In Corrupted Economies, Bitcoin is a Lifeline For Residents

Venezuela's currency has been in free fall. Steve Hanke, an economist at Johns Hopkins University, calculated the country's annual inflation at 1582 percent, the world's highest. Daily inflation hit 4 percent. The bolivar has lost so much value that businesses quit hiring. People cannot find food. Reuters reported that major retailers documented over 1 million job losses across the private sector in the past eighteen months. Alfonso Riera, vice president of Consecomercio, the country's retail association, said those without work were "migrating to the street, informal work or worse."

With jobs vanishing, graduates and trained professionals started mining bitcoin instead. The Atlantic, which has tracked the Venezuelan cryptocurrency scene since 2016, found that the government subsidizes electricity at below-market rates. That cheap power made mining economics work. Miners ordered equipment through Amazon and began extracting bitcoin, Ethereum, and other cryptocurrencies. "To survive, thousands of Venezuelans have taken to minería bitcoin—mining bitcoin, the cryptocurrency. Lend computer processing power to the blockchain (the bitcoin network's immense, decentralized ledger) and you will be rewarded with bitcoin," The Atlantic reported.

Mining has no legal status under Venezuelan law. Police arrested operators of mining centers on various charges. Officers held Joel Padron for fourteen weeks after charging him with energy theft and possession of contraband. Secret police officers also extracted bribes from operators, demanding $1,000 per mining machine from two brothers in Caracas.

Harassment has not deterred Venezuelans from mining bitcoin. Many consider detention a better option than starvation. With formal employment gone and currency worthless, mining represents one of the few paths to income.