Number Of Bitcoin Miners In Venezuela Swells To 100,000

Venezuela’s worsening economic collapse has created something of a social experiment in the use of a digital currency as a de facto currency - a phenomenon that’s also playing out in troubled Zimbabwe.

According to TheNational.ae, bitcoin adoption in Zimbabwe is seemingly skyrocketing as the country’s economic situation looks bleak. So much so, that one bitcoin is trading at nearly $10,000 on the Golix.io exchange, while the global average is, at press time, of $5,642.00.

 

According to a local trader, bitcoin isn’t just being bought by individuals, but by businesses with bills to pay. The country adopted the U.S. dollar back in 2009 as its fiat currency, as the Zimbabwean dollar had lost nearly all its value.

 

At press time, LocalBitcoins Zimbabwe has people buying bitcoin at the global average, and some buying the cryptocurrency for cash for well over $10,000 in the country’s capital. Bitcoin, as every bitcoiner would expect, is helping people in the country survive times of economic uncertainty, as Zimbabwe has been embroiled in a crisis for years.

And as inflation in Venezuela has spiraled further out of control - by one estimated, it peaked above 2,400% in September - more Venezuelans are resorting to mining bitcoin, litecoin and other digital currencies as a means of coping with the country's out-of-control hyperinflation and surviving in a country where staples like food and medicine are scarce.

"Venezuela was one of the richest per-capita nations in the world... but now, hyperinflation is a very difficult thing to understand until you have to buy lunch..."

 

"The country has not yet dollarized...  but there's not enough dollars in Venezuela for that to have happened..."

 

"Venezuela is becoming a cashless society... we are starting to see in Venezuela, the first bitcoinization of a sovereign state."

However, while cryptocurrency mining isn’t explicitly illegal, the country’s Sebin intelligence service has been known to raid establishments that show a suspicious spike in electricity usage. Electricity is heavily subsidized by the state in Venezuela, making mining a particularly lucrative prospect, despite the risks.

Bitcoin mining consultant Randy Brito estimates that about 100,000 Venezuelans are "mining," although it is impossible to have an exact figure because many are protecting themselves by using servers in foreign countries, AFP reports.

According to the LocalBitcoins portal, transactions in bitcoins amounted to $1.1 million in Venezuela in the last week of September.

One local who spoke with AFP said her mining rig is producing 20 to 25 litecoins per month.

"Each litecoin is worth $46, that's $920 a month," said Veronica - a fortune in a country where the minimum monthly salary is 135,543 bolivars ($40), supplemented by a voucher of 189,000 bolivars ($56).

AFP visited one office building in Caracas that has been converted into a clandestine mining operation, with more than 20 computers hard at work performing the cryptographic calculations necessary to unlock valuable blocks of digital currency.

Caracas (AFP) - Inside a locked room in an office building in Caracas, 20 humming computers use their data-crunching power to mine bitcoins, an increasingly popular tool in the fight against Venezuela's hyperinflation.

 

In warehouses, offices and homes, miners are using modified computers to perform complex computations, essentially book-keeping for digital transactions worldwide, for which they earn a commission in bitcoins.

 

While practiced worldwide, Bitcoin mining is part of a growing, underground effort in Venezuela to escape the worst effects of a crippling economic and political crisis and runaway inflation that the IMF says could reach 720 percent this year.

 

Having no confidence in the bolivar and struggling to find dollars, many Venezuelans, who are neither computer geeks nor financial wizards, are relying on the bitcoin - currently valued around $6,050, or other virtual currencies.

As international sanctions have left Venezuela starved for foreign currency, cryptocurrencies have provided one crucial means for the regular people of Venezuela - who arguably have been hardest hit by the sanctions despite marching in the streets and calling for the overthrow of the regime of President Nicolas Maduro - to avoid the consequences of the administration’s economic mismanagement. Now, the question is will Venezuelans abandon the worthless bolivar in favor of relying solely on digital currencies.

As we noted previously, one trader, John Villar, Caracas-based software developer, most eloquently stated "Bitcoin is a way of rebelling against the system." While the currency remained a niche form of payment in the country, many users purchased food and goods online through online marketplaces such as Amazon.com, albeit indirectly through gift cards purchased with the cryptocurrency.

Noel Alvarez, former president of the Venezuelan Federation of Chambers of Commerce, stated that “A maximum of one per cent of the population has access to it, but it is very useful in our situation.”

Bitcoin’s popularity in Venezuela continued to grow. It became the country’s leading parallel currency. Some vendors even begun accepting Bitcoin exclusively. A popular online travel agency, Destinia, cited that, due to the bolivar’s instability and the trouble many Venezuelans experience when attempting to leave the country, “Giving priority to Bitcoin as a payment method could be of help."

While Destina admitted that Venezuela is not a primary focal point for their company, they chose to prioritize Bitcoin payments in the Venezuelan market to facilitate the travel needs of the people in light of the persisting economic downturn.

With infrastructure in place, trading and mining becoming more popular, and the crisis escalating, Maduro’s government began to take notice.

Maduro’s War on Bitcoin

The Venezuelan government began to crack down on the Bitcoin community, with police extorting citizens for “misusing electricity” or undermining the country’s economy. These grievances intensified over time, however, and the attack on miners became more apparent. In the largest raid, two miners were caught with 11,000 mining computers and were charged with cybercrime, electricity theft, exchange fraud, and even funding terrorism.

