
Leveraging Bitcoin to Solve Venezuela’s Hyperinflation - dpapathanasiou
https://medium.com/@jonathan.wheeler/leveraging-bitcoin-to-solve-venezuelas-hyperinflation-9f60c71d380b
======
firekvz
Venezuelan here.

This won't work.

Our problems go way beyond having a way to store our wealth

It's literally impossible to do bitcoin transactions in normal circunstances
because this is not San Francisco and your regular store doesn't even have
internet access, we have one of the worts internet acess in the world [1].

Then there is the problem created by the violence/crime[2]. I myself have to
leave my phone at home everytime I go out, there is no way to take public
transportation regulary without suffering a robery, it's just so common that
it became a meme within Venezuelans.

There has been so many cases where people has been killed over the most stupid
and trivial things to the point that if you google from venezuela "lo mataron
por ______" (Murdered because ____) you get pages and pages of crazy reasons
of why venezuelans have killed other venezuelans. Fast examples:

Murdered for playing carnival (throwing water ballons to other ppl during
carnival, venezuelan tradition) [https://www.el-carabobeno.com/lo-mataron-de-
un-disparo-por-j...](https://www.el-carabobeno.com/lo-mataron-de-un-disparo-
por-jugar-carnaval/)

Murdered to steal 60$ he had on his pocket:
[http://runrun.es/nacional/337760/monitordevictimas-
mataron-a...](http://runrun.es/nacional/337760/monitordevictimas-mataron-a-
hombre-en-petare-para-robarle-60-que-usaria-para-irse-a-peru.html)

So now imagine someone figures out that I have bitcoins and that they have a
value of lets say 300$. There is no fucking way I will risk my life that way.

So in order to use bitcoin in Venezuela i have to do this:

1\. Risk my life by having to pull my phone or using my phone outside.

2\. Risk my life by letting others know that I own/hold bitcoin.

The merchant has to:

1\. Fight all the problems to be able to accept it (electricity problems,
internet access).

2\. Hope that someone doesnt just come into your store and steal your
hardware.

3\. Gov crazy actions.

\------

[1] [http://www.speedtest.net/global-
index/venezuela](http://www.speedtest.net/global-index/venezuela)

[2]
[https://en.wikipedia.org/wiki/Crime_in_Venezuela](https://en.wikipedia.org/wiki/Crime_in_Venezuela)

~~~
MadSudaca
If you could choose between bolivares and some valuable cryptocurrency, what
would you choose?

~~~
firekvz
Obviously I would pick any crypto or any other currency everytime over VEF but
thats just wealth storage.

It doesn't fix our economics problems, it doesn't fix our social problems.

And thats what this post was about, the guy intends to fix our economy or
"Solve Venezuela’s Hyperinflation" by just giving away free bitcoins.

P.S: Me (and every other venezuelan) would gladly take the free bitcoin. But
it will just make me have some extra $ held in some bitcoin wallet, I won't
ever use it to go "buy coffe", most likely every young venezuelan who gets
free bitcoin will use it to leave the country and scape from this madness

~~~
sova
It pains me to hear that the situation is so dire in your country. Are there
any plans to bring internet to the masses?

------
deftnerd
The author seems to be ignorant of some real facts related to Bitcoin
availability. Lightning Network going live on Mainnet was against the advice
of the LN developers who feel that it's not ready for prime-time usage and
admit that the network cannot scale very large without some core difficulties
being solved.

Additionally, the transaction fees have dropped not because of the
introduction of LN or batched transactions or SegWit adoption, but because of
the decline of Bitcoin transactions in general. Enough retailers have stopped
accepting Bitcoin that there are fewer transactions and the fee-market
pressure has lowered. Adding in an entire nation of people using Bitcoin
multiple times a day, even with some of them on LN, will bring usage and fees
to unseen-before levels.

~~~
freejulian
> Enough retailers have stopped accepting Bitcoin that there are fewer
> transactions

That's one theory. Another theory is that bad actors were spamming the mempool
and have stopped.

