Bitcoin and Venezuela, etc.

March 26, 2017 9:26 AM

Venezuala, Brazil, property transfer Venezuela has a serious food shortage, but electricity is subsidized. People are mining bitcoins because it's worthwhile to use bitcoins to buy food across the border. Bitcoin is a way for Brazillians to get around currency controls and tarriffs. It's possible that blockchains will be useful to make property transfer easier and cheaper-- even in the US, proving ownership can be complicated for real estate and cars.
posted by Nancy Lebovitz (22 comments total)

There was a Reason article about this a few months ago, also a few other outlets like WaPo recently.
posted by RobotVoodooPower at 10:04 AM on March 26, 2017 [2 favorites]

Bitcoin is a way for Brazillians to get around currency controls and tarriffs.

Woohoo! Liberty* for all Brazilians**!

* deregulation
** their currency, that is
posted by RogerB at 10:56 AM on March 26, 2017

Bitcoin mining is supposedly not viable anymore unless you have nearly-free electricity. This calculator shows the profit for one miner mentioned in an Ars article, who makes about $45/month with 300 Antminers. Might make sense for wasted wind power out in Texas, probably not for extremely-subsidized fossil fuel energy.
posted by RobotVoodooPower at 12:38 PM on March 26, 2017

This calculator shows the profit for one miner mentioned in an Ars article, who makes about $45/month with 300 Antminers.

And am I missing something or does that not include depreciating the cost of the hardware? Which is very not free.
posted by Sequence at 12:58 PM on March 26, 2017

"Library of Economics and Liberty"

I think I pulled a muscle rolling my eyes this hard. Anyway:

even in the US, proving ownership can be complicated for real estate and cars.

How would Bitcoin help with this? Bitcoin can't magically convert existing paper records into the blockchain, and the reason land ownership can get so complicated is that title records are very often neither electronic nor uniform, and can date back decades or centuries. It might be useful going forward, but it wouldn't affect any existing title issues.
posted by Sangermaine at 1:16 PM on March 26, 2017 [4 favorites]

This was fascinating. I never had an interest in Bitcoin when it seemed to be mainly used by people in the first world to get rich quick or buy drugs. But people in a socialist country turning to it to deal with a severe food shortage is a very interesting evolution of the crypto-currency.

I wonder if this is the reason Bitcoin is trading at a new high? Because it wouldn't take a large number of people to cause the price to spike.
posted by riruro at 1:35 PM on March 26, 2017 [1 favorite]

The block chain, as usual, a solution desperately futilely looking for a problem.

Bitcoin, as usual, only making a 'profit' off the back of public subsidies that the libertarian nerds who are into this shit wilfully ignore.

Good times.
posted by Jimbob at 1:36 PM on March 26, 2017 [13 favorites]

I wonder if this is the reason Bitcoin is trading at a new high? Because it wouldn't take a large number of people to cause the price to spike.

Ask the FBI. They probably have the largest share of bitcoins: an estimated 10% in 2013 at least, and possible much more.
posted by mobunited at 2:21 PM on March 26, 2017 [1 favorite]

And am I missing something or does that not include depreciating the cost of the hardware? Which is very not free.

Yep, and I also botched the calculation. Here's the calculator for a single AntMiner S9, at current rates you could buy one off Amazon and it'll pay for itself in about a year (until everyone buys a bunch and drives the difficulty up further).

But they may have bought older AntMiners that are worthless to everyone except people with energy cheaper than $0.05/kWh.
posted by RobotVoodooPower at 2:40 PM on March 26, 2017

Nancy, I asked for the future with jetpacks and cheap fusion, not the one with contract hackers in a decaying capitalist dystopia. Where can I go to get my money back?
posted by Joe in Australia at 3:16 PM on March 26, 2017 [3 favorites]

Great, now the Bitcoin crowd will be even more intolerable.
posted by Samizdata at 3:23 PM on March 26, 2017 [1 favorite]

The Viceland documentary series Black Market did an episode where they accompanied someone smuggling gasoline from Venezuela (where it's subsidized) to Colombia. (No bitcoin involved, though.)
posted by XMLicious at 4:44 PM on March 26, 2017

It's generally almost impossible for an individual to make money mining bitcoins, but if you're mining at scale, it isn't. Also, the big miners have the ability to manipulate the markets to ensure profits.