In Feb. 2017, following the incident, Surbitcoin, Venezuela’s most popular exchange went offline. The company encouraged users to withdraw their money immediately as Banesco, the company’s banking partner, was set to revoke the account associated with the exchange. Rodrigo Souza, the founder and CEO of Surbitcoin, noted that "When it was found that there were 11,000 mining computers consuming the energy to power a whole town at a time when there are severe electricity shortages, it triggered a reaction.” Souza went on to say that the company was not contacted by the government, but Banesco revoked their account as it did not want to be associated with such an operation. Surbitcoin resumed operations two weeks following.

We suspect it will not be long before Maduro takes further, tougher action against this 'subversive' behavior.

Comments

Exponere Mendaces Oct 23, 2017 3:30 AM Permalink

Oh look, not a single mention of gold.I guess all the (g)oldfags were wrong about that too. You have a weimar-like situation, and nobody gives two shits about bulky metals.Hilarious.But keep telling us that gold is going to rally to the top "any day now".LOL

any_mouse Oct 23, 2017 3:26 AM Permalink

Venezuela is collapsing. Shelves empty.

Yet, there exists a Venezuelan Internet infrastructure sufficient and stable enough to support 100,000 separate Bitcoin mining operations and any other Internet traffic in and out. On Amazon ordering toilet paper.

Is that not fortuitous for those miners?

I read in foreign tech rags that the Nation that created the Internet using Public Funds, has the least amount of high speed broadband connections available per capita.

That is not fortuitous, at all, for US citizens, but very empowering for the US Telcom corps.

Thank the FED, that we have Fascism in the USA.

Debugas Oct 23, 2017 2:41 AM Permalink

the article fails to explain how one can buy food with bitcoin the reality on the ground is that venesuela indeed has adopted an alternative currency and that currency is the USD

any_mouse quadraspleen Oct 23, 2017 4:09 AM Permalink

I will never buy perishable items from Amazon, unless President Comacho makes Amazon the only place where I can buy groceries.

How did "Idiocracy" miss the rise of Amazon and home delivery?

How far off was Judge?

We use the FED equivalent of Brawndo to grow the economy.

The entire Federal government thinks that killing people to make a business deal is "spreading democracy".

EPA releases toxic waste.

NASA is an agency for outreach to Muslims and for promotion of Climate Change.

The Supreme Court thinks an Unconstitutional mandated payment is a tax.

Public Education does not Educate.

Healthcare doesn't make you healthy, as in not requiring maintenance drugs.

One more. One I came up with on my own.

Non-GAAP is now GAAP.

I am going to sign out to get some zzzz's before Market Open.

In reply to by quadraspleen

MPJones Oct 23, 2017 1:23 AM Permalink

I see this as a very positive development. More people globally should use private cryptocurrencies in peer-to-peer transactions and take the control of money away from governments and the funny-money fiat-fraud central banks. Governments are totalitarian by nature and won't shrink voluntarily. They must be made to shrink through other, mainly economic, pressures. Don't forget that governments are simply the predominant gangster cartels in their area - they are in it for themselves, not to serve their populations.

Hongcha Oct 23, 2017 12:56 AM Permalink

Seems like they have adapted an alternate currency because their govt. has corrupted the old one.  Now to get it to the local mercado and spent on food ... and the US will back Maduro and bomb them or sanction them into submission.  My good ol' USA.  Yes, they absolutely should cut a deal with Vlad, to survive.

MoreFreedom Oct 23, 2017 12:42 AM Permalink

Isn't it obvious: socialists subsidize electricity so that guarantees a shortage.  Everyone in Venezuela uses the state to steal from each other, so they take advantage of whatever they can.  That helps speed up the collapse, unlike the value of bitcoin. 

unsafe-space-time Oct 23, 2017 12:32 AM Permalink

Even when starving humans expend effort on useless activities. I have no idea how homo retardikus survived so long without any instinct or brains. Let's waste all energy resources so later we can eat bitcoin. No wander all isms have failed. Too much trash in the gene pool because of indiscriminate fucking.

Mustafa Kemal Oldwood Oct 23, 2017 12:48 AM Permalink

'safety, only profit"Not me. I see a big future in crypto. I dont know if $6K BTC is the top or just on the way up to $500K so McAfee doesnt have to eat his dick on live TV, but I feel it has a very big future. For me, BTC is an investment in the future. And if I am correct, there will be, of course, much profit, very much. Its kind of like a blessing. 

In reply to by Oldwood

asstrix Oct 22, 2017 10:29 PM Permalink

" Rodrigo Souza, the founder and CEO of Surbitcoin, noted that "When it was found that there were 11,000 mining computers consuming the energy to power a whole town at a time when there are severe electricity shortages, it triggered a reaction." That is against the state alright. And it says electricity is heavily subsidized in Venezuela. Odd, given that its economic outlook is bleak and there is shortage for food, medicine and toilet paper.

Rebelrebel7 Oct 22, 2017 9:58 PM Permalink

Conclusion: everything on earth is so overpriced that people would prefer to pay $5,000 - $10,000 for an ounce of nothing than to own anything, or any currency! 

Mr_Potatohead tmosley Oct 22, 2017 10:46 PM Permalink

"You remind me of the outback retards in Atlas Shrugged. Didn't even know what money was when presented with it."LOL.  Did you really read Atlas Shrugged?  Can you imagine John Galt and his buddies going with bitcoin?  How about those cigarettes with the markings that first attracted Dagny's interest.  Did they have a "B" with two verticals lines or something else?  You're such crypto-pumper, tmosley, and you're full of 20 tons of manure.  Anything to pump the price of bitcoin is fair game with you.  Pretty sad.  

In reply to by tmosley

Clock Crasher Oct 22, 2017 10:10 PM Permalink

To believe that fiat printed out of thin air to be money allows the transition to believe that fiat programed out of thin air to be money -a very smooth transition.More reasons to not buy the precious metals.As I type this monday morning is setting up for a gold gap down.