Venezuela: The biggest cryptocurrency market in Latin America
The noise is deafening in a building in Caracas: machines "mine" bitcoins non-stop. In Venezuela, with ridiculous electricity costs, creating cryptocurrencies has become a very profitable business. Smaller than shoeboxes and with a unit value of 400 dollars, almost 80 computers running full time generate about 125 dollars per month per computer. Four fans cool the space where the temperature is high.
The electricity bill? "I don't think it's even $10 a month," Theodoro Toukoumidis shouts over the showroom of his company Doctor Miner, which installs mining farms in the country and sells equipment. "We discovered a way to generate a passive income (...), transforming energy into money."
The company has highly experienced staff in crypto mining, which helps the pool to respond effectively to the needs of all parties involved. The CEO is Theodoro Toukoumidis, a pioneer in crypto mining in Venezuela, and its business director is Juan José Pinto, a mechanical engineer specializing in power generation
In October 2020, Doctor Miner launched the first Venezuelan mining pool, a new development for the company, which aims to boost the growth of cryptocurrency in the region. In this way, Doctorminer tries to tackle the problem of hashrate concentration in China, which threatens the decentralized crypto market. In addition, the company wants to set an example and encourage the creation of more mining pools in Latin America.
Hashrate is a metric that allows you to analyze the strength and security of a blockchain. The more honest miners there are, the higher the hash rate and the less likely they are to be attacked by hackers.
Doctor Miner installs computer equipment for crypto mining, a process that generates a series of complex numerical sequences to mint a virtual currency and validate financial transactions. This task requires significant processing power and therefore huge amounts of energy.
In Venezuela, with a subsidized and practically free electricity service, mining is "profitable, because one of the fundamental variables is the cost of electricity," explains Aaron Olmos, an economist and university researcher in the area of crypto assets. According to Olmos, not even the constant power outages in the provinces, which are a common occurrence in the capital, caused by a collapse of public services, make a dent.
However, it is a small group of people in the midst of the worst crisis in the country's recent history with the highest inflation in the world. The year 2020 closed with 2,959.8% accumulated inflation. The local currency - the bolivar - was pulverized and the Venezuelan's purchasing power, giving way to the dollar. "Having cryptocurrencies is a way out of hyperinflation (...), an additional tool to face the crisis," says economist Olmos, despite the fact that cryptocurrencies created by private individuals are not backed by central banks.
Meanwhile, bitcoin is accepted as a payment method, little by little, in Caracas businesses. According to the portal LocalBitcoin.com, Transactions in this currency generated a peak of $303 million in 2019 in Venezuela. So far, in 2021, 210 million dollars have been transacted.
In Venezuela, a regulatory body for crypto assets (Sunacrip) was created in 2018, when the activity was considered illegal. Two years later, the generation of cryptocurrencies was regulated by the Executive and Sunacrip launched a registry of miners. Nevertheless, Toukoumidis abides by the rules and complies with the bureaucratic permits: "We have learned along the way of institutions that give formalities that we didn't even know about."
For lack of official documents, many continue to fall behind bars, according to specialized portals such as CriptoNoticias. Last week, police arrested a woman in Caracas, seizing 17 machines. In the interior of the country, seizures number in the hundreds. For this reason, many prefer to keep a low profile to their mining activity.
It is important to understand that Venezuela's economic and social context has been conducive for the country to become the main bitcoin market in Latin America. With inflation exceeding 2000% and a diaspora of approximately 5 million people, bitcoin has become a strategic way to send remittances to Venezuela and preserve the value of money. Adding this to the very low electricity costs in Venezuela, the conditions have been given for 47% of cryptocurrencies in Latin America to be traded in the country.
Doctor Miner has become the first blockchain mining pool in Latin America, and many wonder why it would be necessary to join a mining pool if there is the possibility of doing this activity individually. And yes, anyone could mine bitcoin and other cryptocurrencies, as long as they have the necessary resources to do so. The problem is that the more miners or computing power, the more difficult it is to mine, which means you need to have a high hashrate to make significant profits. Otherwise, it's just a waste of time and money.
Even if a person has a good hardware with enough power and electricity needed for its operation, it would only represent "a drop" in the big ocean of cryptocurrency mining. So the chances of mining a block are really low. That's where mining pools are necessary. By pooling the mining power of several users in one node, the chance of achieving the expected profit is higher.
Let's take an example to make it easier to understand. If a miner has a hashing power of 0.1%, he will probably find one out of every thousand blocks. Compared to the entire network, this is a rather low power to generate income. However, this would change if the person decided to join nine other miners with a hashing power of 0.1% each. In that case, their total hash power would increase to 1%. On average, they would be able to find one out of every hundred blocks, a much more efficient result than mining alone.
So, is Doctorminer a good choice when it comes to mining pools? Let's look at the facts. Being located in Latin America, Spanish speakers have the opportunity to access the crypto industry, which helps solve the problem of hashrate concentration in China and helps Bitcoin decentralization.
The payment system used is Full Pay Per Share, a favorite of miners due to the fact that the company assumes the risk of variation of rewards (Luck). The commission on this platform is 2.25%, but it decreases as the user's processing power increases. Another strong point is security. Customers' funds are stored directly in their digital wallets, which eliminates the risk of hacks.
Venezuela remains among the five countries with more visits to pages that exchange cryptocurrencies, according to the specialized portal Chainalysis. Despite the fact that with the pandemic, the amount of transactions decreased compared to 2019, Venezuelans continue to approach this market to protect themselves from hyperinflation and to generate income.
Now, like every mining pool, Doctorminer has some weaknesses, especially considering that it was created recently. One of the most important is that its hash rate is only 20 PHs. Despite this, we can conclude that Doctorminer is very well suited to the needs of Bitcoin miners in Latin America.