I work at a tech company that has a lot of stuff in aws, and people are forever trying to steal aws credentials so they can spin up bitcoin miners.
posted by empath at 7:22 PM on March 26, 2017 [1 favorite]

There was a Reason article about this a few months ago

Note that link in this post is a podcast interview with the author of that article. IMO, there's three topics intermixed here: bitcoin transactions, bitcoin mining, and the blockchain itself.

Bitcoin transactions undermine a country's ability engage in certain local currency regulations. But it's not that much different than transacting in USD, except that in the most severe forms (i.e. Cuba) citizens aren't even allowed to have foreign currency. And unsurprisingly, nobody is willing to export goods to Venezuela in exchange for a currency whose black market inflation rate is extremely high. For a country whose leadership seems unable to unwind the currency controls, bitcoin transactions look like a relief valve.

Bitcoin mining is a separate thing, which the article is mostly focused on. It's sort of a tragedy of the commons, but mining isn't illegal, per se. But it doesn't exactly make you great friends with the people who benefit from the status quo, and whereas a bitcoin wallet is largely anonymous and discreet, a mining operation is a fairly easy thing to catch. If it feels like a theft of electricity, I imagine the industrial sector also benefits from that pricing scheme, so we have to wonder why it's any more legitimate to manufacture, say, aluminum.

Finally, the blockchain as a record of property transactions is a wholly separate thing. Most libertarians are in favor of strong property rights and rule of law. Nobody's proposing that blockchain will retroactive solve property disputes. Just that, in countries where institutions undergo (and even the US) periodic turmoil, distributed ownership databases potentially represent something more durable than what's come before. The unexamined downside to blockchain is that it's fundamentally a voting protocol. If you can convince 51 percent of the computers to vouch for your transaction, it's in the chain. For something as illiquid as real estate, it stands to reason that the number of miners required for operations is far, far smaller than the total global compute capacity, and you might not even need to merger a bank or two to have one entity control that 51 percent of the blockchain voting.
posted by pwnguin at 7:23 PM on March 26, 2017 [2 favorites]

There was already essentially a 51% attack with ethereum after someone found a flaw in a popular smart contract and emptied it out. Everyone voted to fork the currency and reverse everything.
posted by empath at 7:25 PM on March 26, 2017

The solution to property transaction records in Australia (and the UK, I think, and many other places) is to record everything in a government registry which is the definitive evidence as to who owns what. If the registrar records a falsified property transaction then the property owner can sue the registrar to have the record amended, and for damages, but you don't have this idea that current ownership depends on a centuries-old chain of documents.

I can't imagine Bitcoin being even theoretically more secure than this, and if a Bitcoin land-registry were ever implemented practically I expect that property owners would discover that their land had disappeared overnight, only to resurface months later in micropayments for exotic drugs.
posted by Joe in Australia at 9:46 PM on March 26, 2017 [2 favorites]

The really unfortunate thing, IMO, is that Bitcoin mining is by design a complete waste of electricity that serves no other purpose. The amount of electricity, which in today's world really means the amount of fossil fuel, being thrown at what's basically digital masturbation (except less fun!) is pretty staggering.

In terms of sheer wasted resources, the only thing that immediately comes to mind that's close is the effort spent on highly-classified nuclear weapons projects, although even that simulation work involved (which has driven the development of the only supercomputers that even approach the scale of the global Bitcoin miners in aggregate) occasionally has unclassified, not-destined-for-the-burn-bin side effects. Bitcoin mining does not; it's burning coal for the sake of burning coal, in order to prove that you burned the coal to others in a mathematically rigorous way.

