One country’s people are turning to bitcoin as economy nears collapse

24 Aug 2017

Protests continue to spread across Venezuela as economy collapses, driving people to bitcoin. Image: Bumble Dee/Shutterstock

As its currency becomes increasingly worthless due to hyperinflation, the people of Venezuela are rapidly turning to bitcoin.

The meteoric rise of bitcoin in the space of two years has surprised many analysts and the general public at large but, for some, it could become more than a curiosity.

According to The Atlantic, the people of Venezuela are turning to bitcoin mining in their droves as a means of making a living. This is a result of its national currency reaching a state of hyperinflation so great that it is drawing comparisons with the infamous inflation experienced by the Weimar Republic in the 20th century.

Bitcoin owners can earn currency through mining. This involves donating computer power to the underlying blockchain technology, which is then rewarded with bitcoin.

For Venezuelans, bitcoin mining is a far more stable way of making a living, as one of its greatest costs – the electricity needed to allow the computers to handle the processor-heavy action – is practically free.

Due to its socialist government, Venezuela’s energy is heavily subsidised, making it possible for a bitcoin miner to make approximately $500 each month in the cryptocurrency.

According to The Atlantic, this is enough to keep families afloat during the economic crisis that has led to mass protests in the streets and supermarkets being left largely out of stock.

Miners called ‘capitalist parasites’

However, the spread of bitcoin has not gone down well with the country’s president, Nicolás Maduro, whose government is now attempting to clamp down on the use of the cryptocurrency.

The country’s socialist stance – inherited from Venezuela’s former president, Hugo Chávez – those mining bitcoin are being referred to as “capitalist parasites”, with Maduro criticising its trading as well.

Over the past few months, The Atlantic explained, the country’s largest miners have been arrested for various charges linked to bitcoin mining –  such as electricity theft and possession of contraband – as no laws on the cryptocurrency exist in the state.

This has driven users underground in order to avoid Maduro’s government, with some turning to other cryptocurrencies, such as ether, which is much harder to track.

Meanwhile, in Estonia

On the other side of the world, Estonia has taken a completely different stance on cryptocurrency, announcing that it is to start its own one, called estcoin.

Working with ethereum founder Vitalik Buterin, the Estonian government wants to aid in the creation of a “borderless digital nation”.

In a statement, Enterprise Estonia’s managing director of its e-residency programme, Kaspar Korjus, said: “A government-supported initial coin offering would give more people a bigger stake in the future of our country and provide not just investment, but also more expertise and ideas to help us grow exponentially.”

Colm Gorey was a senior journalist with Silicon Republic