(non-fiction) An interview with The Venezuelan Prince
Mind the gap: This piece may contain offensive language.
A dial tone pings as we set up an encrypted VoIP. My contact is very serious about security, and respectably so, as he describes his home country of Venezuela. He paints a picture of a country in the grips of an oppressive regime, a sci-fi dystopia which he sees being challenged by decentralized systems and cryptocurrencies. What he describes applies not only to Venezuela , but could help us define the next century of global civilization.
We’ll call our friend “The Crypto Prince”, a reference to the comparatively lavish lifestyle he lives as a student outside of Venezuela. In reality, The Prince, a Caracas native tells us that his family was middle class before the revolution. He witnessed first-hand as the quality of life rapidly deteriorated. “My family had just enough money to pay for my schooling abroad, now I pay for their basic living,” he tells us.
My call connects and he answers the VoIP. I hear the sound of streetcars and a cafe. He is a student, a techie, and has seen first hand how cryptocurrencies are transforming his home country — A glimpse into the future how decentralized technologies will define the future of humanity.
Names and phrasing have been edited for brevity and to inhibit stylometric attack.
The Venezuelan Prince
Garrett Kinsman: What’s happening in Venezuela and how is crypto part of it?
The Prince: Let’s take it a back a bit. On March 7th, 2007 they eliminated 3 zeroes from the national currency and renamed it the Bolivar Strong [Bolivar Fuerte]. On March 22nd this year, the government announced another conversion to the Sovereign Bolivar, taking another 3 zeroes off. So many new notes are being printed that it’s reached the point where they cannot print enough — the cost of printing alone is higher than the nominal value of the note.
There is a black market for cash- a 20–30% margin in January, now up to 100% margin for cash.
We don’t really know what it is, but cash has disappeared. People will take a strong discount for things if you pay with cash. Organized crime syndicates may be involved taking the cash overseas, there’s so many conspiracies. There’s also no unified exchange rate. The government has several official rates which are significantly lower than the black market rate.
Because people aren’t really allowed to buy foreign currencies through the official rate, the black market has become the real rate. Millions of dollars are flowing through the black market, with no indicators, no controls… its pretty fucked! We just don’t have information on what is happening.
This is where crypto comes in, a way to create marketplaces that are accountable, transparent, and that can enable international tractions. The interesting thing is that crypto has became very subversive to the government. It makes it easy to bypass currency controls.
When the government announces that they love blockchain we have this weird duality. The Venezuelan government wants to control currency and create an official market where people can buy and sell foreign currency. The problem is people are using crypto to bypass the Venezuelan government, and Venezuela is using crypto to try to bypass sanctions set by the American government!
The Petro coin [president Moduro’s attempt to create a national cryptocurrency] has no tech stack, no people, no volume. The Petro was all OTC [over the counter]. It should be made into a movie, a tragic comedy. To even sign up you had to download a paper form, sign it, mail it to some address. There was zero tech. For an ICO that should be the first red flag.
GK: So the Petro is a shitcoin?
Prince: 100%. Most shitcoins have more merit! At least they exist, you can buy and sell things with them. The Petro went from ETH first, then to NEM, now who knows what! It’s a sad show. The Petro is Propaganda.
Government should be the basic enabling platform for innovation, not try to innovate themselves. This is where the Venezuelan government went wrong. Now everyone engaging in crypto without a license is shit scared they’re going to jail.
GK: Bloomberg reported there are “There’s a Crypto-Mining Machine in Every Home in Caracas” Is this true?
I wouldn’t say every house, but there’s one in mine! I’ve got two rigs mining ETH. A rig with six to eight GPUs can make you two to three hundred USD per month mining ETH. You can live pretty comfortably in Venezuela for that, by far the best income you’ll get into the country. A rig will cost you about $2,000- $3,500 USD. Interestingly enough even old rigs are still running. Because electricity is subsidized, miners making even $30 USD per month are still happy as that’s 10x minimum wage!