A quick look at historical mempool stats: [https://dedi.jochen-
hoenicke.de/queue/#1y](https://dedi.jochen-hoenicke.de/queue/#1y)

Makes it look far more likely certain people with an agenda were spamming the
network.

~~~
lawn
Those mempool stats doesn't suggest spam at all. It's basically impossible to
identify spam transactions.

Both Steam and Stripe stopped accepting Bitcoin, that's a fact.

It's only logical that people stopped transacting when fees grew sky high.

~~~
freejulian
Sure, but if it was Steam and Stripe that caused the insane fees wouldn't the
growth have been more organic?

I look at that graph and see ridiculous spikes in transactions followed by
months of very few. I have a hard time believe Steam and Stripe's transactions
would follow that sort of pattern.

------
MadSudaca
There are far better cryptocurrencies to do this than BTC. Today, an actual
venezuelan, part of the team working on a cryptocurrency called Nano, twitted
that he paid for his meal with it.

This would have never been possible with BTC, why? Mainly because the meal's
cost was .5 NANO, which currently amounts to ~5 USD, that would have been the
cost of the transaction fee alone for BTC, or even more. Nano is feeless and
has transactions taking 10 seconds on average to complete.

Nano is a cryptocurrency that is already making an impact in Venezuela
specifically, check it out. Bitcoin days are numbered.

Tweet:
[https://twitter.com/Mrlutavo/status/963948510679830528](https://twitter.com/Mrlutavo/status/963948510679830528)

Nano's website: [https://nano.org/en](https://nano.org/en)

~~~
freejulian
> , part of the team working on a cryptocurrency called Nano

Please, stop shilling.

~~~
MadSudaca
I thought the post what about how to help with Venezuela's hyperinflation.

There couldn't be a more relevant cryptocurrency for this than Nano.
Especially because Nano isn't mined, it has a fixed supply that was
distributed via faucet by solving a very complicated captcha. Many coins went
to people in Venezuela because they found solving captchas a more profitable
way of spending their time than a real job. So Nano is already popular in
Venezuela and does a better job working as a currency than bitcoin.

I have a very favorable opinion of the technology behind Nano and not so
favorable of BTC, so my post might be regarded a shill. However, given the
reasons above I think mentioning Nano is relevant to the thread.

------
arcticfox
Why is this better, or different, than just helping Venezuelans obtain and use
the USD that they already want [1]? If it's a matter of government controls,
the government will surely apply the same policy to BTC.

I realize that he tried to address this in the article, but the reasons are
contrived. And the "$5 wrench attack" simply won't stop when you only give up
one wallet.

[1]
[https://www.npr.org/sections/parallels/2014/03/24/293874845/...](https://www.npr.org/sections/parallels/2014/03/24/293874845/short-
on-dollars-venezuela-tries-to-halt-black-market-trading)

~~~
freejulian
How are they going to securely store those USD?

~~~
adventured
You're getting into the same exact box with Bitcoin.

You're not going to securely store anything in Venezuela until order and a
functioning government system is restored. Venezuela is an entirely collapsed
nation at this point. You're lucky to have any access to electricity to use
Bitcoin and things are still getting worse there.

Safely store your Bitcoin. Gun to the head, you lose your Bitcoin and your
life if you don't give up whatever access is needed.

You store your USD in your home (or wherever). Gun to the head, you lose your
dollars and your life if you don't give it up.

