A cryptocurrency is making huge inroads in Venezuela as inflation runs wild - and it's not bitcoin or the Petro
- Venezuela is currently suffering from hyperinflation and the president recently devalued the currency by 95%.
- Locals are turning to cryptocurrencies as a more stable store of value and means to transact.
- 200 merchants per month are signing up to accept Dash in Venezuela, according to the Dash Core Group, and the rate of adoption is accelerating.
LONDON - Cryptocurrency Dash is seeing a surge in new merchant sign-ups and wallet downloads in Venezuela as hyperinflation in the country runs wild.
Venezuela is forecast to see inflation of as much as 1,000,000% this year, with locals needing stacks and stacks of cash just to buy food. Socialist President Nicolas Maduro last weekend announced a series of measures aimed at stabilizing the economy, including devaluing the bolivar by 95% and pegging it to the state-backed cryptocurrency, the Petro.However, another, non-state backed cryptocurrency is apparently catching on: Dash.
"We are seeing tens of thousands of wallet downloads from the country each month," Ryan Taylor, the CEO of the Dash Core Group, told Business Insider. "Earlier this year, Venezuela became our number two market even ahead of China and Russia, which are of course huge into cryptocurrency right now."
The BBC reported on Wednesday that Venezuela is "a paralyzed country" after the economic changes over the weekend. Cash withdrawals are being restricted and there is confusion over how exactly the new system works.
Venezuelans are turning to cryptocurrencies as a way to store value as the Venezuelan bolivar's exchange rate spirals out of control.
Dash is an open source cryptocurrency created in 2014. It has low fees and near-instant transactions. Dash is currently the 14th largest cryptocurrency in the world, according to CoinMarketCap.com, with just over $1 billion-worth in circulation.The Dash Core Group, which Taylor heads, is owned by the payment network that Dash runs on. The Core Group services the network and its funding comes from mining fees that are generated by the network.
As well as wallet downloads, which consumers need to hold and spend Dash, Taylor said the cryptocurrency is seeing strong adoption with merchants too.
"It took them a long time to get the first 50, first 100 [retailers]," Taylor, who is based in Arizona, told Business Insider on a call last week. "But at the beginning of July the number was around 400, and we're already at 800. We're at this point signing up more than 200 a month."
Brand names including Subway and Calvin Klein have signed up to accept Dash in Venezuela, Taylor said.
"Effectively, even if I accept a credit card, three days later when the funds hit my account, it's worth significantly less in Venezuela than when the authorization went through," he told BI. "This is a problem that cryptocurrency can solve. Our instant transactions can solve it and the relative stability of our cryptocurrency is better than their fiat currency."
Responding to questions over email this week, Taylor said adoption in Venezuela has accelerated even faster after Maduro's latest economic plans were announced.
He said: "We've seen 94 new Venezuelan merchants added to DiscoverDash.com since last week, which is about double the normal rate of about 50 merchants per week [over] the last couple of months.
"We have seen the number of Dash-accepting merchant sign-ups accelerate throughout the crisis. I believe that trend will continue."DiscoverDash.com lists local businesses worldwide that accept Dash. 5 of the 6 newest merchant signups on the website were located in Venezuela when BI checked on Tuesday afternoon.
The characteristics of Dash make it suited to act as a cash or debit card replacement. Dash's transaction fees are in pennies, rather than running into dollars as bitcoin's fees have been known to do. Confirmation times are also in the seconds, versus slower payment processing times for other cryptocurrencies.
However, perhaps the most crucial reason why Dash has caught on in Venezuela is that the Core Group can finance projects on the ground.
Most cryptocurrencies are completely open source, with no central funding or body backing the network or the currency. Dash, on the other hand, has the Core Group which helps to run the network and looks after some new funds generated by the currency's underlying code.
Dash generates new cryptocurrency when transactions are confirmed on the network. Most of the new cryptocurrency is paid to the people who confirm transactions, incentivizing them to do this job of confirming them. But around 10% of this newly generated cryptocurrency goes into "treasury" - a pot of money that the Core Group gives to projects and ideas looking to support and encourage Dash adoption.
"A lot of community members came forward with proposals to do education, hold workshops, open an office where users can come in and sit in a small group setting and get help setting up a wallet," Taylor said.
The Dash Core Group has so far invested around $1 million in Venezuela, funding everything from billboards to sales reps.
Taylor added that Dash is also seeing strong adoption in other countries with similar dynamics to Venezuela.
"Venezuela is unique, it's the only country in the world with what can be called hyperinflation," he said. "But there are other high inflation countries. We're seeing this with Turkey right now. Ukraine, Argentina, these are countries with very high inflation rates with of 20-30% or something. 20-30% we think is enough to get people to try something new."We're going to try and be successful first in Venezuela before branching out to try this in other countries," he concluded.