Venezuelans tried to fight inflation this year using cryptocurrencies on a scale unprecedented in the country.

For Venezuela, 2021 was a year of considerable change at the microeconomic level, where even more than in 2020, the results of powerful catalysts of change such as COVID-19 were clearly visible.

In a more dynamic economy and with a higher volume of currency operations, cryptocurrencies played a fundamental role during this year for the South American country.

In this review, we will examine the highlights of the Venezuelan cryptocurrency ecosystem in 2021, including related areas such as trading, mining, regulation, and nonfungible tokens.

More people accept cryptocurrencies

According to blockchain analytics firm Chainalysis, Venezuela ranks seventh in the 2021 Global Cryptocurrency Adoption Index, thanks in large part to peer-to-peer (P2P) trading activity.

A notable trend in 2021 was the growing number of people and businesses in Venezuela accepting cryptocurrencies as a form of payment to fend off hyperinflation and devaluation of the national currency, the bolivar, a trend that has plagued the South American nation for the past several years.

In some of the main cities of the country, such as the capital Caracas and Puerto La Cruz, it is increasingly normal to see people or merchants using cryptocurrencies as a form of payment.

The emergence and adoption of cryptocurrency payment platforms, such as Binance Pay, Reserve, or even Valiú, have accelerated the adoption of a digital economy based on cryptocurrencies, without the need for users to have extensive experience or knowledge using them.

Among the most prominent businesses that accept cryptocurrencies in Venezuela are the Simon Bolívar International Airport, the supermarket chain Bio Mercados, several casinos, and even the largest cable television operator in the country. Fast-food chain Church’s Chicken has also started paying bonuses to its employees in Dash (DASH).

Support for legal mining

According to a report from the University of Cambridge, Venezuela ranked among the top 10 countries with the most cryptocurrency mining in early 2021, becoming the first Latin American country to break the top 10.

The country’s high mining ranking was thanks in large part to having the cheapest electricity prices in Latin America since 2018. This makes the Caribbean country attractive for Bitcoin (BTC) mining and the creation of a regulatory framework that protects and guarantees the legal development of the industry.

Despite some cases of seizure of mining equipment, arbitrary disconnections, and arrests of illegal miners, the National Superintendency of Cryptoactives (SUNACRIP, in Spanish) has called on miners to operate legally. In addition, it is looking for mechanisms to provide guarantees of legal stability.

Mid-September 2021, an official government statement ordered law enforcement to refrain from conducting inspections or operations related to monitoring, seizure, or of any other nature that would disrupt cryptocurrency mining.

By mid-November 2021, the fifth official mining meeting took place in the country and SUNACRIP met with more than 150 miners from the region, companies linked to the digital mining sector, cryptocurrency personalities from the Venezuelan ecosystem, and exchanges such as Binance.

Blockchain specialist appointed

At the end of September 2021, Venezuelan President Nicolás Maduro’s regime appointed Román Maniglia, a self-designated specialist in cryptocurrencies and new technologies, as president of the largest bank in that country, Banco de Venezuela.

The appointment of civil servant, introduced in his Twitter bio as a specialist in finance, cryptocurrencies, fintech, and Blockchain, demonstrates Venezuela’s interest in combining traditional financial systems with the new generation of technologies such as blockchain. If this will create more financial stability and improve the lives of Venezuelans remains to be seen.

By Audy Castaneda

Average Ethereum transaction fees fell by almost 73.3% in just one month – down to $14.17 from $53.03

The Ethereum platform first appeared in 2015, as the result of the work by the programmer Vitalik Buterin, with the perspective of creating an instrument for decentralized and collaborative applications. Ether (ETH), its native cryptocurrency, is a token used in transactions using this software. Like Bitcoin, ether exists as part of an autonomous peer-to-peer financial system, free from government intervention. Also like Bitcoin, the value of ether skyrocketed in a short time, but it has not been free of fluctuations.

Ethereum (ETH) ecosystem transaction fees underwent a declining phase starting on January 10 to record the lowest average and median fees of $14.17 and $5.67 respectively, the lowest since September 2021.

Blockchair data shows that the average ETH transaction fee in January was $53.03, which peaked at $70.83 in May 2021. In just one month, average fees saw a drop of nearly 73.3%.

Moreover, the resulting median transaction fee also saw a drop of 81.02% from $29.88 in January. Over the past six months, ETH’s median transaction fee was the lowest in September, at $6.26.

Interestingly, the Ethereum network transaction count has also dropped to numbers last seen in early 2019. Blockchair data shows that on February 1st, the Ethereum transaction count dropped to 14,574,808 from 36,851,128, a drop of 60.44% in just one month.

This is the first time in Ethereum history that the transaction count has seen such a large drop in 30 days. In November 2021, Ethereum co-founder Vitalik Buterin proposed a new limit on the total transaction calldata in a block to decrease the overall cost of calldata gas transactions on the ETH network.

