take colombian pesos, exchange them in the back end and provide you with the goods or services. At the end the site wanted Euros. the difference is one of Could vs Must.

    • Rodrigo,

      1.-
      If Venezuelans can have a choice of currency and have the economic freedom to trade, invest/save in any asset that they wish to do so then I would argue that the end result of the “mining” activity is valuable. How so? well you need to have people trading bitcoins in order for it to become widely accepted, and some of the folks using it will be miners but over time it should be people trading with others beyond the Venezuelan border.

      On the inherent value of mining currency – you should then be equally concerned and outraged about people burning fuel, destroying nature and poisoning themselves and other animals just to get gold from the ground just so that it sits in a banks’s vault.

      I am guessing you have bought into Krugman’s point of view – he made the same fluke comparing the internet to the the fax machine in the 90s by the way. http://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/?_r=0

      2.-
      I have yet to meet someone without a background in computer science or years of experience in computers to be have mined bitcoins. There is a knowledge constraint that will make it very hard for ‘everyone’ to mine.

      3.-
      It isn’t that Venezuela has a comparative advantage in the sense that people are going to flock to it to mine. It is that Bitcoin as a currency is FAR more attractive as a means to trade and to save than Venezuela’s currency.

      JB

      • “On the inherent value of mining currency – you should then be equally concerned and outraged about people burning fuel, destroying nature and poisoning themselves and other animals just to get gold from the ground just so that it sits in a banks’s vault.”

        I am.

        “It isn’t that Venezuela has a comparative advantage in the sense that people are going to flock to it to mine. It is that Bitcoin as a currency is FAR more attractive as a means to trade and to save than Venezuela’s currency.”

        I understand that it response to the very much man made barriers created around currency today. BTW, the angle you gave it here is that there is a competitive advantage to mine currency in Vzla.

        Saving in BTC may be better than BsF but is it better than any other asset? Are BTCs the best asset? Come on.

    • Wow dude, it’s the MARKET stupid, that’s the value that REALLY MATTERS, for real that’s the ONLY ONE THAT MATTERS, not whatever subjective value you have in your mind that for some reason you think is objective, but IT IS NOT.

      You said that whatever doesn’t create value, it’s inmoral.
      Again, THE MARKET says otherwise, cuz people think it has value, THAT’S WHAT REALLY MATTERS!!!.

      You think descentralization is not valuable?, low transaction fees aren’t valuable?, a currency you REALLY own it 99.9999% is not valuable?, the most popular cryptocurrency that is even accepted by dell, microsoft, newegg, expedia, gyft (indirectly amazon, bestbuy, ebay, xbox, etc) is not valuable?.

      C’mon.

  6. So, basically, to escape the cuckoland of Venezuelan economies, some guy is moving to the cuckoland of Bitcoin, that amounts right now to a series of cyclical bubbles for anarchocapitalist idiots with too much money and not enough sense.

    The “hurdle” to use Bitcoins is that they are shit for actually being used, given that what they are used right now is for said stupid antics of speculation, meaning what you got paid today may tomorrow be worth nothing at all. That if you dont get scammed in the multiple frauds surrounding it. Or, in a feedback loop, having Bitcoin prices crash again because of the scam scandals.

    Check the price chart for 2015

    https://blockchain.info/charts/market-price

    and now tell me that, as a retailer, thats a currency you want to have any kind of reserves, payments, etc, on.

  7. Sorry but your computer programmer doesn’t really get devaluations:

    “I’ve even paid back Bolivar denominated debt in Bitcoins. it was a very good business decision as the Bolivar has been losing value.”

    Bad call. His Bolivar debt will be worth less and less as Bitcoin retains its value, that’s also a big if, but a better bet that the Bolivar any day!!

  8. Wow! This post is just so full of fail from a Venezuelan point of view.

    “By design, Bitcoin’s supply growth is predictable, capped at 21 Million, and it cannot be manipulated by any central agency.”

    How many BC operations & brokers have gone bankrupt or just stolen the money in the last few years?