Plausibly given the extreme murder going on there, you lose your life
regardless if it becomes known you have any money, whether it's in USD or
Bitcoin.

~~~
charlesdm
> You're not going to securely store anything in Venezuela until order and a
> functioning government system is restored.

Better not hold your breath for that one..

------
dragontamer
The thought of a very rich man from one of the most developed countries in the
world, giving away tons of BTC in an attempt to "solve Venesuela's problems"
strikes me as arrogant and naive. The heart is in the right place. But
different countries work differently. It would take someone who knows a lot
about Venezuela to solve Venezuela's problems.

Take "PlayPump" as a word of caution.
[https://en.wikipedia.org/wiki/Roundabout_PlayPump](https://en.wikipedia.org/wiki/Roundabout_PlayPump)

Massive charity handouts almost always end in dismal failure. Because the
philanthropists don't understand the core problem, and thus the money is
inevitably wasted.

\----------------

Instead, Bill Gate's model of "Economic Philanthropy" looks like it can truly
scale. Bill Gates _sells_ malaria nets and vaccines to the people of Africa.
Why?

Because if the customer doesn't want to pay for it, its probably because the
customer _knows something you don 't know_. Malaria Nets were the solution:
the people of Africa buys it, and that's how we know that its a good solution.

Bitcoin is _already_ a potential solution to the people of Venezuela. If the
people of Venezuela believed in Bitcoin, they'd be buying it. They're not
dumb. Very likely, for reasons unbeknownst to us, they've chosen to do
something else. We have to trust THEIR decision on this. After all, Venezuelan
citizens are living in the crisis. They likely know more about their own
situation than any Goldman Sachs executive who has lived in the USA.

Alternatively: if BTC is a solution and Venezuelan citizens are buying up BTC,
then the problem will solve itself without need of a handout. IIRC, I've heard
some stories about some businessmen in Venezuela using BTC before. But I live
thousands of miles away: its hard for me to know if its an isolated curiosity
or something that really is permeating the nation.

Any valid solution that benefits a Venezuelan Citizen, would allow us to
"sell" said solution to those citizens. One-sided charity efforts are often
doomed to failure.

------
badgers
In 1992 Brazil faced similar inflation numbers (80% per month, or 1156% per
year compared to what the article claims 1219% for Venezuela). I'm surprised
the author does not reference Brazil in their article. The NPR Planet Money
podcast/article does a good job of summarizing the events of 1992 [1].

In the Brazil situation the country had control of both currencies and could
set the exchange rate. I don't see how using Bitcoin would eliminate the
problem that the country is experiencing: an unstable currency. Most developed
countries target around 2% inflation. Bitcoin has not had that kind of
stability recently.

Additionally to be a good currency you want people to think in terms of it,
e.g. I'm paying for this coffee with 0.005 bitcoins, not I'm paying for this
coffee with $5 worth of bitcoins.

[1] -
[https://www.npr.org/sections/money/2010/10/04/130329523/how-...](https://www.npr.org/sections/money/2010/10/04/130329523/how-
fake-money-saved-brazil)

------
CryptoPunk
The LN network has major limitations that don't allow it to be a full
substitute for on-chain transactions.

Let's look at how it affects savers for example. LN channels have a maximum
debit-delta capacity established by their BTC collateral. When one party is
receiving BTC much more often than they're sending it, the LN channel reaches
capacity, and a new LN transaction has to be created with its own collateral.

Any party that saves any portion of their revenue will quickly see their LN
channels filled, and new ones required.

This essentially means that low-income savers, like what you would expect to
see in Venezuela, will see their income eaten up by transaction fees for
continual LN channel setup transactions.

The author should have looked to Bitcoin Cash, which will permit low-cost on-
chain transactions at large scale usage levels, or Ethereum. Ethereum is
processing 4X as many transactions, representing several times as much USD
value, as Bitcoin per day. Its transaction fees are much lower and it has a
comprehensive on-chain scaling plan that it is pursuing.

------
rb808
For crypto currencies, don't you need reliable electricity and internet first?

~~~
freejulian
> don't you need reliable electricity

Electricity is only needed to send a transaction.

> and internet first

You can send a transaction via sms.

~~~
gjjnn
On Lightning Network, node must be always online for receiving transactions.

~~~
freejulian
Ok, but that's not what we're talking about is it?

I'm happy to switch the discussion to Lightning.

As a consumer, I don't always need to be online. I can open my channel and
only come online when I want to send a payment to a merchant.

As a merchant, I need to be online only when accepting payments. I also need
to monitor my open channels to make sure no one's trying to cheat. To monitor
a channel, I would need to check roughly once per day -- though I could
require channels created with me take 4 weeks to close if I desired.