We see mining as a form of rebellion. If the government fucked up every other way of making a living, at least we can plug in a machine and make money. This is where you realize everything is cyclical, we plug in mining rigs because the government has fucked up every industry. But by plugging in these machines we are fueling the network that will enable decentralization, and might one day save us.
GK: Incredible. Can you use crypto day to day to buy thing like bread and vegetables?
Prince: At the moment no. The main issues are basic regulation. If you sell in crypto, there’s no way to register that as a transaction in traditional business accounting. Peer-to-peer is so far limited among the “believers”.
Some old silver coins
GK: I tried to buy vegetables in India after demonetization (The government made over 80% of cash illegal tender), with 2,000 year old silver coins and they did not accept it either. What happened was the whole country had switched to the app Paytm.
Prince: [Laughing], I actually bought flights a while ago using Bitcoin and it was super simple. The only issue was they lost my bags!
GK: Is the government using V Bolivar and food supplies to control the population?
Prince: Oh yeah, the longer you spend outside the country the more you realize how fucked up it is. The more you spend in the country, the more you realize how normal it is.
Let’s define sci-fi dystopia: something that’s pretty fucking weird for us on the outside but it exists. There’s all these weird and fake parameters inside the country that define life. In that context reason and logic don’t matter.
GK: During a talk I attended with Nick Yang (A startup founder from China), he claimed that democratic capitalism cannot survive the blockchain revolution, as decentralized systems are inherently socialist and communist. Witnessing socialism first hand, what are your thoughts on this? These differences in eastern and western thought around blockchain’s impact on civilization is fascinating.
Prince: I think that’s not true- I’m going to give you a brutal example. I was in SF at some design thinking event that was trying to apply design thinking to how you create a token. We were challenged to tokenize something that’s not tangible. I said kindof as a joke, but kindof not really, “lets tokenize human rights.” Everyone concluded in the next few seconds that it’s fucked. Because it wouldn’t take long for people to sell their human rights for almost nothing.
GK: There was a paper about this called The Digital Privacy Paradox. Who needs privacy when you can have Snapchat dog filters!?
Prince: This is why I disagree with your Chinese friend, because people that have no knowledge or no money will take whatever they can. If we assume you can register a business in a decentralized way then maybe that is communist. But I don’t think blockchain will replace human greed; It will make transactions more efficient, which is great, and more transparent, which is great. But someone will still own a majority of the tokens. That’s really a question of one communist to another, maybe a good debate to have over wine.
I was in china last year with friends, and we agreed:
There is nothing more scary than an efficient government.
GK: China is a fascinating experiment in civilization. Many socialist and communist countries have “information barriers”, for example the Great Firewall of China. I had a fascinating debate with Chinese students a few days ago about the antifragility of society (based on the book Antifragile by Nassim Taleb). The theory is that society benefits from as much information and variation in thought as possible, and that information barriers can hinder this. What are your thoughts?
Prince: I first thought about this in depth after reading a book called Look Who’s Back, by Timur Vermes_,_ about Hitler coming back in 2012. The book doesn’t really give you much context, Hitler just appears in middle of modern Germany. People think he’s an imposter and give him a YouTube channel. One of the things he said in the story was how blown away he was by social media— ‘The things my propaganda machine would’ve done with it!’. What Hitler didn’t realize is that now everyone can broadcasts themselves. Anyone can become part of a propaganda machine.
GK: Willingly or unwillingly, as the Mueller Council is investigating…
Prince: Once we realize that we have the power to broadcast anything to the word for free, its very powerful. However, the fact that anyone can say whatever they want waters down the value of information. We live in an era where facts really don’t matter, because you can always find someone that agrees with you. If you believe the Earth is flat you will find a support group online. We may be in the beginning of a massive information era that I hope will eventually consolidate. You can’t control this with a barrier. Maybe blockchain will have a play in that.