    “I bought a mining machine for the equivalent of $500 in bitcoins,”
    “As I write this, you can buy a Bitcoin for BsF 364,000. ”
    “But here’s the key: Bitcoin’s advantage is the lack of the need for a bank.”

    So how do you buy a BC with Bs & not use a bank.
    In cash??

    There’s more but that should do it.
    Anyone trading seriously in BC with the past history is really not thinking this through when the market in US$ is fluid & relatively safe.

    • “How many BC operations & brokers have gone bankrupt or just stolen the money in the last few years?”
      – Yes it is not a 100% safe operation, however, can you argue that it is safer than exchanging Bs to $, how many people have been victims of fraud due to the lack of a free market in Venezuela?

      “So how do you buy a BC with Bs & not use a bank.
      In cash??”

      – Yes you need a bank account to transfer Bs to Bitcoin – you do NOT need a bank account to trade with Bitcoins.

      “There’s more but that should do it.
      Anyone trading seriously in BC with the past history is really not thinking this through when the market in US$ is fluid & relatively safe.”
      – Yes if you live in the US or any country with out currency/exchange controls that would be the case. That is not the case for Venezuela.

  9. Bitcoin also offers a nice method of getting paid for online freelance work if your employer is familiar with them. I usually offer a small discount for web development in exchange for making it a more attractive option over, let’s say Paypal.

    This is because with exchanges such as SurBitcoin, I can actually cash in that money in a matter of hours at most, without having to ask around to see who’s buying. Instead I get to perform a semi-automatic trustless transaction with a buyer while we both remain anonymous, which is hugely valuable considering how risky these transtactions tend to get.

    That also makes it a good option for those sending money to their family in Venezuela, just set up an account for them and do the whole process yourself if they’re not very tech oriented. Buy Bitcoin, deposit them in SurBTC, go through their order book, and make a withdrawal to their Venezuelan bank accounts.

    • Those are uses to bypass the idiocy of Venezuela forex controls, yep. I surmise that as you also get rid of them as soon as possible you bypass the market speculation. Still, it means you have to be very much on top of the bitcoin rate to offer your services without being screwed or screwing somebody else to set your price at exactly the ammount of actual useful currency you want, instead of finding that what you priced at 5$ is now 10 or 1 $.

      And also, well, the warm feeling of thinking if you are not going to wake up to news of SurBTC being next Mt Gox, or any of the other cases of fraud, scams, hacks, etc…

      • Bitcoin/USD exchange rates *very very rarely* go through 100% increases, and far more rarely fall as much as 80% — it typically takes many months to swing that far. «What you priced at $5 is now $10 or $1» is not something that actually happens in Bitcoin unless you spend a month without even a cursory look at the markets. You can stay on top of things with just a quick visit to BitcoinWisdom once a week or so; even in periods of high volatility, checking rates every couple of days is usually fine. The rest is just fear, uncertainty, and doubt, all based on misconceptions and amarillismo worthy of Últimas Noticias.

  10. Morality is relative. I fundamentally agree with the premise that it’s as immoral to mine BTC at the expense of Venezuela as it is to raspar cupos. But we should be pointing the finger at the *real* people responsible for this moral conundrum: the government. With electricity rates this cheap, it’s no wonder people are doing this. Some may even justify it by saying they need this to survive (or at least preserve their savings, something everyone obviously wants and is getting increasingly more difficult).

    Incentives need to be in the right place.

    • Alejandro,

      This seems like a perfect theory of knowledge topic “morality is relative” – it is a tough subject to discuss and would spawn a whole article. I would agree that people can have a perspective on morality but to each individual is not relative. From Rodrigo’s moral principle – making money out of nothing – he argues mining is not moral.

      Mining bitcoins is valuable as the miner is providing a service (solving a math problem so that a transaction can take place) to the community and getting paid to do so.

      JB

      • “Mining bitcoins is valuable as the miner is providing a service (solving a math problem so that a transaction can take place) to the community and getting paid to do so.’

