Bitcoinization refers to Bitcoin taking over as a primary means of exchange.
We have seen it as a legalized method of payment in Japan and we may be starting to see it taking over in another place as well...
Venezuela.
The authorities in Venezuela have not been overly accommodating to Bitcoin and Bitcoin miners as of late. Actually that might be a huge understatement as there have been talks of miners being jailed in the country for mining Bitcoin and other cryptocurrencies.
However, apparently that might not be a problem.
Authorities may not have a choice.
People and businesses have been left scrambling for any way to preserve their wealth with the Venezuelan Bolivar plummeting seeming on a daily basis.
How much has it fallen?
Check out this chart:
The Bolivar has lost roughly 99% of it's value against the greenback since 2012.
And it's not done yet...
Authorities are projecting that prices in Venezuela will rise by roughly another 1,100% over the course of the next year.
Which is where Bitcoin comes in...
In an interview on CNBC with Daniel Osorio of Andean Capital Advisors, Osorio stated that we might be seeing the beginnings of a country (Venezuela) "Bitcoinizing" completely.
Why might Daniel Osorio think this?
For several reasons actually.
Osorio spends roughly a week every month in Venezuela so he has a pretty good understanding of what is actually taking place on the ground.
Osorio said that people are having a hard time dealing with the constant inflation of the local currency and are seeking alternative currencies.
The main one being Bitcoin.
Why Bitcoin, as opposed to say, the dollar?
According to Osorio, a lunch in Venezuela now costs roughly 200,000 Bolivars.
For that reason, locals are beginning to accept Bitcoin (and other foreign currencies) in exchange for goods and services as opposed to the local currency.
In other countries where hyperinflation has taken hold, locals and business have moved to transact primarily in dollars. However, Venezuela is unique in that it doesn't have access to dollars in the amount needed to sustain its local economy, therefore other means are being sought out.
Plus, with Bitcoin making new highs seemingly every month Bitcoin seems very attractive to people who are used to seeing their purchasing power drop every month.
For this reason Osorio states:
"We may be witnessing the first Bitcoinization of a sovereign state."
This isn't the first place where adoption is spiking for Bitcoin, but it might be the first where it completely establishes itself as THE form of payment for its citizens.
Conclusions:
People in Venezuela are tired of watching their purchasing power erode on a daily basis.
Since dollars are not available in the amounts needed to sustain local economies, people are starting to use Bitcoin and other virtual currencies.
Currencies that are insulated from whatever happens with local governments.
This could be the start of a sovereign state becoming Bitcoinized.
Sources:
https://www.cnbc.com/2017/08/30/venezuela-is-one-of-the-worlds-most-dangerous-places-to-mine-bitcoin.html
https://cointelegraph.com/news/first-bitcoinization-of-a-sovereign-state-is-happening-now
Image Sources:
http://www.altcointoday.com/first-bitcoinization-sovereign-state-happening-now/
https://www.cnbc.com/2017/08/30/venezuela-is-one-of-the-worlds-most-dangerous-places-to-mine-bitcoin.html
http://www.zerohedge.com/news/2016-05-25/maximum-amount-cash-you-can-take-out-venezuela-atm
