I’ve been communicating with several Bitcoin Cash supporters in Venezuela. This article shares my revelations in what would make the ‘best’ currency, which is a direct result of talking to these people.
If cryptocurrency is better money, if it truly solves problems for the common man, then there is no better place for it to do this than Venezuela. Any lessons learned from crypto adoption in the country should inform outreach and adoption efforts in other countries. And with the new financial crisis bearing down on the world economy, there is no better time to contemplate and integrate the lessons learned over the last couple years.
Cryptocurrency is solving problems, but not in the way that most Bitcoin supporters think. Neither BTC, Dash, Ethereum, or Bitcoin Cash is an adequate solution for merchants in Venezuela. They all fall short of the Best currency. This currency does not yet exist, and I don’t know what it will be called, but from my discussions with Venezuelans, I’ve gotten a clear picture of the traits it will display. For lack of a better name, I’m going to refer to it as the Best currency.
Lessons from Venezuela
As Roger Ver is fond of saying: BCH is fast, secure, cheap, reliable, and private. Other cryptocurrencies check some of these boxes too. ...But is it enough? From talking with Venezuelans, the answer is no. It’s a great start, but we aren’t there yet. The recent market sell-off just proved the point.
So what’s missing?
I recently had a great discussion with Roberto, the manager of the Bitcoin Cash House in Barqestimeto. He told me that most merchants who accept BCH do it through an app called Uphold. I checked into this app. It’s controlled by a UK-based bank. It’s custodial. Once enrolled, you can switch between many fiat currencies, a stable coin of their own, and several cryptocurrencies. The ease, breadth, and popularity of the app makes it an obvious choice for Venezuelan merchants.
But digging a little deeper showed some obvious room for improvement. First of all it’s custodial. Roberto admitted that people have had their funds frozen by the bank due to ‘suspicious’ activity. So while the app provides stability and ease, it is neither permissionless nor unconfiscatable. Venezuelans need to ask permission to use the app, and at any point their funds can be seized.
Venezuelans are willing to put up with the shortcoming because of their insatiable hunger for a stable currency. In a world of hyperinflation, they crave stability. Compared to the Bolivar, even the wild volatility of Bitcoin seems stable. Many countries are in the same situation as Venezuela, many more will be in the near future.
So now the traits of the Best currency are revealed. It is:
Getting from Here to There
As I said, this Best currency doesn’t yet exist, but we’re getting close. Bitcoin is volatile, yes, but volatility can be good. No risk, no reward, as they say. But as any Venezuelan can attest, currency stability is highly desirable.
Currently on the BCH network is the SLP token, USDH, produced by Honest Coin. They are highly transparent, regulated, and frequently audited. By dividing ones savings between BCH and USDH, each individual is empowered to choose their own balance between volatility and stability. Both are permissionless and unconfiscatable. The two get almost all the way to the three traits of the Best currency. And Sideshift.ai allows people to instantly switch between one or the other, with no sign-up required.
But of course, USDH isn’t really unconfiscatable. The US government doesn’t need to confiscate your tokens if they can attack the centralized company. While the notion of a stable coin is helpful, there is third-party risk associated with every stable coin in existence. Even DAI, the decentralized, algorithmic stable coin, has its own issues.
To be clear, I’m bullish on stable coins, not the US dollar. That may seem contradictory since almost all stable coins are pegged to the US dollar. The undeniable reality is that the US dollar is one of the worlds most stable fiat currencies. I’ve come to understand that crypto will never replace it, but may co-opt it. After all, unlike real US dollars, stable coins are not regulated the NY Fed. They are pegged to the dollar, but not regulated by any government entity. That’s why the IMF is so afraid of stable coins.
It is my hope that one day an algorithmic stable coin will be created that is truly permissionless and unconfiscatable. For the present however, it is possible to mitigate the threat of third-party risk by diversifying among different stable coins. My personal favorites are Honest Coin and DAI, but Tether is also worthy of consideration due to its popularity. Many banks such as Uphold and Airtm offer their own stable coins, and are accessible to Venezuelans.
For the wealth one chooses to allocate to stable coins, it is wise to diversify it among several stable coins. That way, if any one coin gets taken down, it’s not a complete loss to the individual. This is currently the most optimized portfolio a world-citizen can achieve, and the closest one can come to the Best currency.
I believe that one day a single coin will embody all the traits of the Best currency. A single coin will achieve stability, permissionlessness, and unconfiscatability. It will also be fast, secure, reliable, and private. It will probably be backed by a basket of other fiat and crypto currencies, and it will be outside the reach of any state actor.
The reason I know it will exist, is because every human on earth wants to achieve it. They may not know it, they may not even be able to conceptualize it, but every human yearns for sovereignty. And money is simply a reflection of human nature.
Making Bitcoin Cash Truely Unconfiscatable
This video shows how to use some software I wrote to generate 'paper' wallets for Bitcoin Cash. This allows you to store your BCH in a 'cold wallet'. I take the concept a step further by using a laser engraver to etch the information onto a plastic card. This card can be buried, like gold.
Cold Storage for SLP Tokens
This video extends the video above, by showing how to use the same software to create a paper wallet to store SLP tokens. You can retrieve the tokens off the paper wallet using Badger Mobile or the sweep command in slp-cli-wallet.