Original art by Mario Dávila

There’s a restaurant in Puerto Ordaz, Bolívar state, called Portal Grill, a fancy place not aimed at an impoverished middle class, but at a higher, scarcer class. What makes it different, though, is that it’s the only business in Venezuela accepting cryptocurrencies as a form of payment.

Certainly intrigued, I visited the place to see if I could buy lunch in digital coin and talk a bit with Jonathan Santamaría, Portal Grill’s operation manager.

“See that part in the back?” he points to rows of chairs facing a TV. “We are using that section for meetings. We explain to business owners the process and advantages of Onixcoin, so they adopt our currency.”  

Turns out, their plan is huge. Venezuela has the highest inflation rate in the world today, and a major cash crisis. The government is maintaining public expenses by creating lots of bolivars that never become physical banknotes, making cash for day-to-day operations really hard to come by. People use debit and credit cards to the point where networks collapse. Every operation is a potential nightmare.

Cash has become so valuable that businesses are offering discounts if you pay in cash. Lines at the bank can take hours, and people can only withdraw Bs.15,000 a day (less than fifty cents) from ATMs. The cherry on top? Point of sale terminals are scarce too.

At first I thought Portal Grill was just trying to offer another payment option to make our lives easier, but that’s a small part of it all. Joining up with Onixcoin, they’re set to replace the dying bolivar and turn Venezuela into a cryptocurrency nation.

It’s not a hard sell; there are no good reasons to save in bolivars, but with the foreign currency exchange control it’s not easy to get rid of them. That’s why many businesses and individuals try to shield themselves from the crippling inflation by buying bitcoins, and although the bitcoin is extremely volatile, it’s a better choice than the ever-depreciating bolivar. Onixcoin, they say, will allow them to save money without the crazy fluctuation of bitcoins.

“Three kids came in the other day and bought their lunch with bitcoins” a waiter told me. “The older must have been 15, and they impressed everyone with how familiar they were with the process. They ate, asked for the QR code, scanned, paid and left. $18 in total, which is a lot of money for Venezuelan standards.”

He’s even getting tips on cryptocurrency.

“What is this worth?” he shows me a wad of bolivars that barely fit in his pocket. “Those kids had $18 with them and weren’t carrying anything.”

How easy it is to use, however, might be their biggest pitfall: I got there with Onixcoins on my cellphone, but I had to create an account in LocalBitcoins, find a seller that accepted my bolivars, buy the bitcoins, sign up to Novaexchange, transfer my bitcoins from this page to buy onixcoins, download the Onixcoin app from their webpage, install it manually and then transfer the onixcoins to the wallet on my cellphone. All the instructions were in English.

Most people in Venezuela don’t even have a smartphone, and I wonder if the rest is likely to put up with the process.

That’s why the first goal here is to popularize the method. Jonathan tells me that if they manage to expand well, they could partner up with businesses across the city to function as ATMs, where people could change onixcoins for bolivars, even helping companies bypass the exchange controls, as it can be convertible into any currency through the exchange webpages.

They ate, asked for the QR code, scanned, paid and left. $18 in total, which is a lot of money for Venezuelan standards.

Probably the weirdest part is that the government seems to be ok with the experiment — even though there’s no official word about cryptocurrencies in general. A lot of mixed signals, though, with chavismo praising the digital coin as an alternative to the American dollar, while cracking down on bitcoin miners.

I ask Jonathan if they aren’t afraid of the government shutting them down, and if all of this is even legal.

“As long as you declare taxes in bolivars, it’s not a problem.”

“The thing here is” he continues, “that we’re using a decentralized currency precisely to protect our transactions. Regardless of what the government does (to the economy), they cannot touch money that’s not subjected to Venezuela’s Central Bank.”

When it’s time to pay, I go to the cashier. The check is issued in bolivars, and Portal Grill’s software calculates the amount of onixcoins based on current market prices. The cashier then shows me the QR code on a smartphone and I scan it with the app. On my cellphone, I check the amount, write my password and hit send. The phone service in Venezuela is unreliable, so the process stalls for a few minutes before showing up on their screen. Jonathan says they are working on printing the QR code in the invoice, so “it’ll look cooler.”

For me, it’s cool already.

44 COMMENTS

  1. I’ve read about bitcoins many times, and I still don’t understand the concept. I’m a fucking idiot.

    I need a 3 or 4 sentences explanation of crypto-currencies, which I wish the author here had included.

    So I can not understand it yet again.

