State socialism is quickly reaching its inevitable conclusion in Venezuela. The economy is in shambles. The nation’s currency, the bolivar, is in a state of hyperinflation, which makes buying even a loaf a bread with it difficult. While the Venezuelan government scrambles to maintain its control over the people the people are adapting. One of the adaptions they’re making is using an alternative currency, one that is effectively impossible for the Venezuelan government to control. That currency is, of course, Bitcoin:
Amid growing economic chaos, and the highest inflation rate in the world, some Venezuelans are swapping bolivars for bitcoins in order to buy basic necessities or pay their employees
The digital currency is free from central bank or government controls, and users in Venezuela see it as a safe alternative in an economy where the government has enforced strict foreign exchange controls, and inflation is running at an estimated 500%.
This week, Venezuelans rushed to unload 100-bolivar bills – the largest denomination – after the government announced that it would be withdrawn from circulation on Wednesday in what it described as a move against profiteering.
Mainstream economists have been decrying Bitcoin since it started becoming popular. Since the currency isn’t issued by a central bank the mainstream economists have declared it worthless. But the value of Bitcoin continues to rise. When I last checked it was around $800 per Bitcoin. Why does Bitcoin continue to succeed in spite of mainstream economists? Because mainstream economists are fools.
All of the things mainstream economists criticize Bitcoin for are actually important features. Not being controlled by a central bank means that a government can control it. Venezuela can’t just decide to withdraw Bitcoin or print more of it. The fact that there is a cap on the total amount of Bitcoin that will ever exist is also an important feature. Without the ability to print an infinite amount of Bitcoin no government can inflate it. The lack of inflation means that Bitcoin can be a safe method of preserving one’s purchasing power over time (a fancy way of saying savings). Bitcoin’s pseudoanonymity can protect users from the prying eyes of the State, which means it can be used in countries where the State would rather see people starve to death than utilize a currency it isn’t issuing.
Bitcoin’s popularity will likely continue to increase as more national currencies collapse. As its popularity continues to increase the technical limitations, the only valid criticisms against Bitcoin, will continue to be addressed and addressed more rapidly.