Why We’re Innovating in the Venezuelan Blockchain Space

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Photo: Criptonoticias

Facing 4,000% annual inflation and a currency that has lost 90% of its value over the last 12 months, Venezuelans are watching their savings evaporate. The largest banknote (Bs. 100,000) represents some $0.40. Due to limited penetration of electronic payments, Venezuelans are paying premiums of up to 100% to get paper bolivars for services like gasoline. With cash shortages, banks limit withdrawals at their ATMS to a lot less than $1 per day.

There is, however, some hope to fight hyperinflation: bitcoin.

One of bitcoin’s unique attributes is that, instead of being issued by a government or central bank, it’s run by an open network of people around the world that validate transactions and adhere to certain rules — only 21 million bitcoin are to be issued, for example. In this decentralized network without intermediaries, a bank account is not required: to buy bitcoin, you only need an internet connection and someone willing to sell.

It’s hard to appreciate these values when you live in a developed country with a stable currency. For a typical person in the U.S., bitcoin is no more than a speculative instrument, but put yourself in the shoes of a Venezuelan who has to carry a bag of cash to pay for a haircut. A monetary good not controlled by a government, that guarantees a low inflation rate is seriously attractive.

This is why many leaders in the cryptocurrency space expect that some of the strongest uses for cryptocurrencies (worth noting that we don’t see the Petro as such, since it’s issued by a government) will be seen in countries with extremely low trust for governments and institutions. The founder of Ethereum, the second most valuable cryptocurrency, tweeted:

It’s still unclear how many people in Venezuela have been protected from hyperinflation by bitcoin. What is clear is that Venezuelans have demonstrated a growing appetite for it: the graph below shows daily volume of bitcoin purchased with bolivars in localbitcoins.com over the last 12 months, expressed in USD:

Every week, Venezuelans purchase 3.7MM USD worth of bitcoin with bolivars. That’s a +362% increase from 800K USD 12 months ago. During the same time period, the bitcoin exchange rate in bolivars increased by +52,249% (a multiple of 523X).

Venezuelans are also going beyond buying bitcoin, earning it through mining. Given that electricity represents the largest cost to mine bitcoin, and that electricity in Venezuela is extremely inexpensive, Venezuela happens to be the cheapest place in the world to mine.

Some are selling their assets in bolivars (we know of someone who liquidated all his savings, while someone else sold his car) to acquire mining equipment. Most do so at a small scale, buying enough machines to generate a few hundred dollars a month. In a country with a minimum monthly wage of ~$6, that gets you quite far.

But it still is a risky business. Although the government recently legalized mining activity through the creation of the Blockchain Observatory (which requires miners to register on a list), not everyone is jumping in right away. Venezuelan miners have operated in secrecy for years, and there are stories of the police using intelligence to monitor electric power consumption to figure out who is mining, to raid homes and confiscate their equipment.

But as the Venezuelan economy collapses, the cryptocurrency mining space is booming and new services are flourishing. Tech savvy Venezuelans earn bitcoin by installing mining rigs for others, while local chat groups are active with entrepreneurs offering to sell hardware they sourced abroad.

With an increasing number of exchanges, we saw a need to build VeneBloc — a site that aggregates real time transactions and volume across cryptocurrency markets in Venezuela, hoping it turns into one of many tools entrepreneurs come up with to move Venezuela forward and build a new industry from the ground up.

Bitcoin and other cryptocurrencies still have a lot to prove. They are highly volatile and have only been around for less than a decade. But in a country with few economic opportunities, they bring excitement and hope to a generation of youngsters looking to make a difference and see their country progress.

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31 COMMENTS

  1. This article sounds like a disguised piece of advertising for whatever “Venebloc” and its 2 authors are trying to sell:

    “Bitcoin and other cryptocurrencies still have a lot to prove. They are highly volatile and have only been around for less than a decade. But in a country with few economic opportunities, they bring excitement and hope to a generation of youngsters looking to make a difference and see their country progress.”

    I’m allergic to numbers and finance, but I can assure you that anything related to the Klepto-Petro or Bitcoins or Blockchains in Kleptozuela is a FRAUD, as many of the top analysts worldwide have already publicly stated. Another Sham. A new, somewhat sophisticated Money Laundering tool. Another Kleptozuelan Mega-Guiso, of course, as everything the Narco-Tyranny does. I’ll defer to the specialists on further comments, but I don’t buy this crap from these 2 guys, whatever they are selling.

    “http://www.venebloc.com/
    Antonio is building at the intersection of tech and finance. Sebastián is passionate about building impactful blockchain technology, with a focus on developing countries.”

    • Right, so “every week Venezuelans purchase $3.7mm with Bolivares”, as shown by a dubious graph, with no source/origin–that’s a shitload of bolivares, which not only virtually don’t exist physically, but are very hard to transfer via Venezuelan banks, which usually have amount limits and collapsed electronic transfer platforms.

  2. Ok guys, a quick look at your website and I see: “Alternative to DolarToday: calculated by dividing BsF / BTC by USD / BTC.”

