What is Bitcoin Mining? For Venezuelans, it's the difference between life and death

Many people from troubled South American countries have taken up Bitcoin mining in a desperate attempt to stop starving themselves and keep their families alive.

The once-prosperous South American country has been plunging into economic disaster over the past few years. The socialist regime of Hugo Chavez, which continues under current president Nicolás Maduro, has turned Venezuela, a country with more oil reserves than Saudi Arabia, into a living hell.

Inflation is very serious. From 2016 to the beginning of 2017, the price of daily consumer goods increased by 741% . Experts predict that Venezuela's inflation rate will reach 1600% by the end of this year.

Amid this catastrophe, a most unlikely source of hope has emerged: Bitcoin, a digital currency that many starving Venezuelans are mining just to survive.

In desperate situation

To describe Venezuela's current economic and social situation as tragic is an understatement. Food is virtually impossible to find in Venezuela. Demand far outstrips supply, with thousands of people lining up every day for the chance to get the bare necessities. Many have chosen to cross the border to neighbouring countries in search of food, and starvation has become the new normal. Last year, three-quarters of Venezuelans lost weight due to a lack of food.

The crisis was further exacerbated by the seizure of power by President Nicolás Maduro and his allies. A new Constituent Assembly was formed and declared to have authority over all branches of government. This Maduro-controlled assembly fired the country's chief prosecutor (who is an opponent of Maduro), created a "truth commission," and swore an oath of allegiance to Maduro. To date, 124 people have been killed in protest against the current situation in the country.

Bitcoin mining represents the difference between life and death

In this difficult environment, Bitcoin has emerged as a savior. Many desperate Venezuelans have reportedly taken to mining Bitcoin to make ends meet. This seemingly unlikely scenario is due to one unique factor: in this impoverished country, electricity is essentially free because it is subsidized by the government.

Cheap electricity costs mean that Bitcoin miners in the country don't have to pay for regular costs. It is reported that successful Bitcoin miners can earn $500 per month, enough for them to support a family of four. Since cash in the country is basically worthless, many businesses and citizens use Bitcoin to exchange goods and services.

Unfortunately, however, President Maduro has begun to crack down on Bitcoin miners, calling them "capitalist parasites." Bitcoin trading is still possible, though. Since Venezuela has yet to introduce a cryptocurrency bill, many miners have been arrested on charges that have no evidence.

One miner was detained for 14 weeks and his mining equipment was confiscated by the government, but it is believed that police and government officials are using the confiscated equipment to mine bitcoin for themselves.

Regardless, desperate people will continue to look for ways to survive. Because the government is so focused on Bitcoin, many people have started mining Ethereum. A miner from Venezuela said:

Mining ETH is basically the same as mining Bitcoin: both use free electricity to generate cash. But ETH mining is cheaper - all you need is free software and a computer with a graphics card. It's easy for the police to think your ETH mining machine is just an ordinary computer.

While some still scoff at the opportunities that cryptocurrency presents, the reality is that it can provide economic income to all. As the Venezuelan example shows, cryptocurrency can also mean the difference between life and death.