Ups and downs are part of life. No one can ignore it. Once upon a time, Venezuela was also one of the richest countries in the world. Being a huge source of crude oil, Venezuela earned too much money by selling oil to American and European Countries.
Venezuela is a South American Country situated at the coast of the Atlantic ocean above Brazil and Columbia. It is a small country, famous for its oil production and tourism.
Venezuela has become the best example for the World for adopting a blockchain strategy to overcome the economic crisis. Any other South American Country has yet not faced hyperinflation. But using Cryptocurrency in peer-to-peer transactions, Venezuela adjusts its GDP during the crisis. Local bitcoins and Paxful are the two biggest exchanges in Venezuela that help to overcome the hyperinflation in Venezuela according to the world’s best crypto research organization, CoinDesk.
The History behind Hyperinflation in Venezuela
The main oil producer of the World faced its first economical imbalance in 1980 when the oil price collapsed for the first time. All the services for healthy living were provided to the residents by the government which came from the foreign currencies by selling oil. The people became lazy and totally dependent upon government help. Between 1980-1986, inflation reached 12%. When Carlos Andrés Pérez was president in 1989, the level of inflation reached 89% and GDP fell to negative. In fact, the government reduces its spending on people. For this reason, the dependent residents of the country started rioting and dacoity. The liberal economic policy helped to increase the GDP up to 4%.
From then to 2016, the rate of inflation fluctuates between 12% to 66%. In 2001 the economy stabilized for a few years up to 2006. In 2011 the ruling party lost the seat and a new president was selected. After Nicolás Maduro became president of Venezuela the GDP gradually fell to negative again. The whole month of December 2016 the inflation rate continued above 50% and Venezuela was marked as the 57th hyperinflated country in the world.
In 2018 the inflation reached 1 lakh % and in 2019 it reached 10 lakhs %. The well-known strong Venezuelan currency bolivar lost its value by 99.99% in 2011. In 2019 1 dollar represents 60 million bolivars. Thus the total economy crashed. Almost all people lost their jobs and became hopeless. People were ready to do any shit things just for food.
The whole economy again touched the sky with the strong hand of Bitcoin and its Blockchain policy.
Blockchain and Decentralized Digital Currency
Blockchain is a well-established network connected through many computers that stored the ledger of transactions in a secured cryptographical manner for the digital currencies that are used as public & open cryptocurrencies. Bitcoin is the most famous cryptocurrency that any central authority, government, or person cannot issue or control. These unique features of Bitcoin, help Venezuelans from manipulation, hyperinflation, and government interference.
All cryptocurrencies are different in nature. These digital currencies can be made by any allowed blockchains or person. The decentralized computer system made a public blockchain policy to make the world’s first modern digital currency known as Bitcoin. As there is no third-party involvement in building the blocks=chain and cryptocurrency, it is more transparent and reduces the cost. The blockchain works all time without any failure.
Besides public blockchains, cryptocurrencies can be made through a person or private blockchains also. The banks or financial institutions that want to issue and control the transactions, try to make their own digital currency. Private blockchain allows those institutions to create, delete or control the transactions. Central Bank Digital Currency (CBDC) is one example of centralized cryptocurrency made by private blockchain. The Bank of Japan is also trying to issue its centralized cryptocurrency in the market. Hacking and manipulation can be the main issue for the centralization of digital currencies issued under the private blockchain.
Maduro regime’s Petro
The Maduro regime made their own cryptocurrency named Petro to blockade the financial sanctions by American Government. Trump’s Government in early 2018 started to put pressure on Venezuela by giving a notice of financial sanction. With help of Russia, advisors of Maduro’s proposed to launch their own cryptocurrency by giving the name Petro to bypass the sanction. Venezuela wrote its name in World’s history by launching its own financial currency named Petro. Though this was just a so-called project. In reality, there was no such use of technology. However, Petro was not an open or public currency like Bitcoin. It was a financial aid made in a private blockchain.
All the rights and controls of Petro is in the hand of regime. Though it was said to be a public currency, Petro was not recognized internationally. It was restricted to the people also. No one knows the technology behind it. The government uses it to pay the pensioners. People can also use it for making payments in gas stations. Petro has very much restricted uses as a currency.
How Do Venezuelans Purchase Bitcoin?
Being a volatile currency, the value of Bitcoin is changing every minute. On average 1 BTC is equivalent to 32000$ this year. This Bitcoin helps Venezuelans a lot to overcome the hyperinflation and re-establish their economical status. The government banned two cryptocurrency exchanges and 1000 bank accounts also.
The world’s most popular blockchain platform for P2P Bitcoin exchanges is ‘LocalBitcoins’. Since 2018 Venezuelan increase their investment in Local bitcoins and are making records every week.
Dash and Litecoin are another two crypto coins, famous in Venezuela. People used the Crypto ATMs set up by Cryptobuyer to make transactions like withdrawals, sending money to relatives, etc. More than 10000 transactions are done through Cryptobuyer every day according to a report.
Uses of Bitcoin in Venezuela
● Currency: The country is adopting Bitcoin very fast. Though it is not totally recognized as a currency for daily transactions. Very few merchants like 200 shops only accept Bitcoin.
● Bank Account Uses: Petro is the centralized digital currency. Very few people keep bitcoin in their bank accounts. Most of the residents took the help of local brokers for buying and selling Bitcoins. The rate of bitcoin is changing hourly. The broker charges a lot.
● Data Mining Income: Online data miners accept bitcoin as salary for providing services. Very little has to pay for electricity as it is cheap in Venezuela. So the miners make a huge profit from this work.
● Trading: Most of the uses of bitcoin are related to trading in Venezuela. This helps people to survive in inflation conditions.
Why does Blockchain matter to the People of Venezuela?
Five reasons are there that ensure the adoption of blockchain in Venezuela.
● Stability: It is very difficult to make daily life transactions in hyperinflation conditions. Though having Bolivars or Dollar in hand, merchants denied taking payment. Small transactions became very difficult due to a lack of hard cash and critical & jammed banking procedures. In such conditions, blockchain technology gave stability to the transaction process. People found it easy to make transactions through Cryptocurrency and became totally dependent on it.
● Remittances: Due to hyperinflation, more than 5 million people fled away from Venezuela in recent years. 4 billion dollars came from remittances for the country. The oil industry is drying day by day. Prices are decreasing continuously in the world market. To control the financial condition, the regime became strict on the hard cash system. A decentralized and independent cryptocurrency is the only way to support the family members back home to relieve people from the regime’s power.
● Social Helping: Maduro’s regime declined to take help from other countries in their critical condition. Some non-government organizations have already started helping people through cryptocurrencies. One example is Bitcoin Venezuela, an NGO that helps 2000 people daily by sending cryptocurrencies to buy food for them. Acción Solidaria is a medical base NGO that ties up with a Digital Currency wallet named Giving Block to donate medicine and help to the HIV patients of the country.
● Security: Rioting and dacoity are common incidents in Venezuela. In such circumstances, the blockchain process gave security in the earnings of the people by excluding any third-party involvement and hard cash facility.
● Financial inclusion: Venezuelans do not have much money to open a U.S.-based bank account. On the other hand, almost 90% of remittances have come through international banks. In such conditions, the decentralized currency gives the path to the people to make transactions on an international basis.
Bitcoins are repeatedly helping people to overcome bad days. Venezuela will also get back its supremacy soon. Lack of education, less developed technology are some problems for the people of Venezuela that have to be overcome.