    The BTC in the denominator is totally redundant. Just divide BsF by USD. I am sure you know this, so why the extra, unnecessary math? Are you trying to flamboozle the math-challenged masses into thinking your analysis is really, really sophisticated and high-tech?

    • They’re ratios not fractions – it’s just poorly written. All they’re doing is dividing the price of bitcoin in BsF by the price of bitcoin in USD.

  3. The part I don’t get, and haven’t gotten in a long time, is why anyone abroad benefits from taking bolivars and exchanging them for cryptocurrency or dollars to Venezuelans. Is there enough value stored in Bolivars to exchange them for anything meaningful? What do the crypto sellers and dollar sellers do with the Bolivars they gather in these exchanges?

    • I don’t know of anyone (or heard of any VZ expats) exchanging Bolivars for anything outside of Venezuela. My understanding is that any wealth accumulated in Venezuela is sold for whatever it can be sold for, then exchanged for currency that holds its value.

      I have a 100 Bolivar note that I keep for curiosity’s sake. Other than that, I would use Bolivars for the bottom of my Norwegian Blue’s bird cage. It is that useless outside of Venezuela.

    • Obviously it’s not for savings, but have you thought that maybe they have to feed themselves or their families living in the country? or it could be that they just like to buy stuff that is dirty cheap if you have dollars because of the crazy price distortions

  4. Just FYI: cryptocurrencies are not any kind of currency* — they are synthetic virtual commodities with no underlying asset value and no scrap value. Venezolanos are purchasing Bitcoin and any other fungible commodity in an attempt to hedge inflation, same as gold, bags of rice, carparts… same as has occurred throughout history.

    Swapping hyperinflation for hypervolatility will not help Venezolanos. What’s broken in Vz runs much deeper than currency and public policy and the flavor of marxism. Trying to fix Vz inflation with alternative currencies or re-denomination is like treating a decapitation with a bandaid.

    *[In a very odd way the Petro may verge on becoming a currency since it is issued by a government which could accept it for taxes, etc. thus implying a minimum underlying value.]

    • I don’t understand the author to say that cryptos will help solve Venezuela’s deep problems. He is saying that some individual Venezuelans are getting a benefit – either conserving some vestige of purchasing power for their liquid assets, or using their expertise in cryptos – which they would not get absent the existence cryptocurrencies. –

    • Theauthor is not pretending that cryptos will help solve Venezuela’s deep problems. He is saying that some individual Venezuelans are getting a benefit – either conserving some vestige of purchasing power for their liquid assets, or using their expertise in cryptos – which they would not get absent the existence cryptocurrencies. Of course, it is a pity that there are not more productive opportunities – such as growing food without fear of the crop being stolen – to make a living in Venezuela right now.

      • “But in a country with few economic opportunities, they bring excitement and hope to a generation of youngsters looking to make a difference and see their country progress.”

        BTW isn’t uncertainty, hyperinflation, extraneous inefficient transactions, hunger, violent crime, and official corruption exciting enough for any Venezolano?

    • Davy Jones – Cryptocurrencies are currencies in that they’re used for exchange purposes, and you can buy things with them. I agree that they are treated as synthetic virtual commodities, or speculative vehicles to a greater extent than national currencies, gold, silver, etc. (which similarly have a principal value in exchange or in the case of metals, industrial and jewelry uses). I don’t have data on uses of Bitcoin, but I’m assuming a lot of it is involved in transferring from one national currency account into another one, and some of it must be used for commercial purchases and sales. I know for sure that some of it is just holding in anticipation of appreciation relative to national currencies. Not picking arguments, but hyperinflation goes in only one direction, while volatility, even purely speculative, can go in other direction. Granted, speculative assets even with some underlying value can become virtually worthless, but if I lived in Venezuela using BF, I think I’d prefer Bitcoin if I could find someone to take the BF, and even better if it was a one-way conversion and I could use Bitcoin to pay for things. Even better if I got paid in Bitcoin. But I don’t live in Venezuela.

      • No entity is bound by law to accept any crypto. Any commodity can serve as a medium of exchange without being a currency. Any crypto could be made into a currency (but that would defy the concept of cryptocurrency) and governments would be insane to do so — see “seigniorage.”

        • I see! Interesting. I hadn’t considered the legal tender aspect. A doctor refused to see me as a new patient for a routine examination – because I had no medical insurance (my choice, medical insurance is a waste, imo) and would pay by check or plastic (cash). That still irritates me. I let it go without making a stink and found another doctor (who gave me a huge discount over “insurance” for paying cash). Anyone can refuse service on many grounds, legally, but not because someone offers to pay with legal tender. You’re right about cybers not being currency, and I’ll change my statements accordingly in the future. Thanks.

          • I sympathize with your experiences re: cash payment for medical services and glad you found a wise doctor. Third party payer (insurance & gov) has completely distorted medical care — he who has the gold makes the rules. Compare with the efficiencies and low costs of glasses/contacts which are mostly still market driven.

            Many doctors only think in terms of treatments specified by insurance underwriters & government, without considering what the patient actually needs. Yet some doctors & clinics are prepared to negotiate cash pricing and treatments, so there’s still hope.