        Indeed, but that’s by design. By design means that someone made that decision. Someone anonymous btw. Once the BTC cap is reached, then the system must support itself with fees. Why not support the system with fees from the beginning?

        • It is called Proof of Work, is what makes bitcoin safe from nasty things happening, like changing the blockchain to make double spend for example.

          I’m not nearly an expert in the matter, and I don’t even have an idea how bitcoin will continue to work after fee rewards overcome mining’s, but as things are now, that energy waste AKA Proof of work it’s really needed so that no one has a temporary access to a >51% hashing power (or bitcoin could have something similar to a central bank), like you said it was designed, but if you have a better idea with the right incentives in place the world is very welcome to hear it.
          And meanwhile, it really creates value, obviously not one that you consider “moral”, but it really is a subjective thing.

        • Even if that’s the only reason for BTC to exist, I can’t see your point.

          Is there a reason for money to exist other than facilitate trading of good and services? Before you answer, think this: BTC also facilitates trading of goods and services, and money (eg. dollars) is also used by criminals for their activities.

          • Rodrigo
            Remember that currencies have different expectations from one to another.

            For example, let’s supposed this:
            Bsf I expect it to inflate more than 700% this year, dollars I expect it to inflate less than 5% (idk), BTC I expect it to inflate less than -20% this year, all those numbers are my subjective opinion, but that OPINION gives them value to ME, according to my opinion, on average, I will store more value in BTC than whatever other currency, so I will choose BTC for storing value.

            I can make a transfer with bitcoin without the risk that my bank blocks my account because of “strange movements” (Been there), or without the hurdle of needing to make and international call in order to give permission to the bank to proceed with the transfer.

            Bitcoin doesn’t have any of those pain in the asses.
            That’s exactly why it has value to people in spite of all the hurdle for the knowledge required to use them.

  11. There’s an article today on the DolarToday site, about Venezuelan tourists whose domestic credit cards are blocked when they are at their destination, leaving them without access to their Venezuelan accounts, and so without money to pay for their expenses in Ecuador or Aruba. For them, Bitcoin would definitely be an advantage. The fluctuation in value of bitcoin still would have to be dealt with, to avoid losing value.

  12. After reading some of the comments here I think want to take a step back from my original position. Bit coin miners are providing a service. Why is the service paid like this instead via fees I don’t know. Why will it transition to fees eventually (a limit in circulation is not cure for inflation) I don’t know. I don’t think anyone has explained it here. I also haven’t found any article elaborating on the reasons for such designs.

    Whether currencies that are untraceable, untaxable and decentralized will find a hold in society or will this be just a fad, it is too early to say. My guess is that governments will have no interest in this due to the lack of control. Those controls are sometimes good and sometimes bad. Given that there can be an unlimited number of decentralized currencies too, which one will take hold is also hard to say.

    Right now, BTCs are merely a currency that allows transactions online. But at the end of the transaction some sort of cash will appear at the end. To say this in other words, transactions could happen with BTCs but they don’t have to happen with BTCs. There may be a quick buck to be made by speculating with it, or maybe the whole thing will collapse if interest is lost in it (a potential risk).

    Chubeto, thank you for opening the forum around this topic. Somewhat refreshing to talk about other things every now and then.

    • Now I can agree 100% with you, even on the doubts, it’s really hard to see what will happen, specially because of it high complexity, that’s why very few people understand how it really works, myself excluded.

    • Rodrigo,

      Kudos for reviewing your conclusions after presented with arguments from other folks. This is a tough topic to discuss, as these concepts and technologies are being deployed and developed on very rapidly. An analogy that has been thrown around regarding bitcoins and the blockchain technology is “try to explain services like uber/ebay/airbnb to someone in the 90’s when the internet was in its infancy”

      On your point of limited circulation is not a cure for inflation. It may not be, however the supply of BTC is predictable and capped, unlike fiat currency which its supply depends on the (some what unpredictable) policies of a central bank.