    • Lemme try: the supply of a fiat currency(eg the dollar or almost every other currency since the gold standard was abolished) is not tied to something physical(eg an ounce of gold), but is controlled by a central bank in order to not be a constraint on economic growth yet not cause inflation in excess of the target (2% annual inflation is case of US dollar.) A cryptocurrency starts with an arbitrary number of units of account (zero in the case of bitcoins in 2009) and provides a small amount of reward for the computers that will serve to confirm proposed transactions (eg bitcoin miners.) If you want to send payment to someone, the receiver will send an “invoice”, which you would approve and send, and this proposed transaction would be sent to the “miners” for confirmation(typically under 15 minutes.) A major problem with crytocurrencies (and fiat currencies) is that their value is arbitrary(based on what someone is willing to spend) and can vary from almost nothing (bitcoin 2009) to a lot(1 bitcoin=$5K dollars in 2017) and has been known to go up or down by 30% or more in a heartbeat.

        • You don’t HAVE to, but the easiest way to obtain bitcoin is to buy from someone. The easiest way to obtain bitcoin is to buy some through an exchange such as Coinbase (which is a legit company backed by Silicon Valley money), though it is possible to set up computers to mine and keep the reward (even if electricity is almost free, the price of buying and importing computer/s might make it uneconomical.)

          • Ahhhh…”The easiest way to obtain bitcoin is to buy some through an exchange such as Coinbase (which is a legit company backed by Silicon Valley money)” So, there is still some real money involved.

          • Not necessarily Maria, you can also mine: put some computers to earn bitcoin (and other cryptos) for you by becoming part of the networks that keeps the ledgers verify the transactions all around the world.
            You can also launch an ICO and convince people to donate or invest in your projects.
            It’s a whole new economy.

    • Assuming you understand that money in our times is based on trust and trust only, answer this question to yourself: Would you rather trust the BCV or a network of computers all around the world, with millions of owners, that keep and constantly verify an unbreakable, uncorruptable ledger with every transaction ever done on a currency.
      Cryptocurrencies are an obvious answer.

      • That´s the thing, Carlos: if it is all about trust, then how could we trust ANY economy player in Venezuela (or any player that gets into the Venezuelan economy)?. I mean, you read all the “plugged” stories, all the people that is doing dark businesses, etc. and one should ask oneself (I do all the time): would I put my money in the hands of people that, given “the ethical boundaries relaxation” don´t know anymore what is good and what is wrong?. I watched a documentary on Netflix about bitcoins and the level of “estafa” is huge. There are guys in jail because of their scam. The US government had to put a legislation (although the one that wrote it is now in the business….)
        I mean (I try to mean) that it looks like a good business, and I am eager to put some money on it, but it is really frightening only to think to trust your virtual money on somebody that could be just trying to get your savings, and enoy them in any beach in the Mediterranean. I only somebody could throw a couple of reliable names to trust. Any one wants to bet on somebody?.

  2. “Onixcoin, they say, will allow them to save money without the crazy fluctuation of bitcoins.”

    But your chart indicates that onixcoin fluctuates more than all the other cryptocurrencies. Also on the chart, what are the units for the y axis? USD?

    I’m with you, it’s cool! And VZ is the perfect petri dish for this.

    • Yeah, the thing was stable for a few months, and then it wasn’t. I guess you can’t really foresee these things. Right know, all the cryptocurrencies are in this awkward “experimental” state (Still, way better than bolívares amirite?)

      About the graph. I had to tinker with the data a little so it could be shown like that because Excel wouldn’t let me use a different Y axis for each line. Here’s what I did: I normalized the data, I made the highest vaule 100, and the lowest value 0 for each of the coins so I could be compare them to each other.

  3. I read an article just the other day, posted on Drudge, about people in Venezuela earning bitcoins via data mining operations. Claimed the data mining operations are illegal because of the high energy usage so they spread the computers around to keep from generating hotspots and being reported to SEBIN.

    Since I’m even dumber than Ira, didn’t understand all the complexities or computer language used in the article. For those interested, it should still be findable on Drudge as I believe it was during the weekend I read the story.

    • Venezuela is the cheapest country to mine because it has the cheapest energy costs anywhere. Electricity costs are the most significant cost variable cost when mining.

  4. It’s a bank account. I guarantee you, you do not understand everything about banking (no one does, is my guess), so do not be upset with yourself if you do not understand everything about bitcoins.

