Inflation in Venezuela soared above one million percent last year and the local currency is worthless. Meanwhile, the dictator who wrecked the economy is ordering thugs to torch crates of foreign aid containing food and medicine. The country is suffering but one man has found a way to cope. In a weekend op-ed for the New York Times, economist Carlos Hernandez explained how Bitcoin has literally saved his family by letting him hold money that can’t be deflated or stolen by the government.
Needless to say, the op-ed was a hit with the crypto crowd. Ever since Satoshi gave birth to bitcoin a decade ago, supporters have hailed the currency as a way to subvert bad governments. Now, Hernandez represents real world proof this may be possible. It’s also fitting he is from South America, where reckless monetary policies inspired the crypto dreams of CEOs like Wences Casares of Xapo and Brian Armstong of Coinbase.
Still, it’s worth asking if Hernandez offers real hope for others trapped in a collapsed economy—or if he’s instead an outlier whose story fuels the libertarian fantasies of rich tech types. Skeptics will point out that Bitcoin accounts for a minuscule amount of overall economic activity in Venezuela, and is accepted by only a handful of merchants.
“I´d say it´s tech bro bullshit and a lame attempt to try to promote Bitcoin. Ultimately, people need hard currency to buy groceries. So unless you tell me there’s a way for people to buy groceries with Bitcoins, I can´t see how it would work,” said Rafael Mathus Ruiz, an Argentine economist and journalist for La Nacion, who has experienced his share of economic crises firsthand.
Others have pointed out that Bitcoin is not necessarily beyond the grasp of government. While the currency’s secure cryptography prevents anyone from hacking into a digital wallet, that’s no guarantee the funds are safe. Depraved regimes like the one in Venezuela may resort to physical violence to force Bitcoin owners to disclose the private keys that control their wallets.
But despite these cautions, there’s evidence Hernandez’s story is not unusual, and that Bitcoin in Venezuela is getting more traction every day. In response to a query from Fortune, the analytics firm Chainalysis pointed to a survey and a discussion board that suggest Bitcoin use is on the rise in the country. That view was echoed by David Jevens of CipherTrace, another analytics firms, who said there has been a Bitcoin uptick not just in places suffering from hyper-inflation but those under sanctions or currency controls.
This raises the question of whether the U.S. State Department—or private citizens—who support Venezuela’s opposition party might start distributing aid to Venezuelans in the form of Bitcoin. Perhaps it’s a crazy idea but, as Jevens told me, there’s precedent for Uncle Sam supporting radical decentralized protocols—“The U.S. invented Tor, right?”
***
Speaking of economic mismanagement, Coinbase took a closer look at the collapsed crypto exchange Quadriga—whose CEO allegedly took $137 million or more in customer funds to the grave—and suggests the debacle was the result of earlier losses rather than a planned exit scam. Nick Szabo isn’t so sure, noting that the remaining employees might have seized on the CEOs death to get out of a sticky situation.
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THE LEDGER'S LATEST
Coinbase Lists Controversial Cryptocurrency XRP, Price Jumps By Robert Hackett
Busting Myths About Cryptocurrency Custody By Coinbase CEO Brian Armstrong
Apple and Goldman Sachs Are Developing a Credit Card With Special iPhone Features By Don Reisinger
DECENTRALIZED NEWS
To the Moon… Wyoming lawmakers heart crypto. University of Michigan and Ivy League invest in a16z's crypto fund. CME Group notches record-breaking day for bitcoin futures contracts. Facebook CEO is open to blockchain-based logins. New "Samsung Knox" offers phone-based private key storage. Now chickens are on the blockchain.
…Rekt. A grand total of two companies use Ohio's option to pay taxes with crypto. Hong Kong exchange demands shit coins pay for wash trading. RIP Shift debit card. QuadrigaCX's cold wallets may not even exist. More blockchains under attack. FBI asks to talk with Bitconnnnnect victims.
BALANCING THE LEDGER
Private blockchains for enterprise are having a bit of a revival—but don't ask the CEO of Abra to buy in. Bill Barhydt joined Robert and I on Balancing the Ledger to explain why he thinks private chains are garbage. He also discusses how Abra's Bitcoin app now lets people buy traditional stocks.
BUBBLE-O-METER
The long view of Bitcoin. In price chatter about Bitcoin, people typically talk about the possible highs. Here's another way to look at it (h/t James McDowall): Namely. look at the currency's annual lows. Those who say Bitcoin is resilient have a point:
2012: $4
2013: $65
2014: $200
2015: $185
2016: $365
2017: $780
2018: $3,200
Also, happy 5-year anniversary Mt. Gox disaster.
MEMES AND MUMBLES
Bitcoin would never... Anthony Pompliano aka Pomp, an investor and fixture of crypto Twitter, tweeted about Bitcoin's resilience...
...and appears to have inadvertently touched off a meme akin to Chuck Norris facts. Soon Twitter was clogged with a growing list of Bitcoin's other improbable feats:
And so it went.
FOMO NO MO'
Don't miss out: Marvin Ammori, who made his name fighting for net neutrality and Internet free speech in Washington, DC, now works as general counsel for blockchain research outfit Protocol Labs. The gigs seem very different but it turns out the ideals of blockchain—such as decentralization and anti-censorship—overlap with those of a free web. In a Q&A with Fortune, Ammori discussed his journey to crypto:
When people started saying “we’re in 1995” [when it comes to blockchain technology], I thought “no, we’re in the 1970s.” When I told my mentor, [law professor] Yochai Benkler, what I was working on, he said distributed file storage has been the holy grail forever. [...]
If you talk to developers about the [peer-to-peer] stuff we’re building, they think it’s magical. Is the decentralization of the web right around the corner? Maybe not. But maybe it is. Is it a worthy goal? Yes.
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