Venezuela: With Low Electricity Prices, Cryptocurrency Mining Is On The Rise

Good business. The noise is deafening in this room of a building in Caracas where machines “mine” bitcoins. Taking advantage of the ridiculous price of electricity, many Venezuelans have embarked on the creation of cryptocurrencies. Cooled by fans, some 80 computers, the size of a shoebox, are constantly running. Each of the machines generates around $ 125 per month. The electricity bill: “It does not exceed 10 dollars a month,” shouts Theodoro Toukoumidis, explaining how the devices work. His company Doctor Miner establishes bitcoin “mining farms” and sells the devices to people who wish to embark on the adventure.

Cryptocurrencies like bitcoin operate through a decentralized network with independent computers validating transactions around the world. Participants, or “miners,” use powerful processors to make complex equations that prove their participation and automatically receive bitcoins in return. But this activity consumes a lot of energy. Selon le Cambridge bitcoin electricity consumption index (CBECI), the miners of bitcoin consommeraient around 114 TWh (terrawatt-heure) sur une annualized basis, soit 0.5% of the production d’électricité mondiale, ou a peu plus that the consommation des Netherlands.

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Venezuela, an oil-producing country, has been providing electricity to its inhabitants for years at a ridiculous price. In a country that is going through a serious economic crisis, therefore, the calculations are made quickly: with such a cheap current, it takes a few months to depreciate a machine and earn money when the salary of an official is two dollars. “We have found a way to generate passive income … by turning energy into money,” says Theodoro Toukoumidis.

Mining is “profitable because one of the fundamental variables is the price of electricity,” explains Aaron Olmos, an economist and researcher specialized in cryptocurrencies, and this despite frequent outages and low internet bandwidth, one of the weakest in the world. “For mine, you don’t need a high speed, but a stable speed,” he emphasizes.

Venezuela has become something of an El Dorado cryptocurrency with hundreds of miners eager to profit from the vein. Gold rush … “I sold my car to buy a machine and my partner changed his motorcycle” in 2016, recalls Theodoro Toukoumidis. At first, they installed the machines in their dining room, to prepare them for mining and sell them. “People didn’t understand anything, but they said ‘We want one,'” he says.

Under the radars

Venezuela has seen its Gross Domestic Product (GDP) fall by 80% since 2013, mainly due to the political crisis. 65% of households live in poverty. Hyperinflation hovered around 3,000% in 2020. Pedro, a fictitious name, has been riding the wave. In 2017, he bought two video cards (with which it can also be extracted) worth $ 800. After three months he had his money back. Estimate your earnings today at $ 20,000. “Cryptocurrencies are a way out of hyperinflation (…) One of the tools that can help face the crisis,” said Aaron Olmos.

The site ensures that the equivalent of $ 303 million was exchanged there in 2019 in this currency in Venezuela, when hyperinflation was at its peak. In 2021, with a dollarized economy and slowing hyperinflation (70% in six months), bitcoin exchanges are around $ 100 million. President Nicolás Maduro’s own socialist government launched a cryptocurrency, the Petro, in 2018. Officially backed by the Venezuelan subsoil (oil and minerals), the Petro has not had the success expected by the authorities to become a kind of unit of account .

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However, if bitcoin is not official, since 2018 there is a cryptocurrency regulatory body (Sunacrip) that since 2020 has listed official miners such as Theodoro Toukoumidis who comply with all legal obligations. However, many “minors” work outside of any legal framework that does not declare their assets. In September, the police confiscated 17 machines from a woman and seizures in the provinces surpassed 100 in 2021. Pedro continues to operate under the radar. “It’s better not to talk about it.”

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