You might have recently heard that countries like Venezuela and Argentina, both of which suffer from high levels of inflation, are currently big proponents of Bitcoin and trying their best to find ways to maintain their value through it. Aside from these two countries we see the same happening in many African countries which suffer from low banking coverage and an inability to trade effectivelly.
But why do all these countries buy Bitcoin instead of any other store of value? What makes cryptocurrency so interesting for third world countries and what can we learn from this process? In this article we attempt to answer all this and more. After reading the contents of this post you should better understand how Bitcoin resolves most common financial issues and why it is a great way for you, too, to protect your funds.
Why cryptocurrency is helpful for poor countries
Poor countries are often victims of (as mentioned above) large inflation on a year-over-year basis. Look at Argentina for example; the cost of a Macbook Air costs $6200 at the time of this writing. At the same time, US citizens only have to pay $1100 for the exact same model. Due to the large difference in purchasing power, the currency circulated in these countries allows for nearly now imported purchases, making citizens poorer and more limited from a choice aspect.
Additionally, it is well known that poor countries often have stricter regulations around earning potential, taxation, and overseas transfers. This doesn’t help much with the situation.
But cryptocurrency, and more specifically Bitcoin, solves all of these issues. BTC does not lose its value against the US dollar. In fact, if you have been paying attention, it has outgrown it by a large factor. Especially this year, with the heavy amounts of money printing on a global scale, the topic of inflation is more prevalent than ever.
Bitcoin and other cryptocurrencies are also fully decentralized, meaning that no third party or institution is able to control or confiscate your funds. This gives full freedom back to the owners of the currency, allowing them to decide when and how to make transactions.
Crypto earning potential
But cryptocurrency is not only here to counteract the flaws of FIAT currencies. The concept is also an excellent way for low-income families to supplement their income using little to no effort.
This happens in two ways:
- Cryptocurrency mining – People will need to purchase hardware equipment an set it up to mine cryptocurrency using the power of their electricity. With a modest investment of $2000-$3000 you should be able to earn $5-$10 per day, which for many countries is more than the average daily salary.
- Cryptocurrency staking – Another concept is that of cryptocurrency staking. With this model, people simply need to hold onto their cryptocurrency (specific coins) and not use it for any purpose other than storage. By doing so, they will be able to earn interest on their coins on a daily basis, most of which are between 8%-10% APY. So, a $10.000 investment could earn $800-$1000 in interest within one year, simply by sitting in your account. Not a bad deal, huh?
- Yield faming – The riskiest option the earn money from your crypto investment is by offering liquidity to a staking pool, a process otherwise known as yield farming. The process is relatively similar to staking, the funds remain in an exchange-based wallet and you can earn a lot higher interest on an annual basis. However, all the farming is powered by smart contract, which could pose significant risk for the investor (hence the higher yield).
Poor countries that choose to adopt Bitcoin
There are currently many smaller countries with low influence on a global scale that are considering the possibility of allocating part of their cash reserves into Bitcoin. Eastern European countries, South American countries; the trend is just beginning to unfold. The first countries that choose to invest in the technology of Bitcoin and hold onto a significant portion of coins will be the countries that will evolve the fastest over the next 10 years.
Many can still not fathom the geopolitical significance of Bitcoin, especially when it comes to the impact it could have for governments that choose to welcome it in their economy. At the moment we are still at a complex phase where adoption is slowly underway. Until interest and adoption is built on a global scale it will be increasingly difficult to understand Bitcoin’s position in the future, digital economy.
While a handful of countries are already experimenting with cryptocurrency mining using their energy reserves, the stigma of crypto continues to prevail. We will have to patiently await and see where the current trends will lead to.