      JB

        • How is this *any* different from the money supply in fiat currencies? What intrinsic meaning is there in the money supply determined by central banks? Are you seriously suggesting on a public forum for venezuelans that we kneel before the wise gods of government monetary policy and the trascendental essence of their decisions? How is the cap on Bitcoin supply any more arbitrary than whatever Merentes pulls out of his ass?

          • Again, central banks have been successful at keeping currencies stable. The fact that the BCV hasn’t doesn’t mean that it shouldn’t exist. That argument can be easily extended to government. Maybe you also think that governments shouldn’t exist.

            BTCs haven’t been stable, particularly when compared with well managed currencies.

        • Rodrigo
          Let me start by saying I’m no expert on Bitcoin but I can answer some of your questions.

          The cap in production of Bitcoins is merely to achieve enough distribution and fluidity for the currency.
          It is also necessary to stop the mining which, having achieved its objective of creating the Bitcoing economy, would not be necessary anymore.

          When enough Bitcoins have been produced the Bitcoin economy could keep functioning with the attained fixed amount. This prevents inflation, actually produces deflation because some Bitcoins are lost when people forget their keys or die without leaving inheritance.

          The amount of the cap itself is not important what is important is the time needed to ramp up to it.

          Why couldn’t they start with all the bitcoins from the beggining?
          Because, who would be the owner of those bitcoins?
          Who would want them?
          The intention was to have the bitcoin economy grow together with the number of bitcoins without unduly benefiting anyone except those that actually help in making it grow.
          The artificial process of mining was designed so that bitcoins are generated slowly and evenly distributed. That way people would have an incentive to get early into the Bitcoin economy and to ensure no one would have an unfair advantage. Also the mining process was more productive at the beginning but it becomes less so with time. That stimulated early adoption but it will be less important in the future.

          Notice that the sale of bitcoins is not too different from the sale of shares of a company, except there is no IPO. Instead there is the mining process. After that they are traded just like shares, commodities, currencies, etc.

    • Again you reveal your abhorrently poor understanding of the technical fundamentals of Bitcoin and every other cryptocurrency it has inspired. Have you even had a cursory look at the original Satoshi paper? The reasons for the block reward in addition to miner fees are explicitly laid out and explained: it provides the fundamental incentive for initial adoption and circulation of currency. This is not a new, fascinating discovery — this has been part of the concept of Bitcoin since its very beginning.

      Bitcoin is NOT in ANY way untraceable. It is, in fact, far more traceable than traditional currencies; even though Bitcoin transactions are pseudonymous (which is fundamentally different from being anonymous), they are entirely traceable; have you ever even used a block explorer application? Have you a clue of how triple entry accounting even works? The very blockchain which you claim to appreciate is at its core a mechanism for publicly tracing cryptocurrency transactions.

      Seriously, how hard is it to quickly search Google for «Bitcoin tracing» before you come on a public forum and spew uninformed opinions?

      • “Have you even had a cursory look at the original Satoshi paper?”

        Yes. It seems like it is treated like a holy scripture by some.

        “The reasons for the block reward in addition to miner fees are explicitly laid out and explained: it provides the fundamental incentive for initial adoption and circulation of currency.”

        Evidently. I understand the initial incentives scheme (chosen from a pool of other schemes). Are the incentives there for the whole life-cycle of the currency?

        “Google for «Bitcoin tracing»”

        https://en.bitcoin.it/wiki/Anonymity
        http://www.technologyreview.com/news/518816/mapping-the-bitcoin-economy-could-reveal-users-identities/

        Based on those (top two hits) it seems like someone knowing how it works can avoid tracing. Anonymity is a commonly advertised feature of cryptocurrencies.

        Obviously you understand it very well. I don’t make such claims. I do come to forums to learn from others and I do appreciate your comments. Now, it is evident that you are in the BTC business. It is also evident that you think BTC are the best thing in the whole wide world. So much that you take criticisms to it personally.

        I think, understanding a bit more now. It is a neat, hipster, anarchic way of doing some online transactions.

        Many of the questions I posed here haven’t been addressed. You don’t have to.

