As you may, or may not know, Venezuela is going through a rough patch at the moment. With the former president, Hugo Chavez, Venezuela’s economy prospered as well as the quality of life of the people. However, this growth was unsustainable and was solely reliant on oil products, the keystone of the Venezuelan economy. This is not the first time or the only country where this has happened, Angola for example registered a big boom after the end of the civil war in 2002, but is now going through a high inflation period because their economy was so dependent on oil and diamond products. The Dutch disease, an economic term to describe this kind situation, happens when growth in an certain economic sector causes a decline in other economic sectors.
After the death of Hugo Chavez in 2013, president Nicolás Maduro took charge and inherited not only the position but all the problems that came with it. By 2014 Venezuela had already entered in economic recession and since then inflation rates have skyrocketed(inflation was 68.5% in 2014 and has reached 700% in 2016). As with Portugal, Angola, Italy and other countries, there’s a strong correlation between economic crisis and corruption levels. Venezuela is no different, with corruption being high by world standards and present throughout many levels of society.
The economic crisis evolved into a political and social crisis, and things aren’t looking bright for Venezuela. Bolivar, the official Venezuelan currency, is now worth less than the paper it’s printed on. Not only that, but the government is withdrawing the 100 bolivar bill(the largest denomination) off the market. Why? The government says that it’s to prevent criminal activity.
With such a high inflation and with the government forcing people to make large payments electronically, it’s the perfect setting for cryptocurrencies, because of their decentralized nature, to emerge in Venezuela. People are already swapping bolivars for bitcoins in order to be able to buy basic goods, food and medicine sometimes have to be ordered from abroad because of a shortage of supplies. Others use it to pay their employees and Venezuelans living abroad also use it to send funds to their families. Although bitcoin still represents a minority, it has grown much in popularity since the recession kicked in, Surbitcoin.com – a platform allowing Venezuelans to buy and sell bitcoins in exchange for bolivars – has increased from 450 users in 2014 to more than 85,000 in 2016. This is just one of many stories that show not only the utility of bitcoin but how revolutionary it is. If you take the history of money into account, the creation of bitcoin is the revolutionary equivalent to the creation of coins or paper money.
It is good to know that cryptocurrencies are helping the Venezuelan people. With continued use, it is possible that the distributed ledger system will hinder, and hopefully prevent, the banking industry from creating the situation that currently exists.
There is a choke-hold on the Venezuelan economy, because it is centrally controlled. The low prices of oil combined with the unsustainable debt by a central government would not be factors of economic ruin for individuals using a distributed ledger system.
I hope cryptocurrencies expand in use there, here in the U. S., and everywhere. Thanks for sharing this story, and spreading some light.
Sad to see my beloved country in this state, I ran away from there when I had the opportunity, my family however...