What Bitcoin Did

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How Venezuelans are Using Bitcoin to Counter the Effects of Hyperinflation with Alejandro Machado

Peter McCormack
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How Venezuelans are Using Bitcoin to Counter Hyperinflation, Alejandro Machado - WBD019 Peter McCormack

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Interview location: Shoreditch, London, UK
Interview date: Mon 7th May 2018

Despite the recent fall in the Bitcoin price from $20,000 in January back down to $6,000 in March, the price continues to grow year on year, with the price today back over $7,500. These price moves create lots of excitement and bring speculators into the market, yet many still question where the value is? What are the use cases? Who is spending Bitcoin?

Right now, the use cases for western nations are niche, and with the recent scaling issues, there has been a decrease in the use of Bitcoin as a means of payment. While Lightning Network promises fast and low-cost payments, the question remains whether people will use Bitcoin instead of their debit/credit cards or cash in their pocket. Others argue spend volumes aren't relevant and that Bitcoin is a store of value, but objectors claim that the volatility means it can't be. But volatility is relative to domestic inflation.

On a personal level, I use Bitcoin to pay my mining bills because the transactions are faster and more straightforward than via the bank, but I use Bitcoin for little else. My experience is in a closed loop of activity within the Crypto world. The use case for Bitcoin is broader in collapsing economies, for example, in Venezuela Bitcoin is a lifeline for many struggling with the impact of hyperinflation:

  • People using Bitcoin as a store of value to ensure that their income holds value

  • Others are mining Bitcoin as a means to earn an income to feed their families

Bitcoin maximalists often discuss hyperbitcoinisation: the transition to an economy where Bitcoin is the primary currency, and with Venezuela, this is a possibility. The strict controls over the use of foreign currency have led to an ever-growing Bitcoin economy in the country. The trustless, censorship-resistant, decentralised nature of Bitcoin makes it a viable alternative currency for a population living through a collapsing economy.

Even the socialist government of Nicholas Madura has recognised the potential of Bitcoin and Cryptocurrencies with the building of government mining farms, able to mine Bitcoin competitively due to the control of the energy system, to the launch of the widely criticised $PETRO as a way to generate much-needed money for the failing government.

In this interview, I met with Alejandro Machado to discuss the recent history of Venezuela, government corruption, failed socialist policies and the increase in Bitcoin adoption to counter hyperinflation.

Alejandro is a Venezuelan national who left the country in 2015. He writes openly about the failing Madura government for the Caracas Chronicles and is a developer and designer, working on Crypto projects.

Alejandro brings an insight into life inside Venezuela, why he left, how Crypto can help the population and his desire to return to his home country.

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SHOW NOTES

BREAKDOWN OF THE SHOW

00:03:30: Introductions
00:07:02: Venezuela under Hugo Chávez
00:10:22: The new Venezuela Constitution and Simón Bolívar
00:14:35: Changes implemented by Chávez
00:21:36: Chavista Government corruption
00:31:19: Nicolás Maduro and his policies
00:39:28: The dangers of Venezuela
00:43:29: Exchange ban between bolivars and dollars
00:46:37: Alejandro's introduction to Bitcoin
00:52:06: Use of Bitcoin in Venezuela
00:59:52: Bitcoin: Venezuela's future national currency?
01:04:54: Mining in Venezuela
01:10:29: The crypto petro
01:23:15: The upcoming election
01:26:46: Change will only happen through collapse
01:28:57: Moving back to Venezuela?
01:31:30: Final comments

THANKS

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