        I will simply conclude by re-linking was was posted before by “El detalle que faltaba”.

        https://medium.com/@octskyward/the-resolution-of-the-bitcoin-experiment-dabb30201f7#.urvl9ftj6

  13. Hi Chubeto. Thanks a lot for your input in a topic where most people (me included) aren’t familiar with.

    I have some observations to point out about the topic of Bictoin:

    1. This piece, quite frankly, reads like a very long ad for Bitcoins, and more specifically, Bitcoin mining technology. Given the prices on bitcoin mining equipment, I dare to say that it seems like the biggest bucks are made by mining equipment sellers rather than the miners themselves. I don’t really know what’s your current job or whether it is linked to the Bitcoin industry, but I’m a bit concerned with conflict of interest here.

    2. Bitcoin has a fatal flaw, IMHO. The structure might seem like it’s bulletproof, but there have been several cases of massive fraud (The one I think was most important was the theft of 850.000 Bitcoin – about USD 450 MM at market rates – from the first bitcoin exchange MtGox.. https://en.wikipedia.org/wiki/Mt._Gox for reference). There have also been issues of malware infecting unsuspecting PC’s to mine Bitcoin for their creators (http://www.theinquirer.net/inquirer/news/2109599/worlds-dangerous-botnet-mines-bitcoins).

    3. I have another issue with the economics of Bitcoin in particular. The concept of cryptocurrencies makes it easy to replicate the concept and create new currencies (https://en.wikipedia.org/wiki/List_of_cryptocurrencies for the current offering). While BTC benefits from being the first and enjoys the lion’s share of public advertisement because of this, the truth is that it’s definitely possible in the future that the network economies pushing everybody to go BTC can change, leading everybody to ditch BTC for LiteCoin, or DogeCoin, etc…

    4. I agree partially on the view of Rodrigo that BTC mining is essentially immoral, but I also agree on Alejandro that morality is relative. My view in the matter, to conclude, is that BTC isn’t safe of the market failure / propensity to be used for crime that taint so many other facets of the contemporary global economy, so it’s not objective to sanctify BTC in my view.

    5. Many of the arguments used to defend BTC are shockingly familiar to the ones used by Gold Bugs, and I think their arguments are flawed in many similar aspects. Safe to say, fiat currencies won’t be traded for BTC anywhere soon, basically because the current global economy isn’t prepared for the quantitative restrictions placed by BTC or any fixed-supply currency for that matter.

    • Responses below:

      1

      I work in a fintech company that has no interest or stake in bitcoin or Venezuela. We help banks price their products period.
      I think that anarchists structures (decentralized) will replace most centrally controlled institutions. Think of all the disruption brought upon by the internet. Google’s chairman Eric Schmidt: “The Internet is the first thing that humanity has built that humanity doesn’t understand, the largest experiment in anarchy that we have ever had.”

      2.

      – Yes there have been frauds and hacks. Again my thesis is that the Bolivar is so depreciated and so volatile and the Central Bank in Venezuela is so discredited that Bitcoin is a better alternative. Can you buy anything on Amazon with Bolivares? No, can you buy it with Bitcoins? Yes.

      3.

      -Yes there will be other cryptocurrencies, the more the better

      4.
      – Then don’t use/trade BTC

      5.
      – Sure not the case for Venezuela.

    • Regarding your second point: scams such as MtGox have essentially nothing to do with the structure and design of Bitcoin. Similar scams occur all the time on the leading fiat currencies of the world. On your third point, a similar situation exists (although on a far greater scale) with the main reserve currencies of the world. These two complaints have nothing to them that’s specific to cryptocurrencies.

  14. At the moment, for someone living in Venezuela, Bitcoins are very useful because they allow for sending and receiving small amounts of money with minimal fees.

    If you have the right friends, you can buy more than $500 for a wire transfer, or more than $100 in cash, but if you want to buy smaller amounts it is not practical or fees become too expensive. Bitcoin is a cost-effective way to receive $200 from a relative overseas, or to save your hardly earned Bolivars every week and later convert them to a hard currency.

