Bitcoin offers Venezuelans a risky solution to avoid the crisis
In Venezuela, where hyper-inflation looms and citizens have lost all of their purchasing power, every alternative to earning Bolivars is tempting, through Bitcoin ‘mining’ some Venezuelans have achieved remarkable success.
Bitcoin ‘mining’ is a complicated process in which people compete to ‘seal’ bitcoin transaction blocks by assigning them with an impenetrable and unalterable keys consisting of numbers and letters known as a hash. The hash prevents people from tampering with transactions recorded in the ‘blockchain’ (the continuous registry of all bitcoin transactions ever made), and creating a successful hash that gets added to the blockchain earns its creator 25 bitcoins (roughly $16,000 USD).
Bitcoin mining has become a legitimate profession from a number of Venezuelans, that additionally benefit from price control on electricity, which makes it nearly free. Since bitcoin mining requires serious processing power, miners’ power bills are usually abnormally high, but current conditions favor the business in Venezuela.
Alberto, a Venezuelan bitcoin miner interviewed by Reason.com, earns $1,200 a day, and he lives unaffected by Venezuela’s shortages and inflation. All his earnings come in bitcoin form and he shops for groceries through Amazon’s Prime Pantry Service, which he pays for in Amazon gift cards bought with bitcoin.
But for all the success Alberto has, bitcoin mining in Venezuela means running big risks. The Venezuelan government does not look kindly upon bitcoin miners, they perceive it as being similar to printing your own money at home, and since they pay next to nothing for electricity, the reality is that Venezuela’s bitcoin mining take advantage of socialism to further their capitalist goals.
Venezuela’s intelligence service, Servicio Bolivariano de Inteligencia Nacional (SEBIN), is on constant pursuit of bitcoin miners, despite bitcoin mining not being illegal in Venezuela. Joel Padrón, one of Venezuela’s most prominent miners, was arrested by SEBIN in 2015 for running a bitcoin mining operation with three partners. Since he could not be found guilty of crimes relating to bitcoin mining, Padrón was arrested for alleged problems with the purchase of some computers from China.
It is hard to dissuade Venezuelans from adopting the bitcoin, a stable currency that retains its value across borders and through time, but the government is trying their best. Still, despite their best efforts, many people in Venezuela are finding out that bitcoin mining offers a near perfect alternative to a sinking economy, and they refuse to be tied down to a currency that will ensure their poverty in the coming years.