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Is Venezuela Becoming The First Ever Bitcoin State?

Is Venezuela Becoming The First Ever Bitcoin State?

Is Venezuela Becoming The First Ever Bitcoin State?

The idea behind bitcoin is one that – when looked at against a backdrop of fiat currencies and traditional sovereign state-led regions – has the potential to help overcome a range of existing issues. Things like inflation, which have long been considered a built in derivative of a cash backed financial system and a necessary evil of such, now look like a much less necessary element of the traditional system and are almost becoming reasons to champion change.

In nowhere right now is this truer than in Venezuela.

Many reading might already be familiar with the issue that Venezuela currently faces surrounding hyperinflation. For anyone that's not, here are some numbers – in 2013, $20 was roughly equivalent to 629 Bolivars. Today, the same $20 is worth close to 200,000 Bolivars.

In other words, the nation's currency has very quickly become totally worthless and there's practically nothing anyone can do about it as far as reversing or even slowing the trend is concerned.

So why is this news for bitcoin?

Well, because Venezuelans are turning to bitcoin as both a store of wealth and a means of transacting. Electricity is incredibly cheap in the region, meaning bitcoin mining can be far more profitable than it would be in the US, for example. Venezuelans are hooking up computing power and mining rigs to the cheap electricity source and mining bitcoin not as an investment or a speculative tool but, instead, to live.

The cost of living in Venezuela is relatively low.

As per Numbeo, a one bedroom apartment in the city (Caracas) will cost about $252 (this is adjusted to account for the inflation discussed above). With a simple setup, bitcoin miners are reportedly bringing in as much as $500in bitcoin every month – more than enough to cover living costs.

CNBC reported this week that this might be the first ever bitcoinization of a sovereign state. Let's see what happens.

Author : Jack Dean

Jack has worked in the cryptocurrency industry for 5 years now as a reporter. His experience is predominately in banking, while he also has a keen interest in the forex world. His daily output is read by thousands of readers globally.

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