It is time to take advantage of Ethereum low rates while they last

There are certainly some advantages of using Ethereum. Of all the cryptocurrencies, ether is the one that could possibly replace Bitcoin at the top of the pyramid, although the capitalization of Bitcoin exceeds that of ether by far.

One argument, for some skeptics, is that the only function of Bitcoin is to be a currency, while ether’s main function is to facilitate smart contracts and DApps (a decentralized application, an interface that connects a user to a provider’s service through a decentralized peer network, without limiting the number of users). This means that its reputation as an alternative currency may not materialize.

Fees dropped probably due to the migration of users to other blockchains. As reported by CriptoNoticias, Binance Smart Chain, Solana, Fantom, and others, have cornered part of the market traditionally occupied by Ethereum.

Scalability solutions, such as the Polygon sidechain, help decongest the network. Something similar happens with rollups, second layers of Ethereum that group transactions and execute them outside of the similar transaction.

A little over a month ago, on January 10, Ethereum saw an average of transactions almost five times higher than the current one: $53.03.

Unlike other blockchains, Ethereum fees are not only for sending money (i.e., transactions in the native ether currency) but also for interactions with smart contracts.

The latter includes, for example, non-fungible token (NFT) marketplace transactions, movements on decentralized finance (DeFi) platforms, or ERC-20 token shipments, for example, tether (USDT), DAI, or shiba inu (SHIB), among others.

It would not be any surprise that, in a few days, the Ethereum rates increase their value considerably again. If the low amounts to operate on the network attract users massively again, it would become congested again and possibly the cycle will repeat itself.

By Audy Castaneda

NFTs main features are their transferability and commercial viability, but there are also some drawbacks, according to Buterin.

Vitalik Buterin, the creator of Ethereum, has suggested a new concept for NFTs, governance, and a spectrum of other non-transferable, decentralized solutions. The idea for the concept comes from the famous MMORPG game, World of Warcraft, of which Butelin is reportedly a big fan.

In a blog post published on Wednesday, Buterin expressed his desire to create non-fungible tokens (NFTs) that are soul-bound to the item class of the same name in World of Warcraft, which he calls “Named article class”. For example, if someone owns an NFT that he or she can make available to others by executing X, such as by attending an auction, it is impossible to determine whether they actually attended the auction or simply bought it second-hand from someone else.

The “soulbound” feature in WoW prevents anyone from trading, mailing, or selling an item to other players in the Auction House game. It was designed by the developers to prevent “twinking” from high-level characters to low-level ones, in order to drastically speed up the grinding process of fighting monsters to gain experience.

However, they help to show achievement, meaning that the character has earned the item by defeating challenging bosses, and not through a relic. The latter property seems to be of interest to Buterin, as the Ethereum co-founder raised that on-chain proposals to store driver’s licenses, college degrees, etc., would face problems if someone who doesn’t meet the necessary conditions can easily acquire them.

Buterin also referred to the POAP “proof of attendance protocol” project, which stores digital memories of a person’s life on-chain and issues a unique badge backed by a cryptographic record. The team behind the project encourages developers who care about portability to check “on the chain if the current owner is the same address as the original owner.” But like soul items in WoW, removing the transferability of NFTs would also presumably remove their commercial viability.

A POAP can reflect actual participation in something in a similar way to how soulbound items work in World of Warcraft, which is a testament to participation in multiple events. Investors cannot buy or sell these items later.

Buterin also suggests that NFTs act as a reflection of one’s wealth rather than the ability to acquire a specific NFT. The creators of Ethereum argue that most of the unusual products that appear on the market can actually be used for good causes, such as collectibles that support charities once someone buys them on the secondary market.

Antonio Gonzalo, co-founder of Ethereum Madrid, believes that compared to Bitcoin, Ethereum is better money. “The promise of Ethereum is greater. He talks about the evolution of money, about better money as a product. This constantly iterating system makes it possible to find a cross between product and market that gives better money. Looking at the last 5 years, I would say that the applications that are finding it are the ones that are using ETH for the financial world (DeFi).”

Perhaps the greatest success of Ethereum since its creation has been putting into practice the decentralized heart of Bitcoin. It has become the largest programmable money blockchain in the world and the chosen place to build the new financial industry. Anyone with software knowledge can build applications on top of it. It makes it possible to tokenize any valuable object on its network. From a house, a work of art, an action, work hours, a car, or Reddit rewards for its users.

While Buterin’s proposal and concept sounds refreshing, it is not clear what the difference is between selling NFTs or private keys to a wallet with non-transferable tokens.

By Audy Castaneda

The head of the Hungarian central monetary authority spoke out in favor of the anti-crypto stance of countries like China and Russia. He believes that the EU should take a similar approach.

