As Venezuela faces its worst hyperinflation in years, everyday Venezuelans have turned to cryptocurrency bitcoin to afford basic necessities.
The founder of BitcoinVenezuela.com, Randy Brito, estimates that around 100,000 Venezuelans are “mining bitcoin”. The mining trend took off in 2014 when the country’s economic crisis worsened due to the fall of oil prices.
Bitcoin mining consists of people using special software to perform complex mathematical operations and receive a certain numbers of bitcoins in exchange.
Computers that “mine” the cryptocurrency are specially made for this purpose and different models have different computational capacities. Diego, a young Venezuelan miner, who spoke to Euronews on condition of anonymity said: “There are computers that give 800 dollars a month,” the equivalent of more than 77 million Venezuelan bolivars in the black market, which is enough to buy daily necessities. For comparison, the minimum wage in Venezuela is currently 456.07 bolivars.
“A computer costs between 1000 and 4000 dollars plus customs taxes,” said Diego. But Venezuela’s heavily subsidised electricity market makes bitcoin mining profitable as miners need large amounts of power to run successful operations.
Since operating cryptocurrency is not illegal in Venezuela, no regulations exist. But miners have gone underground because since police began cracking down on operations, according to Diego.
“If the SEBIN (Bolivarian Intelligence Services) finds out you’re mining, they’ll accuse you of money laundering, making profit out of illicit business or stealing electricity to arrest you and confiscate the computers,” said Diego.
“I know people who have had to pay the equivalent of more than 40 thousand dollars in bitcoins to the CICPC (Venezuelan bureau of investigations), Alejandro, another Venezuelan miner, told Euronews under the condition of anonymity.
“They extort you by accusing you of violating exchange controls and contraband, said Alejandro.
The SEBIN and the CICP, who are in the mining business, usually decommission the computers to use them themselves or sell them,” he added.
“They know where the mining computers are: sometimes they are very exposed and they can see them from the street,” said Diego.
“They catch the ones hiding using the meters of the Corpoelec (Venezuela’s power corporation) by detecting high electrical indices, says Diego, SEBIN also has access to IPs, so they know who is visiting bitmain.com, the main sellers of mining computers.”
Whoever obtains bitcoins today with bolivars gains in value because of bitcoin’s increased price in regards to the dollar. And as the bitcoin-dollar rates increase, and the bolivar loses value every day, residents are able to get a large amount of dollars with a few bitcoins and thus get a lot of bolivars.
“With the earnings I make from mining one day, I can live very well for the rest of the week,” said Diego.
Bitcoin allows people to buy services and products all over the world. Payments are almost immediate and commissions are very low. Additionally, bitcoins cannot be government-regulated and it is very easy to change them abroad. As a result, bitcoin has become an important resource for Venezuelans who struggle to purchase necessities in their hyperinflation-stricken country.