Why you might buy a burger with bitcoin in Venezuela, but not Europe

If you live in a country plagued by hyperinflation, which renders the local currency close to worthless, how would you go about buying anything?

In Venezuela, where the bolívar continues to decline against the dollar – on Monday, $1 could buy you just shy of VEF250,000 – cryptocurrencies offer one possible solution.

Bitcoin and Dash, an altcoin based on bitcoin technology, have become popular in Venezuela.

In January, fast-food chain Burger King announced it would allow customers to use Bitcoin and Dash as well as Ether, Litecoin, Binance Coin and Tether (a stablecoin, backed by hard-currency reserve assets) to buy meals in a number of their stores across the country, joining other international food retailers, including KFC, which started accepting cryptocurrencies in 2018.

We built a technology stack that allows multiple economies to function under a single platform 

 – Ramón Ferraz, 2gether

Cryptocurrencies can thrive in broken economies where they may be considered safer stores of value than the local tender – and given cryptocurrency volatility in recent years, that’s some bar – and possibly progress to a widely accepted medium of exchange.

But what about cryptocurrency’s use-case in a more stable economy?

Scalability

According to CoinMarketCap, there are just under 3,000 cryptocurrencies in the world. Total market capitalization for cryptocurrencies at the end of December 2013 was $10.33 billion. By the start of 2020, it had hit $196.92 billion.

2GT is one of the newest coins out there.

The coin is the brainchild of Ramón Ferraz, CEO of 2gether: a community-led financial platform based in Spain that allows users to sell and use fiat, crypto and other tokenized forms of currency on the Visa network, all within one app and without fees.

Ramón Ferraz, CEO of 2gether

Customers can gain access to 2GT when they buy products on the 2gether marketplace or when they participate in decision-making within the community – and when they share their data.

But to become a ‘community member’ and reap the benefits of the online platform and marketplace, users must either invest €10 in 2gether, or sign up two other friends to join the scheme.

“The idea for 2gether came to us in 2016,” says Ferraz. “It was born out of the conviction that in the future Bitcoin and other digital currencies will lead to the creation of personal economies of the future – where individuals are able to pay in a variety of ways, not just fiat currencies.

“To do this, we built a technology stack that allows multiple economies to function under a single platform.”

There has been a little traction: launched in April 2019, the app had around 2,500 people signed up by the end of August, increasing to 10,000 by the end of last year. However, the number of transactions processed via the app hasn’t been disclosed.

Privacy

Perhaps the slow take-up is due to the company’s model.

Firstly, the fact this looks like a pyramid scheme is concerning. Secondly, the 2gether app logs your transactions and collects your data, which fundamentally goes against one of the main benefits of using cryptocurrencies in the first place: privacy through decentralization.

This is an issue other cryptocurrencies hoping to break into the mainstream have grappled with before, as well as volatility, regulatory uncertainty and security concerns.

But Ferraz says that while using a decentralized cryptocurrency is appealing for some of the population seeking anonymity, this segment is small and doesn’t really concern them.

“2gether is for the mainstream,” he says. “We at 2gether believe that our digital currency and our app has a broader use-case and is thus much more valuable as a product moving forward.”

In the absence of regulation around existing cryptocurrencies, central banks are looking at their own digital currencies to keep up with developments in electronic payments across the globe.

Banks are looking at issuing their own digital stablecoins, too, to make their own payment systems more efficient.

For those who aren’t concerned about privacy issues, but worry about volatility, this would be a much more viable option than another new cryptocurrency on the market.

However, for now, outside of broken economies, cryptocurrencies will be left to the devices of niche technology enthusiasts, and few others.