The Governor of the Central Bank of Hungary urged European Union (EU) to apply prohibitions on activities related to Bitcoin and other digital currencies.

The leader of the entity, György Matolcsy, revealed a statement highlighting that he firmly supports the ban on cryptocurrency trading and mining in the European Union. The representative explained that this asset could get exploited to carry out criminal activities, including financial fraud.

The representative mentioned the Chinese government and its stance on making all digital asset transactions illegal. He also talked about the Russian central bank and the recent proposal to implement similar procedures. Matolcsy stated he supported these strategies and asked the EU to lift a prohibitive policy.

Matolcsy Agrees with China Stance about Crypto

Matolcsy added that he agreed with the Russian Monetary Authority when it argued that the breakneck growth and market value of cryptocurrencies get defined by speculative demand for future growth, which generates bubbles.

According to the official, cryptocurrencies could become a tool to boost illegal activities and develop financial pyramids. He said America must prevent new financial pyramids that could harm the economy and the financial health of its citizens.

On the other hand, the Russian central bank recently changed its stance to support the regulation of cryptocurrencies instead of pursuing a complete prohibition set.

In any case, the governor does not seem to expect the European Union to apply an extended ban for all nations in the alliance. Matolcsy, instead, proposed strong regulation at the local level while Europe tracks the sector more closely.

The official said EU citizens and companies would hold cryptocurrencies abroad, and their holdings would enter into regulators monitor to keep them on track.

The remarks by the head of Hungary’s central bank arrived the same week the European Commission revealed its intentions to move towards supportive legislation for digital currencies in 2023.

The ECB is already carrying out internal experiments to create a digital euro, so they to start working with a prototype in public by the end of 2023.

The final move will remain in the hands of the governments of the Eurozone, which will declare if it will be worthwhile to mint a cryptocurrency supported by the financial institution. If an agreement gets reached, the Eurozone could start using said currency by 2025.

The Legislative Path

According to many analysts, if the legislative calendar contemplated for the European CBDC gets fulfilled within expectations, the bill will have to go through debates and analysis within the EU capitals and parliaments before it becomes law.

As such, a public consultation by the EU executive wing got scheduled to happen in March, and it would focus on how the digital euro can serve different sectors.

By: Jenson Nuñez

The managing director of the IMF believes that stablecoins are no match for central bank digital currencies. The international organization states that one hundred countries explore CBDCs in different phases.

A recent report from the International Monetary Fund (IMF) states that central bank digital currencies (CBDCs) are in an experimental phase. However, the organization considers that that form of money may provide higher stability and security than (decentralized) cryptocurrencies like Bitcoin (BTC).

Kristalina Georgieva, managing director of the IMF, noted that CBDCs might provide higher resilience, security, and availability than private digital money. She explained that they might offer those advantages, besides lower costs, if they have a careful design.

Georgieva considers CBDCs are more advantageous than (decentralized) cryptocurrencies, arguing that the latter have no backing and are inherently volatile. She even believes that central bank digital currencies may be superior to stablecoins.

The official said that the best managed and regulated stablecoins might be no match for a well-designed stable CBDC.

She admitted that CBDCs are still at an early stage of development and said she does not know their true potential.

The IMF report points out that 100 countries are currently exploring the development of CBDCs at different levels. While some are in the research phase, others are undergoing tests or already distributing those currencies to the public.

Bitcoin Can Solve the Historical Problems of Fiat Money

The position of the IMF on Bitcoin and other cryptocurrencies is less radical now than it was a few years ago. However, the comments from Georgieva show that they still look at them out of the corner of their eye.

Jack Mallers, founder and CEO of Bitcoin payment gateway Strike, talked to the IMF about the advantages of BTC in December. He told them the cryptocurrency could solve the problems that international monetary transactions backed by the financial institution have dragged for years.

The renowned bitcoiner said that cross-border transactions depend on the participation of many intermediaries between the sender and the receiver. Unlike fiat money, the Bitcoin network can reduce slowness and high costs through the Lightning Network.

Since Bitcoin is a decentralized network, there is no need to involve trusted third parties. In other words, users carry out their transactions directly between them, thus making the process easier.

Mallers also described the pioneering cryptocurrency as global money, equally valued everywhere at all times worldwide. He said it is a non-localized and open system and a monetary policy defended by a distributed network of peers.

Bitcoin is different from fiat money, including its digital version as CBDCs. No government can take it or change it, it works all the time, and it is reliable and decentralized enough to survive.

In addition, users do not run the risk that a financial institution can block third-party accounts in that digital system. All the above is strength, compared to digital currencies of central banks, which are just under development.

Bitcoin is trading at around USD 42,378 and has accumulated a profit of 2.1% in the last week. Its daily trading volume is above USD 12.77 billion, and its market capitalization is about USD 802.75 billion, according to CoinGecko.

By Alexander Salazar