Most of the world’s economies run in accordance to the old Wu-Tang Clan mantra of C.R.E.A.M.: “cash rules everything around me.” The idea is pretty straightforward: if you have cash, you can buy things. If you don’t, you can’t.
But in Venezuela, citizens can have buckets of bolivares (the national currency) and still find themselves unable to buy the sorts of goods that many in the developed world take for granted.
Currency controls imposed by the late Hugo Chavez in 2003 and maintained under his successor Nicolas Maduro make it difficult for Venezuelans to exchange bolivares for US dollars and other foreign currencies. They are also limited to just $300 for online purchases per year — a minuscule amount in a country that has to import almost everything.
Hard currency is so scarce, dollars trade on the street for many times the official exchange rate. Meanwhile, the country’s runaway inflation reached an annual rate of 63.4 percent last month.
This has driven an increasing number of Venezuelans to the freedom offered by bitcoin, a virtual currency outside of the control of any state or government. It is based on the properties of mathematics rather than relying on physical properties, like gold and silver, or trust in central authorities. Bitcoins can be earned as payment for goods or services, purchased at an online bitcoin exchange, or accumulated by “miners” who process transactions and secure the currency’s network using special hardware and software in exchange for bitcoins.