In a Bitcoin News exclusive, Bitcoin Venezuela founder Randy Brito reveals a wealth of ideas about how cryptocurrency can be used to combat the effects of extreme hyperinflation in Venezuela right now. He takes us on an insightful journey on the ground in the South American nation, uncovering deep skepticism from Venezuelans of both the Petro crypto token and an uncorrupted future for local cryptocurrency exchanges.
When Bitcoin News caught up with him, yesterday had been a crazy day. All API had stopped working (Bitcoin Venezuela’s API is popularly used by locals to keep track of crypto prices) but because the banks were already non-functional, people were more concerned about the latter.
”But Bitcoin is 24/7”, Randy critiqued, wondering why people didn’t care more about the APIs.
What is really happening in Venezuela?
Hyperinflation is hitting Venezuela hard, with consumer prices increasing 82,766% last month compared to July last year. What does this mean for the people of the country?
Randy described the scene in the streets as near chaos; workers desperately try to spend their wages as soon as they are paid on whatever they can find in the streets to store value, later trading their goods with others who have the products they need. People need to bring five bags of cash with them just to buy their weekly groceries. Yesterday, he said, with the new rates only one bank made their new ATM limits public at one million bolivars – nearly enough to buy one-third of a cup of coffee.
Those lucky enough to be in full-time employment are unable to take care of themselves sufficiently without going to the black market, he said, highlighting multiple issues: ”People don’t have bank cards, the banks don’t even have plastic to make new cards.”
Even when workers receive their wages in a bank transfer, they are required to pay a premium of several thousand per cent on anything they buy. Cash is far more valuable right now as there are many things that can only be purchased with physical money to avoid these costs.
As Randy sees it, cryptocurrency could provide a solution to at least some of these problems: ”Bitcoin could be a common currency denomination to transact with as a medium of exchange… it already has an international market traded against currencies. Bitcoin could create frictionless trades.”
It is also a way of getting around bank transfer limits. As of yet, however, it is difficult to find vendors or service providers willing to accept cryptocurrency payments. This is predominantly because people do not understand how the payment methods work but many more issues surround adoption.
The economic crisis in Venezuela means that many people are not equipped with the necessary tools to trade cryptocurrencies, as they lack smart devices with wallet applications to hold funds. Combined with a lack of relevant education or economic understanding, a Bitcoin revolution in the country is far from imminent. Not to forget also that it is illegal to accept any currency in Venezuelan stores other than the bolivar unless you accept the government imposed exchange rates, or face a fine or even prison. The rates the government has set are so low that nobody is willing to use them and suffer financially.
Randy believes that the people willing to accept cryptocurrency payments are those who have a history in tech or the digital trading of foreign currencies but it is his ambition to change that with his non-profit, Bitcoin Venezuela.
Nobody should trust Petro
For a Venezuelan like Randy, the Petro token is a laughable concept. He states frankly, “People don’t trust the government here on anything to do with economics or currency management because they have proven to be so bad.”
He believes the idea that each Petro is backed by a barrel of oil is simply not true: ”The Petro is not backed by anything, there is no way to back a digital currency to a physical asset like a barrel of oil without having to trust a third party. Here, the third party is the government, so I don’t think anyone that understands this concept believes that they are telling the truth.”
Randy said he finds it shocking that anybody from the cryptocurrency or tech community would get excited about it or actually believe the idea, putting it down to either ignorance of how assets actually work or an attempt to do more harm than good. Just as currency traders are unwilling to buy the bolivar, they are unwilling to invest in Petro; there is no trust in the government to produce a barrel of oil in exchange for a Petro as theoretically promised.
While oil production is several times lower than it was ten years ago, what is being produced is being done so to pay off debts. Randy sees Petro as a ”digital bond so they can get debt issued” as it is being offered to countries such as India, who have already refused to use or accept Petro for anything it exports to Venezuela, demanding strong fiat currencies instead.
The issue the government faces now, Randy detailed, is that it needs to produce something that can be exchanged for a stable fiat currency in order to import needed goods.
”Printing another good looking bolivar is not the solution,” he said.
Too early for airdrops
The Bitcoin Venezuela humanitarian aid project began around two years ago, initially raising funds of around USD 200 per month in cryptocurrency. Randy is trying to increase this substantially now, as they are currently feeding over 2,000 Venezuelans a day in their soup kitchens. While he would like to send cryptocurrency directly on the ground to citizens, the current climate does not allow for that.
”People have old cheap phones because of the crime. That’s what is safe to take out on the streets,” he said, referencing the lack of proper tools people have to access cryptocurrency.
So what about the cryptocurrency airdrops that have happened in Venezuela if people don’t have their own wallets?
According to Randy, the few that have been organized by those like the Bitcoin Cash and Nano communities have been small, and the organizers of the bigger ones scheduled in the near future have apparently just been learning that most people don’t have any way to store or spend the cryptocurrency. So whether they really happen or not, or what good they can do is still a question.
Instead, he has different ideas about how cryptocurrency can positively impact change in the country. Ideas that span around empowering people to have their own economic independence before airdrops can really work.
Crypto-driven humanitarian aid
Randy’s non-profit, open source project for cryptocurrency has an objective of improving the tools for people themselves. This involves adapting and translating user interfaces to reach Venezuelans, researching solutions like Bitcoin’s Lightning Network to launch in the country when it is ready, and creating a cryptocurrency index price in bolivar based on the real market price.
The cryptocurrency value used to be based on the black market dollar with a guide changed manually on a computer just once a day, but now people have Bitcoin Venezuela’s API for a real market price index. Randy has coded this himself and now has it completely rewritten. It has been working pretty well… minus yesterday’s API crash incident.
Another innovation they are working on is the development of cheap, interconnected devices that anyone can set up in their house or around the city that works on a network alternative to the internet. This is to solve problems such as what happened last week when everything crashed: ”People couldn’t make calls, send SMS, or access the 3G mobile network.”
They are currently trying to recruit more help and funding so they can launch these devices, with the ambition of enabling people to transact cryptocurrencies with one another regardless of the country’s poor infrastructure and rid the need of spending bolivar altogether.
A sketchy future for crypto exchanges
Right now, Localbitcoins is the only exchanging pairing Bitcoin with the Bolivar, offering just enough volume to calculate the index price and real market price, as well as having an appealing escrow system. Randy noted that Paxful is looking to enter the market after the last two or three exchanges got shut down for operating without governmental permission that they were required to pay for. He commented, ”This is what Venezuela is about: paying people to do things that you are supposed to be able to do freely.”
With around 16 exchanges planned to open in the country next month, Randy shared some local rumors that they would be run by government officials and their families. As well as this, each exchange apparently had to fund the government by buying Petro tokens and pairing Bitcoin with Petro on the platform.
He speculates that the government hopes to create liquidity for Petro so people around the world might want to actually start buying and selling it themselves, potentially making it the much-needed commodity to export for strong fiat currency.
Changing the perception of crypto
One of the ongoing issues in the cryptocurrency industry is the negative attention it receives in the mainstream press, which often labels it as a tool for illicit activities. As Randy has shown, there is much more to it than that.
”There are people actually using crypto as a tool for solving peoples problems, or at least teaching them how to solve their own problems. Almost no one wants to talk about this because it’s not a good story to put in the news sites, you don’t get something that is clickbait enough and they don’t want to talk about the economics behind it,” he said.
Randy believes that press coverage of humanitarian program such as Bitcoin Venezuela is crucial to getting the positive message about cryptocurrency out there.
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Images Courtesy: Randy Brito/Bitcoin Venezuela