GK: Most young people I meet in China grew up in the age of the VPN. I’m amazed how we are all the same, connecting over Tinder, Snapchat, and Instagram. We even have some of the same memes.
Prince: Go Tinder!
GK: This information era is leading to what I call information engines, systems designed to engineer thought at a societal scale. Bridgewater Capital published a report in March that populism has not been this prevalent since WWII. What can the we learn from Venezuelan populism?
Bridgewater Capital, used without permission (Sorry Ray)
I think what we can learn is that democracy today is too complex. Trump won because he was arguing a single issue.
GK: Today we are seeing stressors applied to democratic systems that we have not seen since WWII.
Another question, Mobile wallets like PayTM and AliPay have transformed countries, can crypto do this to Venezuela? Will anonymity be important?
Prince: Yes. Anonymity is really interesting in Venezuela — it is both very important but seemingly not a pressing issue today. The economy runs in the black market and obviously everyone is exposed. Because it’s so widespread, everyone ignores it.
For the government to halt the black market would halt the economy.
However, as the government is after people’s private property, anyone that has any real money has moved it overseas — where the privacy enabled by foreign jurisdictions keep their wealth safe. The second or third in charge of the country, Diosdado Cabello, his daughter was trying to get into the US. Her American visa was cancelled, and $800M in assets seized by the US! [laughing into the phone] Socialism… it works every time! If Cabello were a coin that would be the top 25!
There has to be a way to curb such illegal activity. I believe crypto will play an important role in this.
GK: Now this poses an interesting problem if everyone is using crypto. The International Monetary fund has said that “Crypto Does Not ‘Pose Risks To Global Finance… but they could pose risks if used with leverage or without appropriate safeguards.”
[As a side note: Nomi Prins argues in her book, Collusion: How Central Bankers Rigged the World, that cryptocurrencies offer a stabilizing alternative in gaining autonomy from central banks. Via Talks at Google]
Can you see that without centralized issuance and monetary policy, market saturation of cryptocurrencies may destabilize governments? We are entering a new era of global economic theory that has not yet been tested.
Prince: Yes. But I don’t think that’s a bad thing. The way I see it, everything is cyclical. If there is something that doesn’t work, I am 100% in favour of breaking it so we fix it. It’s all about leveraging a window of opportunity. Look at Elon musk, some city was having power shortages, and he saw a window of opportunity. The infrastructure was clearly not working, and a completely new technology emerged:
The same thing goes for currency. If you have a monopoly on a currency, and your currency is shit. I see disruption as indirect feedback.
Kaua’I Island Utility Cooperative, Tesla Energy
GK: Let’s dive deeper into the realms of international politics. Looking at how the CIA has been overthrowing regimes over the past 50 years, finance has always played an important role. Do you see cryptocurrencies as posing a major threat to oppressive regimes, or providing a way for these regimes to discreetly finance themselves?
Prince: I feel that crypto evens the playing field. Yes you can fund anything, but do you have the money to back it? It comes down to financing. The advantage of the CIA is that the USD is a strong currency, they can do whatever the fuck they want. They can print $20 million and it won’t make an impact on the economy. You can’t do that with other currencies. If unstable governments or terrorists have cash they’ll find a way to move it. Does crypto improve this? I’m not so not sure, especially when even a few $100k can swing the market.
GK: Clearly these underground groups are going OTC.
Prince: You’re looking at HUGE OTC trades. This is why I tell my friends not to worry about the Bitcoin price. What I think is happening now is that _deep pocket_s (not necessarily criminals) are buying OTC because they will definitely move the market. Billions of dollars are moving into crypto, and no one is seeing it. It will be interesting to see what happens after. These are the things I think about when I sleep.
GK: So this isn’t something that’s only going on throughout the “rougher” parts of our spaceship Earth?