That's what Bitcoins are, really: they're mathematical trophies that you wasted some of the Universe's finite reserve of entropy and moved us infinitesimally that much further towards Heat Death because you fucking well could, and because someone might be stupid enough to maybe trade you actual useful stuff for a few of those trophies.

And people think this is a better system than having a central bank.

Which really means, if you're running a central bank and you ever find that a significant proportion of people think you really are doing a worse job creating a medium for the exchange of goods and services than passing around receipts for the digital equivalent of digging a hole and filling it back in, you should probably find a new occupation, because boy howdy are you goddamn bad at your job.
posted by Kadin2048 at 10:24 PM on March 26, 2017 [8 favorites]

The unexamined downside to blockchain is that it's fundamentally a voting protocol. If you can convince 51 percent of the computers to vouch for your transaction, it's in the chain.

The thing that puzzles me about Bitcoin and similar crypto-currencies these days (most of my previous objections having long since been answered by 'oh they genuinely don't have an answer for that') is a) it's a currency where monopolies are catastrophic, and b) it's completely unregulated in a market with a positive feedback loop, which means that, given enough time, a monopoly will form.
posted by Merus at 3:24 AM on March 27, 2017

Kadin2048, that's an interesting argument.

I think the amount of electricity used for bitcoin is small compared to world usage. Having a stable currency is really valuable, and while it's possible that governments generally have solved the stable currency problem, it's reasonable to want insurance. Bitcoin might be that insurance. So far it's helping out in Venezuela.
posted by Nancy Lebovitz at 9:37 AM on March 27, 2017

empath: "I work at a tech company that has a lot of stuff in aws, and people are forever trying to steal aws credentials so they can spin up bitcoin miners."

This was the first thing that happened when my company set up its first aws account a couple years ago!

The food shortage in Venezuela is so terrible and difficult for me to understand - I guess it mirrors bitcoin. Their own president is refusing humanitarian aid, and it has been going on for years. They have the natural resources to grow their own food, but not the government to have a thriving market, so they have nothing.
posted by bluefly at 6:02 PM on March 27, 2017

Having a stable currency is really valuable, and while it's possible that governments generally have solved the stable currency problem, it's reasonable to want insurance. Bitcoin might be that insurance.

One thing that gets to me--and it happened in the podcast--is that Bitcoin is not a stable currency. When people talk about how they should have "invested" in Bitcoin a while ago because now it's worth a lot, that's a sign that it is not going to do well setting prices, yet here we have two economists doing it. You don't "invest" in currencies, you speculate.

So far it's helping out in Venezuela.

AFAICT it's helping out some individual Venezuelans, who have basically figured out a way to re-sell subsidized power they are getting from the state by very inefficiently converting it to Bitcoins. Net for Venezuela the nation is certainly negative--they'd make more money selling the power generation fuel abroad directly, wouldn't they? Of course, incompetent government + other complications, etc.

[BTW, I really found the podcast interesting and wish I'd had time to comment yesterday--I may add a more appreciative post later if I get a burst of energy.]
posted by mark k at 9:33 PM on March 27, 2017

I think Spain's economy under the Habsburgs is a sort of precedent for what happened in Venezuela. Spain acquired immensely profitable gold and silver resources through its conquest of the New World. It was literally coining money. But, the flow of money drove up prices in Spain, and made it uneconomical to produce things domestically; anything that could be imported was brought from outside the country. That wasn't a direct cause of the decay and fall of Habsburg Spain, but I think it was morally responsible: the government didn't depend on the support of its citizens and its disengagement from the populace left the country weak.

Oil played a similar role in Venezuela. It destroyed local industry, but the government could use it to secure support as long as the price of oil was high enough to import everything the people needed. Now that the price has fallen they can't afford imports; there's no local industry left; and the government isn't strong enough to make the right decisions and fix the economy.
posted by Joe in Australia at 2:12 AM on March 28, 2017 [2 favorites]