    You buy bitcoins with cash (debit, credit, payment service) and the amount is converted from the currency you use, into bitcoin. Don’t confuse the **coin** (value of the account) with the **methodology** of it. The methodology is a bit … (har-har-har-ho-ho! OMG, I’m funny!) … more complicated, and involves multiple user who track transactions submitted over the network – that tracking takes some time and computer energy, so the people who do that get paid tiny fractions of each transaction, hence the popular term “mining”. Did I go over the sentence limit? The network serves as a bank, only it isn’t centralized accounting.

    Understanding the methodology of cryptocurrency means understanding the design of it all, which is, in a word, geeky, and it includes the security feature of having your “account number” (password), which you use to access your account and authorize payments, but the person you are paying, although he “sees” your payment “address”, cannot reverse engineer that back to get your password.

    I have heard that the number of bitcoins never increases, but I didn’t read far enough into (again) “the methodology”, to understand beyond a very rough conceptual level that the value of each bitcoin fluctuates with demand (not the number), and “mining” is not new bitcoins, but tiny fractions of existing ones.

    • The number of bitcoins is increasing but there is a hard limit, I think it’s 21 million bitcoins. Right now the new bitcoin issued goes to miners, but I don’t know how miners will get paid once it reaches the limit. The beautiful thing about this fixed limit is that no government can tamper it, hence there can be no meddling and no inflation. Bitcoin is really a giant middle finger to all the central banks in the world.

  5. Those kids probably just have a tech savvy dad, that`s all.

    Apparently when it was still kinda niche and not on the mainstream bitcoin was a good way to invest little and make a lot of return. Everyone knows about it now, so i don`t think is that easy anymore and the rises of the currency are not the same.

    I remember checking once and the cost of the miners and what they produced for X ammount of time, PC requirements, etc, and is just not that productive as simply just doing online work as a freelance professional.

    Unless maybe you get WAY into it and put a ton of miners in locations all across town and have the right connections and authority cracking down on you is no trouble. But if you have all those resources to begin with its not like you need money that badly.

    I also have to say that this little world of new coins is a gamble since a lot of these new currencies get created, inflated by the group behind them and then sold off at the highest value only for them to crash the next day. So they make real dollars selling pretty much air.

    In a way is like a geeky ponzi scheme, a manipulated market. And boy oh boy do some wannabee geeks try to sell you their shitty new currency as if it were Herbalife.

  6. Speaking of money, the thing that amazes me is reading stories about Venezuelan protests over a two cent bus fare and a dollar a kilo for beef. Last time I rode a bus in the U.S. the fare was thirty-five cents – and that was 30 some odd years ago. A kilo of beef here in the U.S., even the inexpensive bottom round roast is $10 a kilo (VEF 400,000).

    I found a website that gives comparison prices for food around the world.

    https://www.numbeo.com/food-prices/

    Food in Switzerland is about twice what it is in the U.S., most other developed countries are very nearly the same, and food in Colombia is very comparable to Venezuela. Data about Venezuela is notoriously inaccurate, and with the hyperinflation, worse, and what I read in Spanish about prices in Venezuela would seem to indicate that the data on the site I linked to here is not accurate, even though it is dated October 2017.

    If someone here would like to contribute to that site and update the information – or post here what prices are in Venezuela – that would be helpful and interesting.

    • Venezuela’s economy is completely bonkers but even if it weren’t, you need to bear in mind firstly what the purchasing power of the median citizen is.
      About two months ago, for instance, an unskilled worker, a taxi driver, could expect to earn enough in a week to buy less than a kilo of meat
      and nothing else.
      Here in Germany one has to work about 30 minutes in order to buy that kilo.

      So: always ask how many hours the average worker needs to buy this product or that service.

      I did some calculations several years ago and Venezuelans’s purchasing power in 2012 was already as bad as in 1998. Now it is much worse.
      In fact, it is worse than when feudal dictator Gómez was ruling the country, from early in the XX century up to 1937.

      Venezuelans remember very little. They know when Simón Bolívar supposedly said this or that rubbish, what the
      name of his last lover was and so on but few remember or know from any account that most kids were getting fresh milk produced in Venezuela for free at schools in the seventies or in what century our Spanish ancestors (and the average Venezuelan is of 60% Spanish extraction) arrived in the country etc.

      • Kepler (and Vero) – Thank you. Yes, I am aware of per capita GDP (monthly wages and salary levels for even medical doctors are what a lot of the population here spend each day). And getting into purchasing power parity with the bizarro currency controls and hyperinflation in Venezuela would challenge a supercomputer. But yes, of course, you are correct. And the salario minimo cost of a food basket is a good measure, but who and how many make how many salarios minimos?