Prince: Look if you ask me, San Francisco is also a highly dystopian reality. The way my friend described it is that SF is an unlimited problem solving machine, with unlimited talent and capital. Yet it is the choice of the problem that is the source of the problem. I use home automation and it’s okay- but who really needs the lights to dim just before going to sleep. We could use a fraction of those resources to create groundbreaking tech to solve real problems elsewhere.
GK: I agree that we should be focusing our attention towards moonshots, like Martian settlements and fusion — something that resonates with the younger generation.
Prince: Exactly, I mean it’s interesting once you identify the problem is the choice of focus, but who’s fault is it?
GK: The market decides what Google works on, the youth of today don’t yet have the spending power.
Prince: I’d love to get some private security contractors and fly people from SF to Venezuela. I mean the country is going back in time! We’re regressing to using humans instead of traffic lights. How can human time become worth less than a machine? That’s where blockchain comes in, these new systems have to be decentralized. The people at Google and Amazon need to see it for themselves, and this perspective would help San Francisco.
One of my favorite quotes is from The Three Body Problem. The American environmentalist tells the Chinese scientist, as they stand amongst a burned down a forest, something like, ‘everything you see around you is a product of poverty, but really how much different are we in the developed world?’.
GK: Ok so how will quantum computing impact all of this?
Prince: I mean, Richard Feynman once said that, “If you think you understand quantum mechanics, you don’t understand quantum mechanics.” I obviously don’t get it. It’s really fucking powerful computers. The real gap between the developing world and developed world is technology. The internet speeds in Venezuela make you cry, smartphone ownership is going down. Computers at home are increasingly rare as well. People don’t have the tools. Quantum computers will no doubt have a massive impact on everything tech, the question is who has access to it?
I posed a question to a panel once, “Machine learning is not new, and the data sets are larger than ever, but there is a big issue with who is collecting this data. A couple of American giants are collecting everything. We’ll see massive advancements in English, but other languages may not be as developed.” I don’t think quantum computing is making it to Venezuela anytime soon.
An Indian gold coin, (May be fake)
GK: Let’s look back to ancient technologies, what about gold? In India, gold is used by families as a store of value. In fact- India does not allow import of gold without tax to protect these assets. Poor people won’t hold cash, they hold gold, It is part of desi culture.
Prince: Wow! I’ve heard some good stories about gold. There’s illegal gold mining going on in the south of the country near the Amazon, and some “very well connected people” are buying this with cash and selling overseas. It is so fucked, they are absolutely destroying the landscape, and it’s fucked. The country is too poor for people to buy gold, it’s there, but gold is controlled by a terribly corrupt elite.
It is interesting that the lower classes in many countries have a working economy, even a growing economy. In India they have an economy and can aspire to buy gold. In Venezuela, my mom has been selling off her gold, saying,
fuck I’m going to get killed if I keep this around!
The crisis is leading people to liquidate assets to stay afloat. I can’t imagine anyone poor will have any disposable income to save in gold.
GK: Seeing that BTC is replacing Gold in many situations, of all the cryptos you see being traded within Venezuela, which one is still king?
Prince: I think it’s fascinating that how even a year ago, maybe a bit more, Bitcoin was a bit underground. My experience was that the knowledge of BTC was so basic and limited, that the only reference was buying drugs online. Mainstream media did a great job, the more they talked about it the more it grew exponentially. We are seeing a grassroots movement. When you put money into crypto, people seem to go for the largest ones.
The single biggest problem with Bitcoin in Venezuela is the cost of transactions. ETH has been gaining a lot of traction because people have been mining, ETH is cheaper to transact and is growing interest in ICOs. Dash has grown a lot, mostly because they could get basically a fuckton of Dash from the company treasury. I like other currencies like Stellar, Decred. I think Bitcoin can be toppled, but for now Bitcoin is still king.
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Garrett Kinsman is the co-founder of Nodle.io, making internet available everywhere for IoT devices. He moved to India at age 20 to build Ola Play, and has a deep interest in wireless, decentralized systems, and innovations that emerge from developing countries.