    Rodrigo is mostly right about the long term uncertainty in Bitcoin, I wouldn’t invest my life savings in BTC, and is right that it is used mostly as an in-between currency. That means it is used mostly for money remittance, but money remittance is a HUGE business worldwide.

  15. There’s a bit of a misconception about the actual cost of electricity in Venezuela, that while some folks call it “dirt cheap” I tend to disagree, because no one takes in account two critical factors in that equation:

    1) The actual cost of the equipment and facilities that generate the electricity and their maintenance costs, also, it must be taken in account the conversion rate at how much Bs to $s is used to do so, to determine how much is actually someone paying for said electricity. For example, you could state that paying 600 Bs for the electricity monthly bill would be dirt cheap, yet it represents almost 15% of the minimum wage.

    “But 600 Bs is less than one dollar at DT’s rate!” some will claim, well, then I’ve to tell you some basic math lesson here: When you work with units in equations, you have to convert everything to bring it to the same variables, or else you would be adding “oranges with goats”, if you use DT’s rate to calculate the spending for the bill, then use the same unit to measure the income, which in this case rounds at a barely 10$/month, while you’re paying almost 0,75 $ in electricity, that’s not the most subsidized bill ever, isn’t it?

    If the facilities to generate electricity were bought at 6,3 rate, then you calculate the costs and income with that unit too, so it leaves us that while a minimum wage roughly equals to 1430 $ (Which is a fallacy, as you can’t convert to that amount of dollars freely, but let’s keep it as a part of the exercise) then you’re paying almost 100$ for a monthly electricity bill, I don’t know you guys, but 100$ just in electricity sounds like a lot there…

    2) Now, on the second factor, which is even more important than the first one: When you claim that “electricity is cheap in Venezuela”, you are not taking in account the amount of people that outright STEALS all the electricity they consume, meaning that they pay zero Bs, while everybody else has to pay for what they consume, and because the government doesn’t want to measure how many folks are stealing electricity, (Fucken’ political demagogical electorera reasons) that complicates the calculation even more.

    Now, the government’s also guilty of blocking the ability for some people to acquire equipment that doesn’t waste as much electricity as now; I remember that one technician that took a look at one fridge I had in my house, told me that I had to change that thing because it was hogging a lot of current for itself, raising my bill to the “multa zone” where the KW/Hs are worth almost 0,75Bs each rather than the “subsidized” 0,50 than they cost below 500KW/H (And 0,25Bs if you are between 0 and 100KW/H); but how the flyin’ f**k are I gonna buy a new fridge when nowadays they cost almost a decade of minimum wages??

    The regime itself destroyed all the value the Bolívar could have as a currency, which coupled with the grievous judicial insecurity drove away all the serious investments that could be brought to Venezuela in the short term, which in return, has completely crippled the population’s ability to change their old, wasteful appliances to ones that make better use of the limited electricity available; and the regime also has let free reign to those bastards that hook directly in the lines and keep stealing thousands of KW/H each month (Because why the fuck will you worry about cutting the consumption when you pay zero to maintain triple the amount of gadgets and aplliances than a “sifrinito escuaca marico” has in her house?)

    • The infrastructure for energy production is an issue in Venezuela. I sure hope that the mining activity does not have a significant impact on the nation’s crippled electricity system.

      However, I do hope that Venezuelans can get themselves out the of the mess that our economic planners have made of our currency and economy.

      The point I should have emphasized more is: Bitcoins are great for decoupling individuals from the policies of *irresponsible* governments like ours, by providing an alternative means to trade assets.

      This is essentially what many in the Dolarization camp have boosted, a way to “clamp” on the the central’s bank ability to hit the printing press at the expense of the people!! Only with Bitcoin is better since we wouldn’t be subject the Federal Reserve of the United States of America which is what nationalists counter against the dolarization

  16. All I needed to start buying or selling bitcoins at furcoins(.)com was getting a btc wallet, no sign up, no verification and no delay or stress. They always deliver every time I use them.

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