        What I had in the back of my mind was getting some kind of handle on the size of the Venezuelan subsidy. Part of the question is where the data on the prices is taken – are those bolichico price levels, or barrio price levels? Given that they are not that different from Colombia’s, I suspect the former: that is, someone just took prices in the centro commercial Palos Grandes, or Las Mercedes, or some enchufado market that escapes price controls, and called it a day.

        As regards prices, hypothesize that someone waves a magic wand and Someone Important gets control, and holds true elections, re-imports Venezuelan economists educated at Sloan School (“Chicago boys”) and tries to establish free market prices overnight while at the same time eliminating government subsidies. Caracazo wouldn’t be the word for it. Either use the airforce bombs and tank shells, or Miraflores burns to ashes.

        I said long ago here that I thought there would have to be a transition period during which food subsidies continue, before free market wages have a chance to catch back up to even the most basic necessities. If all government subsidies stopped, following a magic wand waving, how high would prices go in Venezuela? The demand is clearly not in balance with supply – as it *may* be in other LatAm countries. The other question is about how many benefit from the subsidies. On a macro level, maybe someone knows the government budget for subsidized food?

      • Kepler (and Vero) – Thank you. Yes, I am aware of per capita GDP (monthly wages and salary levels for even medical doctors are what a lot of the population here spend each day). And getting into purchasing power parity with the bizarro currency controls and hyperinflation in Venezuela would challenge a supercomputer. But yes, of course, you are correct. And the salario minimo cost of a food basket is a good measure, but who and how many make how many salarios minimos?

        What I had in mind was getting some kind of handle on the size of the Venezuelan subsidy. Part of the question is where the data on the prices is taken – are those bolichico price levels, or barrio price levels? Given that they are not that different from Colombia’s, I suspect the former: someone just took prices in the centro commercial Palos Grandes, or Las Mercedes, or some enchufado market that escapes price controls, and called it a day.

        As regards prices, hypothesize that someone waves a magic wand and Someone Important gets control, and holds true elections, re-imports Venezuelan economists educated at Sloan School (“Chicago boys”) and tries to establish free market prices overnight while at the same time eliminating government subsidies. Caracazo wouldn’t be the word for it. Either use the airforce bombs and tank shells, or Miraflores burns to ashes.

        I said long ago here that I thought there would have to be a transition period during which food subsidies continue, before free market wages have a chance to catch back up to even the most basic necessities. If all government subsidies stopped, following a magic wand waving, how high would prices go in Venezuela? The demand is clearly not in balance with supply – as it *may* be in other LatAm countries. The other question is about how many benefit from the subsidies. On a macro level, maybe someone knows the government budget for subsidized food?

        • So sorry about double posts. I got a message that there was a server error, so I submitted again later in the day.

          It may be that people in first world countries are spoiled – so used to free market economies we lose sight of things. Getting started in life here, I counted pennies. A car or even a washing machine were not realistic considerations. But I always ate well.

          • The subsidies that need to go are the preferential currency

            You see, is worthless tlaking about the market when still thousands of enchufados and bolichicos buy dollars at 10 bsf

            That`s the distortion right there, it creates a black market were dollars are available but still not meet the demand and the prices are speculative.

            One dollar is not worth 10 bsf but it also not worth 40 000 bsf. Both are distortions.

            So if you really want to open and sincere the economy thats the first control that needs to get out, so the Bolivar can gain value and purchasing power again and that companies can import and produce freely. That takes care of a big chunk of the inflation. Without even dollarizing.

          • Vero – Exactly. Crash the “divisas” scheme. Who would be hurt if the BF10=$1 disappeared overnight? Let the enchufados and bolichicos have their own little Caracazo. That and hope the IMF, Interpol, FBI, and local authorities can recover the estimated $300,000,000,000 that the Chavistas (“Ladronistas”?) pilfered from oil revenues. That would go a l-o-n-g way to covering the multiple levels of debt, and making the transition period of subsidized basic necessities possible.

    • Kepler comment was on point.

      For many people even the bus fare is more than they earn. For you it might be a few cents. For a Venezuelan worker, if he has to take a couple buses to get to work, or a ride from Guarenas to Caracas . There goes the paycheck. A lot of people drop out of school and work because they cannot affor even that.

      The problem is not that things cost cents, is that people make even less than that. You simply cannot put things in comparison with first world standards. If you make 11$ an hour minimun wage, then a couple dollars are nothing to you, it is just a fraction of your time, for a Venezuela earning a salary a dollar is like a weeks work.

