Honest question: Why don't they just adopt bitcoin and stop this madness?
If you're not talking about the government, who obviously like printing money, then the issue is that people are paid in the local currency and have no choice and shops may be forced to accept it. The black market has long ago dealt in USD. Bitcoin doesn't help anyone since people don't have enough money to eat, let alone buy computers or mobile phones. Also Bitcoin is not a hard, ie stable, currency.
It's not at US levels, but many already have mobile phones:
https://en.m.wikipedia.org/wiki/List_of_countries_by_smartph...
Really though, many Venezuelans have turned to crypto. There are more sales in Venezuela than in China according to localbitcoins data, and a lot of them are buying mining equipment because energy is still heavily subsidized:
https://www.economist.com/the-economist-explains/2018/04/03/...
The question was originally buried but one of its premises is really good: to the extent bitcoin has some utility eventually, it's about putting a floor on gross macroeconomic malpractice like in Zimbabwe or Venezuela. It can give people a currency to flee to in emergencies. One that is easier to get and store and harder to seize than dollars.
The real question is why aren't even more Venezuelans using it. Whatever is preventing mass adoption in a crisis should be what cryptocurrency experiments should probably focus on, and most probably involve tradeoffs with crypto idealism. Things like:
1. Value stability. Maybe you can get that with more competing tethers.
2. Predictable and low transaction costs. Maybe let ideal clearing rates, target tx per min, affect round length.
3. More usable, but trustworthy implementations. Ie, dead simple, never see any keys. Bitcoin needs whatever Dropbox did to rsync.
4. Better options to do off chain transactions without deposits for counterparties where you have some trust, or know you can go back to that shop or person if they double spend.
5. Some system of revocation for the most extreme and undisputed fraud or thefts.
6. Wallet penetration. How cheap can a specialized wallet device or phone with an app get?
Some of those would irritate bitcoin purists, but they are the things that make people trust your system.
Some cryptocurrency will probably offer those things at some point and fall on its face just to prove me wrong, we'll see.
Who do you think has access to lots of subsidized electricity and hard currency with which to buy mining equipment?
It's a great question, and an incredibly quick reply!
I would like some time to consider it carefully, but recommended you check out the article I originally linked which includes more details in the meantime.
Bitcoin's volatility is the opposite of what Venezuela needs. About the only proven solution for hyperinflating countries with poor institutions is a currency board [1]. You peg the local currency 1:1 to an external currency. If that doesn't work, you switch to a hard currency.
Many other currencies are also stable - the NZD for example, but I suspect (with no proof either way) a large change in their use may cause issues.
Typically USD is chosen, as that is the international currency of oil. EUR is I think second, mainly for political reasons.
If the answer to that question is anything but yes, I doubt adopting bitcoin at all will help.
People who don't what to follow this tried and true approach of solving smaller problems usually don't want problem to be solved at all.
Transaction fees for bitcoin rose to what, 50-ish USD during the December madness? (when the network was saturated).
Just imagine the network congestion if all of Venezuella's business start using bitcoin to settle their transactions, even if they're batched into large amounts. No way 7 tx/s is enough.
Worrying about coffee seems unrealistic, "let them have a cake"-like thinking.
And buying coffee is just an example for small transactions that most people rely on, people want to do small penny transactions all the time to buy food not in bulk but as they need it. Buying in bulk is usually bad not only because it's happening due to the failing economy but also because it leads to more spoilage and rotten food being thrown away. That's bad for the environment.
They also need pencils, toilet paper or the odd USB cable.
It's easier to barter or use hard currency. When you're at 1 million percent inflation, you don't want to have to rely on having electricity and network access to buy food. Moreover, pitching people on a new currency in the midst of a currency collapse is an uphill battle.
A far more realistic approach is to adopt another country's stable currency (e.g. US dollar).
(2) Even if its value "unstable upwards", rapid deflation of currency is just as harmful as rapid inflation.
(2) It is not harmful to people going long with their own money, but it is a huge risk to margin traders (both those going short and long, but on a loaned capital). But this is a positive thing because that's how you get the sound money bootstrapped: by incentivizing long-term holding and disincentivizing wild speculation.
Yes, appreciation on assets is great for owners.
But when talking about currencies (i.e. standard medium of exchange), it is the overwhelming consensus that deflation -- especially rapid deflation -- is harmful to an economy. The Great Depression being the most dramatic example of a deflationary spiral.
Are the regular international credit card systems still working in Venezuela?
However this ignores the reality that they can already not buy any useful amount of bitcoins with their currency and mining is unrealistic.
Maybe some altcoin might work, but then a lot of vendors would need to switch as well.
The people could individually decide to switch to cryptocurrencies (or dollars, euros, bottle caps etc...) and get others to accept it but then you have the problem of purchasing this currency in the first place and it still doesn't solve the underlying issue of the broken Venezuelan economy. You could be a bitcoin billionaire in Caracas right now, if the shop doesn't sell toilet paper then it doesn't sell toilet paper. On the other hand if you have bolivar bills...
It's not the bolivar that's broken, it's the Venezuelan economy. This ridiculous inflation is a symptom.
When governments fail to protect the private property rights of their citizens, be it physical property, financial investments and savings, to the income they earn, poverty will result for the majority.
Lack of protection for the private property probably didn't help but making that the main cause for the Venezuelan collapse is a very ideological stance to have IMO. Insert here the obligatory "look at china" counter-example.
As far as I can tell the only way to really avoid this catastrophe would've been to diversify the Venezuelan economy in decades past (something Chavez promised to do but didn't) but nobody did it, regardless of political affiliation. "Free money coming straight from the ground" is just so much easier for a politician than making a complex and potentially impopular long term economic reform.
China has a state plan and they invest in businesses. That means they provide resources to businesses instead of taking them away. Maybe that sounds like just better implemented socialism. Or maybe it's just literal capitalism on a scale never before seen. Think about it. What does the government of China provide to its citizens? If you are poor in China, will the government take care of you? No. It might provide you with a job, though. The USA is more socialist than China, the government will provide food, housing and even medical care for you and your children. You cannot be refused from an emergency room because you cannot pay. A few extremely wealthy people run China, and make decisions that are in their best interests. They invest their capital to get returns. Sounds like capitalism to me.
I'm pretty certain that if the right had been in charge when the crisis happened things would've played out mostly the same (I don't believe for a second that the right would have better diversified the economy for the same reason that the socialists didn't, nobody says no to free money), the main difference being that they would have cut all the benefits to the poor immediately to cushion the fall a bit and they'd have let papa USA bail them out in exchange for a de-facto feudalization of their economy. I agree that it would probably have turned better for the Venezuelan people (at least in the short term) but socialism vs. capitalism is not really the cause of the crash, it's more about the recovery or lack thereof. If the petrol infusion had kept going I'm sure people would be chanting Dear Leader's name in the streets, whoever that would be.
If I'm correct, I'd say "they" refers to "Venezuelans", that is, the inhabitants of Venezuela.
People may not like it, but the US dollar is a stable currency, it's reasonably well managed and importantly the Venezuelan government can do anything weird with it.
Most crypto coins aren't as unstable as the Venezuelan currency, but still much less stable than the US dollar or Euros, so it's not actually that attractive as an alternative.
Otherwise, despite its shortcomings, it would be kind of a god-sent in this kind of situation. However, I'm sure the government would try to prevent wide adoption.