If you are new to blockchain, you may not understand its relationship with inflation. Blockchain works much more than being the technology behind cryptocurrencies. They have a high level of capabilities that can enable even the world’s biggest countries to survive high-scale hyperinflation.
Content Summary
The hyperinflation in Venezuela: A case
How cryptos working under blockchain are manageable
Local and global supply of blockchain
Protection against sanctions
Overall benefit
The point that inflation will exist with the mass-scale adoption of blockchain is nothing but a myth. Multiple countries have completely moved towards crypto because it offers them better results than traditional currencies. One of the greatest examples is Venezuela. It is a country that has handled its economic crisis just because it used cryptocurrency based on blockchain technology.
The hyperinflation in Venezuela: A case
Venezuela has been undergoing the problem of hyperinflation for many years. The problem worsened, so people could not get goods even for their basic needs. They were unable to afford even the simplest of goods. The only method through which families in Venezuela were able to survive the recession period was when they used to get remittances from their families living abroad. Millions of dollars were funnelled to the nation from the immigrants in the USA. Still, the solution never worked. Due to high-scale political issues, the problem of getting remittances became even worse.
To tackle the issue, locals used new methods. They welcomed the dash system in the market. Venezuela was the ideal market for introducing the dash system of blockchain. Even to date, consumers as well as merchants in Venezuela use Dash as their currency. When the government of Venezuela found that the blockchain system was hijacking their country, they came up with their e-currency, Petro. But, one problem was that the currency was not getting the needed reliability. Since the government was handling it, people were not entirely ready to accept it. Doubtless, many companies and businesses tried to make Petro a sustainable currency, but the people of Venezuela completely rejected the currency.
How cryptos working under blockchain are manageable
One of the most useful features of a cryptocurrency is called “Burning.” When companies see that their products are performing well in the market, they need an extra push to stabilise them. In this case, they try to purchase back the crypto, and then they burn it. The simplest meaning of burning is all coins are removed from the process. The supply of the currency is then reduced and the price hits exponentially and supports the exchange rate.
Local and global supply of blockchain
By using crypto, nations can react to cryptocurrency’s local and global supply and demand. Thus, it works in the same way as regular crypto. The government can get involved in emitting these currencies and can take any measure they want. They can either choose the buyback option or can burn the reserve. Thus, it enables us to get rid of extreme volatility.
Protection against sanctions
Another major reason that countries are using blockchain at a large scale is because of the economic sanctions by other nations. For example, in the case of Venezuela they are facing sanctions from the United States. A very good example of how sanctions affect inflation is Georgia. The country recently faced a high level of depreciation of its national currency. In addition, the country had to face sanctions from Russia. The anticipation of sanctions led to a more than 10% fall in the currency’s value. Thus, in many cases, the use of blockchain helps in getting protection against these types of sanctions. Thus, if any nation has a comprehensive blockchain system established on a national level, it protects them against sanctions.
Overall benefit
There are numerous other benefits when a country uses blockchain-based cryptocurrency rather than using traditional benefits. But it’s up to the nation how they want to get the benefit. For example, blockchain can offer an alternate payment system that can offer numerous benefits to countries facing hyperinflation.
If you want to know about similar case studies of blockchain applications, you can look like the Bitcoin Era app.