  7. It’s 11pm now Monday night. And after reading about a half-hour’s worth of stuff here, I do my Yahoo search and find this:

    https://www.yahoo.com/news/venezuela-opposition-governors-oath-assembly-215653857.html

    How the fuck isn’t the swearing in of these governors in front of the Cuntsitional Assembly ( no typo there…Cunt)…how is this not already reported here?

    And how does VZ manage to sink even DEEPER every day, ever fucking day, into Bizzaroland!?

    They voluntarily swore themselves in front of this unrecognized body!

  8. I’m sorry, but jumping from the bolivar to cryptocurrencies is like switching your terminal cancer for advanced
    cirrhosis.

    There are very interesting concepts in this that are academically exciting, but in the end, cryptocurrencies are right now an asset bubble. You get incredible fluctuations because everybody and his dog is trying to “get in” into something they dont understand but “is growing like crazy”. You have a hundred new ones per month, a lot of them just scams. You have breaches at barely regulated “banks” that leave you penniless.

    It is only because the chavistas make sure the bolivar is worth less than the electrons you waste typing “it is worthless” that things like bitcoin look like an alternative. In the rest of the world they are just another crazy bubble that will hurt a lot of people when it burst.

    https://blog.chain.com/a-letter-to-jamie-dimon-de89d417cb80

    Thats a neutral, level headed response from someone that is pro-crypto assets. Summary and my own view, the thing has a ton of interest in some areas which are NOT the creation of currencies for general use, but as everybody has heard about the gold rush, now you have an outbreak of ICO’s all around.

    • I agree. VZ would be better served by dollarizing. Cryptocurrencies are too volatile, and their storage is still too risky (Mt Gox anyone?).

    • You could use them as an intermediary payor, like Paypal. Another question is the “float” or liquidity. If someone tried a billion dollar transaction, would the shoot the price of bitcoin up, only to bring it right back down when the receiving party cashed in his bitcoins? If you can corner a market on a regular currency with a GDP up into the hundreds of billions, or the silver market worldwide, could you do it with a cryptocurrency?

      There are apparently serve problems with the service CC is using, so I have no idea if this will go or not.

    • You’re just a boomer who like Jamie Diamond is deep down scared because this is the new world order. Say bye bye to big banks and all the big crony financial institutions. Bitcoin and blockchain are a true way to give power to the people.

      • Spoken like a true millenial “real comunist” Kike, i am impresed.

        That Bernie, uh…

        @Robert Nasser

        Yep, exactly that. Even friend techies agree.

        But you gotta remember, even with Herbalife some people do make money, its all about knowing the catch in the scheme.

        BTW, i am also milllenial and i rather stick to the banks and real currency for now.

  9. I just sit here shaking my head.
    This whole crypto currency “fad” will crash and burn sooner rather than later.
    People will be crying about all the money that was lost (stolen?).
    And don’t say they can’t be stolen. Just check Google news.

    Invest in US$, Euros or CDN$.
    At least tomorrow they will still be there.

  10. “Probably the weirdest part is that the government seems to be ok with the experiment — even though there’s no official word about cryptocurrencies in general. A lot of mixed signals, though, with chavismo praising the digital coin as an alternative to the American dollar, while cracking down on bitcoin miners.”

    This is the part that people should be focused, chavismo will soon come after those who use that currency that’s not the sweaty worthless toilet paper that chavismo turned the bolivar into.

    Remember that chavismo works to keep the people as miserable and poor as posible so they can’t do anything to topple the regime.

    • I`ve heard rumors of bolichichos being behind it. And it makes sense, they have the means to back it up, experiment, inflate the crap out of it and drop it when its not profitable. They go into business out of pure hobby.

      A lot of these guys have fancy degrees from the empire itself, have technical skills and are business saavy. There is still an stereotype of a chavista being from a barrio and having no teeth. When in fact that is no true at all. maybe the fanatics, but not the leaders and their families.

      • Too difficult for the enchufado manure.

        They could simply continue plundering the country’s vaults with hundreds of millions of dollars in fake imports of rotten food as they’ve been doing since the day 1 of cadivi in 2003.

  11. Just what is needed in Venezuela, a country where 90% of the population can scarcely read or write, if at all–a nerdy financial transaction form that even geeks have trouble understanding, requires complicated handheld cel computer savvy to apply/access, and can go from 5 to 100 easily (as for Onix, twice in 2017 alone, described by Carlos as being more stable than alternatives, but whose graph shows it much more unstable than alternatives)….

    • Very good points.

      Especially since as I see it…and I hate to be so critical but you guys know the deal…VZ will never go forward with these new electro-currency systems.

      For Christ’s sake, they’re getting to the point of exchanging rocks and virgin daughters to engage in commerce.

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