  5. Last night Maracaibo had 5 hours of electricity out of 12(three different blackouts), due primarily to ongoing generation problems at Termozulia. This problem won’t be resolved anytime soon.

  6. According to DolarToday, the Bolivar Fuerte has lost 40% of its value over the weekend.

    4/6/2018 265,312 BsF/USD
    4/10/2018 371,829 BsF/USD

  7. I know the primary focus here on this site is Venezuela but events on the other side of the globe can and do affect Venezuela. I am sure you have all heard by now that President Trump has cancelled his trip to Lima and Bogata because of the worsening crisis in Syria….renewed chemical attacks etc. I really hope this does not weaken the resolve of the attending nation’s to form a determined coalition willing to stand against the thugs in Caracas. I would love to see Maduro try to barge in to the meeting as he has stated and be thrown out on his ear!! Hopefully Peru has the “intestinal fortitude” to do just that if Maduro shows up!

    • Vice President Pence will represent the U.S.. I feel confident he will do a good job of that, and he has already met with principals so it’s more likely to be a continuous dialogue.

    • That is probably good news. The Donald can’t help but shoot off his mouth. He would probably say something silly about invasion and give the dictator a chance to play the victim. The hero bullshit about fighting aggressive imperialism. Too many LA countries have established left leaning parties that fall for that. There is a twisted irony that populism works against DT. He has a huge ego always having to “have the last word”. It would not help garner support with the fence straddling countries attending the summit. Hopefully Pence will lead from the side meetings. Reminding these fence straddling countries how much they do rely on the US. And also drive home the point of how foolish it is to depend on the current failed state that is Vzla. This is not easily accomplished with saber rattling speeches, over the top press conferences, nor twitter. This will only help the Lima Group not having to deal with the nonsense of DT’s bombasity.
      Go and represent us well Mike Pence.

      • I’d much rather have someone who isn’t afraid to tell the truth, than someone who sits in the wings and hides behind smiling politically correct legalese while conveniently lying and undermining a man’s right to speak straight. You sorely misunderstand and blindly ignore the intelligence of President Trump’s statement that a military option is not off the table. Look at the effect it had before YOU shoot YOUR mouth off. Go drink some more Kool Aid, kid.

        • Gringo, It has nothing to do with not shooting straight. Meeting on the side and reminding fence straddling nations that good relations with th USA are more important than supporting a shitty little dictator is……smart politics. Trump has wasted a lot of political capital already when he refused to take the military option off the table. He was trying to project strength towards North Korea and instead did damage to the efforts of Rex Tillerson, Luis Almagro, and others. That is DT. He can’t help it. You may love him with all your heart, but that is dumb politics. The US is not prepared to use force in Venezuela. The shitty marxist regime will collapse on it’s own. Who knows when that will be. Prediction like that are impossible and most folks on this site realize that fantasizing about Tom Clancy style interventions is childish. Diplomacy in LA calls for the US to use it’s influence smartly and avoid the appearance of being the “boss”. Donald’s tough talking sound bytes don’t play well. That is just a fact my friend. BTW. I’m not some liberal shit for brains you might take me for. I’m a farmer (corn/soybean rotation/cattle) in Missouri.

          • Kool Aid Kid … Who came to the table offering to give up nuclear weapons? I’ll take you for your word as to who you are, but I think you may be reading politics wrong, or putting politics-as-usual ahead of common sense. You carry a shotgun or rifle mounted in the cab of your truck, yes? That doesn’t mean you don’t respect life! On the domestic front, a few people were ready to lynch Trump for signing that omnibus budget bill, without understanding what it was. Trump is no dummy, and he has enough trouble to deal with without his “friends” making comments about his overalls. “Professor Briceno” over at Chiguire Bipolar never misses an opportunity to compare Trump to Stalin, all the while moaning and wringing his hands about how terrible things are in Venezuela – makes you wonder if he even knows which side is which, while his principal concern is making money off his comedy skits, sitting safely in Miami. Just for a lol, all I know about farming, I would die of starvation on a good productive farm, if no one showed me what to do. My cousins think I’m just great fun! They’ve never met anyone scared of cows. There are a lot of disconnects in our society, people whose closest contact with a farm is a supermarket shelf, and people who think the best way to deal with a mule is to slowly back away from it.

    • Tom – A bit straight-laced for my tastes, not very flamboyant, but yes I think he’s willing and able to shoot straight. I was surprised Trump was scheduled to attend, given Maduro’s inane shooting his mouth off and disgracing the meeting, aa well as President Santos’ coalition of LatAm opposition to any military action (which Santos has since rescinded), but apparently it is formally an attendance record for U.S. Presidents. Remains to be seen if anything is accomplished there.

      Is Oklahoma beef better than beef from other states? I could have rib roast shipped to me, but they want $48/lb.

  8. I have recycling plants that take plasic waste and old tires and convert them into oil and carbon blck.. Cleans up the environment and provides oil for generating electricity..Money back in less than a year and you have virtually free electricity to sell to the national or local grid or use for crypto mining .. Also no pollution at all with the process. Alan.. alansand1@gmail.com for more info .

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