There’s been a lot of hype in the media recently about a supposed rush out of the bolivar and to Bitcoin. It’s a nice story line, and I wish that it were true, but it tends to soft pedal some very real usability problems that make Bitcoin not quite ready to be your WhatsApp Tía’s ticket out of the bolivar crisis.
Now, don’t get me wrong: techies around the world really are excited about decentralized digital currencies. They’re confident that this new kind of tradeable asset, not being subject to the authority of any one irresponsible central banker, will give us citizens of failed states a way to bypass the failed national currency (without resorting to El Comandante’s beloved trueque, that is).
You can think of one Bitcoin as a kind of a digital morocota that you can divide.
So, “decentralized digital currency”? ¿Con qué se come eso?
You can think of one Bitcoin as a kind of a digital morocota that you can divide (down to 8 decimal places) and send to people over the Internet instantaneously. Like morocotas, Bitcoins are scarce: there’s only so many to go around, which currently makes it a more valuable asset than “strong” bolivars coming out of Sanguino’s printing press. Also like morocotas, Bitcoins are guaranteed to remain scarce.
How is Bitcoin doing in Venezuela now? A year ago, we reported on Bitcoin as a small but growing phenomenon in the country. Its valuation is less volatile than many commodities, and contrary to the bolivar, has appreciated recently. It’s also possible to exchange Bitcoin to more stable national currencies without the approval or the knowledge of the Venezuelan government. Some use it to pay employees and to buy food and medicine. Others have set up mining operations to take advantage of the cheap electricity prices and make money, a practice that the government is increasingly cracking down on.
Access to a non-evaporating currency sounds like a dream to every Venezuelan, and that begs the question: will we ever replace our centrally controlled and tragically inflated bolivars with Bitcoin? As a curious technologist, I want to see it happen, but the truth is that Bitcoin isn’t quite ready for mass adoption in the country.
Getting an empty “wallet” —an address where you can send and receive Bitcoin— is as easy as signing up for a website, but keeping that money safe is hard for most Venezuelans.
The problem really is the “key” — which is sort of like a password that allows you to actually spend your bitcoin. A bitcoin key is usually made up of 64 characters in the range 0-9 or A-F, something like:
E9 87 3D 79 C6 D8 7D C0 FB 6A 57 78 63 33 89 F4 45 32 13 30 3D A6 1F 20 BD 67 FC 23 3A A3 32 62
Think you can memorize that? Probably not. You could write it down on a piece of paper and hide it —the equivalent of hoarding cash under the mattress— but as we know, most physical spaces in the country aren’t exactly secure. You could lose all your money if you misplace them or get mugged.
The answer to this, as to most of life’s problems is: software! Bitcoin websites that follow best practices to keep your keys secure in the cloud typically require a bank account or some form of ID from an OECD country – your cédula is no good here.
I still think Bitcoin is more a story about the future than the present.
For certain, technologists are working to invent secure and usable systems that allow anyone to trade digital currencies. Last year WhatsApp pioneered the mainstream adoption of end-to-end encryption in messaging apps. Solutions are coming. They’re just not quite here yet — at least not in a way that past the Tía test.
I still think Bitcoin is more a story about the future than the present. Once deemed safe to store and easy to trade, it could permeate society like smartphones and the Internet have. What happens next is up for grabs: regulations may follow immediately in some places, citizens may assert their right to use decentralized money in others.
Widespread decentralized money might just mark the start of a new chapter in the history of economics. As a debacle-era Venezuelan, I take comfort in believing such a sea change could shift the power from the Merenteses of the world, back to the people living in fiscally irresponsible states everywhere.Caracas Chronicles is 100% reader-supported. Support independent Venezuelan journalism by making a donation.