------
prodikl
lots of negativity here. i think it's a cool idea, and i hope he runs with
this. if you're problem with bitcoin is "it's not quite perfect enough" then
that's a bad reason to not attempt this

it has obvious benefits (and some cons) over the bolivar or a foreign fiat
currency, but ya know, baby with the bathwater

i look forward to seeing where this goes

but i do agree about LN mainnet not being appropriate to use yet

~~~
ufo
The problem with Venezuela isn't just inflation. Inflation is a symptom of the
political and economical chaos they are going through. Before you can attempt
to fix their inflation you need to first get them out of the borderline civil
war they are going through.

This is also not the first time I see these suggestions that bitcoin is going
to solve all of Venezuela's troubles. Overall these suggestions strike me as
foreign bitcoin holders hoping that the venezuelans will push up the value of
their speculative investment.

------
helthanatos
Suite. Use the imaginary commodity that can't keep it's value to solve
inflation because the currency is controlled by a tyrannical government. It's
probably easier to overthrow their government than use a currency that will
soon be outlawed.

~~~
mkhalil
Whether you like it or not, Bitcoin is here to stay.

"will soon be outlawed." >> You speak like it relies on any ones countries
laws and a law would vaporize it. Anyone who read the SEC announcements,
understand that _even they_ seem to understand that.

------
matthoiland
This is fantastic. Disasters, while terrible, should be the time to think
outside the box. Similar to Puerto Rico and the solar experiment – hopefully
Venezuela and Bitcoin will be the proof of concept that convinces the
"adults".

------
JonnyNova
I'm always a bit suspicious of articles like this that plug for specifically
bitcoin versus cryptocurrencies as a whole. Many cryptos can help to fill the
needs of Venezuelan citizens. Are we not talking about them since they won't
make the author rich?

------
tmaly
Was this related to the recent 400 million in Bitcoin that was purchased?

------
_Codemonkeyism
"Imagine that you could flee Nazi Germany with all of your capital using
nothing more than a password in your head"

It's sad so many people know so few things about history. Fleeing with your
money was not the problem.

~~~
__s
[https://en.wikipedia.org/wiki/Reich_Flight_Tax](https://en.wikipedia.org/wiki/Reich_Flight_Tax)

~~~
_Codemonkeyism
The main problem was that you couldn't sell your stuff, were forced to sell
way below market price to Nazis [1] and countries wouldn't take you in [2] So
many people didn't even have money because they couldn't sell at market prices
or were murdered because they could not flee outside of Europe. Of those that
could flee and sell their stuff, yes, those had to pay a lot of money to get
away. But they were only able to get away legally after paying the "tax" and
have a certificate.

The article makes it look like everything would have been fine if people could
transfer money with a password in their head.

[1]
[https://en.wikipedia.org/wiki/Aryanization_(Nazism)](https://en.wikipedia.org/wiki/Aryanization_\(Nazism\))

[2]
[https://en.wikipedia.org/wiki/MS_St._Louis](https://en.wikipedia.org/wiki/MS_St._Louis)

------
_Codemonkeyism
The government will make Bitcoin the same way illegal as US dollars.

Then they can't easily control Bitcoin.

Then they will increase prison sentences for owning Bitcoins and Bitcoin apps.

Then they will not be able to control that.

Then they will monitor the internet for bitcoin transfers.

Then they will outlaw any encryption.

Then they will send out undercover police who try to pay with Bitcoin.

etc.

No government well let anyone take away their privilege to print money.

~~~
SadWebDeveloper
You forget to add A and B scenarios to your conclusions....

A) Criminals/Bitcoins-enthusiasts/elites leave the country for the next
unregulated paradise.

B) Criminals/Bitcoins-enthusiasts/elites overthrown the government due to
strict policies regarding free trade.

The government can't enforce a laws by itself it needs his citizens to abide
by those rules.

~~~
_Codemonkeyism
The Venezuelan government killed [1] 163 people who believed in scenario B.

[1]
[https://en.wikipedia.org/wiki/2017_Venezuelan_protests](https://en.wikipedia.org/wiki/2017_Venezuelan_protests)

~~~
SadWebDeveloper
American Revolutionary War death toll 25,000 people who believed in scenario B

------
Feniks
At least Venezuela exists. What is backing bitcoin? Faith? Worse, blind faith?

~~~
MadSudaca
Its ability to exist as digital information that can't be copied.

