Venezuela Uses Bitcoin Mining To Protect Itself From Hyperinflation

Venezuela has been the vital force behind bitcoin mining as the country primarily uses it as an effective tool to fight hyperinflation in their country. In the city of Caracas and in a small office, there is a network of 20 complex computers with intense data crunching ability that mines bitcoins.

Although bitcoin mining is a practice which is being carried out globally but it was picked up mainly from a local office in Venezuela. One of the biggest reasons behind rising activities of bitcoin mining in Venezuela is that the country is fighting hard with its economic and political crisis. Its economic position is menaced by hyperinflation which has reached an astounding level of 720% this year (IMF report). Many miners are using computers to carry out complex calculations which is essentially book keeping for the digital transactions. Therefore, these miners earn a commission in bitcoin on every transaction.

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Venezuelans have found respite in bitcoin these days and other virtual currencies as their local currency has almost become worthless. In addition, they are finding it very difficult to find dollars. Their rising interest in the virtual currency world has pushed bitcoin price to above $6,000 mark.

As reported in a local publication, Veronica – one of the office worker in Caracas (she did not reveal her complete identity due to arrest threat), has given a statement that her supervisor had installed these machines back in 2015. She said:

“These are machines that bring in $800 a month (more than 26 million bolivars)”

Randy Brito, bitcoin mining consultant speculates that roughly 100,000 Venezuelans are mining. However, it is very difficult to find the exact figure as they are shielding against the servers of other countries. He also added that virtual currencies picked up in 2014 when economic crisis in Venezuela became worse. The primary reason behind economic meltdown was slump in global oil prices as it constitutes 96% in their country’s revenues.

Randy also said:

“Whoever buys bitcoins with bolivars earns money by increasing the price of the bitcoin against the dollar, and escapes inflation”

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Bitcoin mining and subsidized electricity in Venezuela

Venezuela has become a popular spot of bitcoin mining as it requires heavy power electricity which is almost free in the country. This is because the government has offered huge subsidies on electricity which makes it highly profitable to mine virtual currencies.

Many workers are attracted by the money in this business as Veronica herself has bought a machine worth $2,280 from China.

She said:

“A friend took another and a boy I know bought 20. People are buying machines like crazy”

They have set up the machines in different locations to divide power consumption and avoid any raid by intelligence agencies.

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Furthermore, she added:

“If they find machines, they arrest the owners or they try to extort money. In electricity, we spend barely 15,000 bolivars a month (less than 50 cents at the black market rate)”

Bitcoin transactions have reached $1.1 million in Venezuela during the last week of September. In the end Veronica said, “each Litecoin is worth $46, that’s $920 a month”.

This is indeed a treasure in a country where the minimum salary about $40.

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