Defi and cryptoassets lifelines of a global economy in crisis.

Greetings to the great LeoFinance tribe. Entering fully into the subject, for some time now it can be seen how my country Venezuela is gradually reviving its economy, driven on the one hand, by private enterprise that for a while now has been implementing strategies that have helped to maintain or at least, to avoid the total collapse of the gross domestic product. On the other hand, due to measures taken by the State related to mining and the adoption of a crypto-asset, Venezuela has been able to survive by generating alternative foreign currency inflows to the oil income.

In this order of ideas, on a personal level, many Venezuelans have benefited from 3.0 platforms such as Hive, which have provided us with the possibility of generating income with the production of content, investing in cryptocurrencies or by obtaining passive income that these generate, which have helped us in the acquisition of equipment and other technological implements. Then it is logical to deduce the great financial importance that cryptocurrencies and decentralized finance (Defi) have within emerging economies and in many of the third world countries.

It is a recurring question -that few can answer- how Venezuela was able to alleviate the crisis situation it generated: on the one hand the pandemic and on the other hand the economic measures adopted by the United States against its government, which unfortunately, as always happens, affected its inhabitants more than those in power. As I mentioned above, in my humble opinion, there have been three economic and financial strategies that we will analyze separately.

PRIVATE COMPANIES

The first strategy was to increase salaries: against all odds, when in the rest of the institutions salaries were very low. Companies began to pay very differentiated amounts to their workers compared to what public employees earned, to give an example.

Another strategy closely related to the previous one and which they adopted very quickly, following a kind of collective egregore that took over the country was: the payment and collection in foreign currency (dollars) of products, services and salaries. This, in spite of the fierce opposition of the government, which was overwhelmed by the massive use of the currency by the entire population and in the end had to give in.

DIGITAL CURRENCIES AND CRYPTOASSETS

The first thing to mention is that there are currently different types of digital currencies. Of all of them the first one that had worldwide backing was the Bitcoin crypto supported by Blockchain technology. However, different centralized digital currencies and cryptoassets using advanced crypto technology and linked to natural or fiat resources are currently under development which are playing a key role in our global economy.

In this sense, there are distinctions between these mostly decentralized currencies such as BTC and ETH and the emerging centralized alternatives. In theory, cryptocurrencies obtain their value thanks to the backing of users and therefore do not depend on any bank, authority or third party to function. They have a white book that establishes the technology used and the rules of the game to acquire them, among other parameters.

Since its appearance in 2008, the facilities offered by not having any intermediary and the substantial reduction or gratuity of transaction fees, coupled with the speed in the execution of the same, made the blockchain had an exponential growth in these thirteen years since its inception. As a result, this Defi universe is the basis for a number of fast-growing financial services. In 2021, there was talk of a total market capitalization of over 2.3 trillion dollars.

To capitalize on this financial boom, the government established Bitcoin mining farms throughout the country. It is no coincidence that the energy crisis began along with the increase of these farms, which consume large amounts of electricity. In this sense, what at the beginning was a desperate act to generate some resources; thanks to the growth of this digital asset, gave the government results not foreseen by the United States and Europe, which still wonders: How did Venezuela generate alternative resources?

The success of decentralized currencies and their popularity, made emerging powers (China and Russia) think that it was feasible to create centralized digital currencies backed by fiat money and in turn the implementation of cryptoassets in this case backed by natural resources.

Then they came up with something very smart, they chose a country that was willing to be a guinea pig to carry out a pilot project and implement a monetized crypto-asset backed by oil and gold, then go on to monitor it for a certain period, to see how it worked and see the result it would produce on the economy. The country with the resources and the government willing to collaborate was Venezuela. The rest is history and as a result the famous digital Petro was born.

Many believe that the Petro was only an idea of the Venezuelan government, they also thought it was a decentralized cryptocurrency and it was not at all like that. However, one thing is certain, the move worked out very well for all those involved, both the powers that be and the Venezuelan government. So much so and as proof of the above, in this year 2022 the State decreed an increase in salaries and wages. Part of which has been produced with the foreign currency obtained from mining and the Petro, which has been used to pay debt and anchor the value of some products.

It should be noted that centralized currencies are known by the acronym CBDC. For reasons of space, we will not go deeper into the subject in this post, given that both China and Russia have implemented several types of both centralized and decentralized cryptocurrencies.

TELEWORK AND WEB 3.0

Finally, one of the things that have allowed continuously generate online resources for most ordinary people with internet access, have been teleworking and web 3.0 as our platform. In this sense, these have become the lifeline for many Venezuelans and Latin Americans that has allowed them to generate new income to help solve the prolonged crisis of our economies.

Cryptocurrencies and decentralized finance have been drivers of positive changes in the global economy. It is also true that there is still a long way to go, especially for their use to be massified worldwide and for there not to be such disproportionate cyclical fluctuations that liquidate large and small investors.

If we had to compare the world economy and finance - including Defi - with a supernatural being, it would have to be with the Hydra. That mythological monster that when one of its heads was cut off, two more heads emerged, making it practically invincible. However, Hercules defeated it with some help, but he did it. Hopefully cryptocurrencies will be like that hero and bring a long period of stability and prosperity to the world.

See you soon.