TL;DR: It “is still hard to come across aggregate data which shows this behavior occurring on a consistent and measurable scale,” data scientist Matt Ahlborg wrote of the trouble in gathering evidence bitcoin is being used as intended. He’s devised a new formula with numbers gathered from peer-to-peer exchange LocalBitcoins (LBC) “which adjusts for these factors and returns a score which I believe is the best reflection of Bitcoin’s impact via LBC globally. I call it Usage per (Online) Economic-Person, or UP(O)EP.” It’s a compelling way to understand how developing countries are interacting with cryptocurrency.
LocalBitcoins Helps People in Developing Countries
Speculative prices, digital gold, lambos, all of the ways in which some have viewed the phenomenon of crypto, certainly have a place. For people in countries hit by political corruption and decidedly less economic freedom, crypto is a potential lifeline. At least that’s what the pseudonymous founder of peer-to-peer electronic cash seemed to imply.
And while there is a heft of data surrounding crypto, few have been able to whittle it all down into something meaningful on the score of how more desperate economies are interacting with it. Ahlborg’s UP(O)EP is an interesting look at where bitcoin is now, six years from its early trading highs, from the perspective of LBC.
The exchange’s “low or no fee, frictionless exchanges, trading Bitcoin through LBC is costly. On the whole, Bitcoin trades on LBC occur at an average of 4.5% over the USD equivalent spot price globally, and the spread between ask and bid is often considerable, especially in developing countries,” he explained.
Fewer Speculative Trades
LBC also functions as a way to see people leaving fiat into crypto, enabling Ahlborg to make the assumption “fewer traders are using LBC for speculative reasons in comparison to other exchanges.” Hundreds of countries are represented in large measure because LBC is based out of Finland and won’t be hounded by governments with citizens elsewhere who use the service.
After 2013, established economies such as the US and Europe “were soon overtaken by less developed regions; Venezuela-fueled trading in South and Central America has been on a consistent uptrend, regardless of bubbles, for nearly every quarter in LBC’s history,” he contends.
UP(O)EP is particularly notable in countries where conditions are favorable, of course, but that’s not always so easy to determine. Some believe developed countries would then take the lead, and that’s not the case necessarily. “Not all countries with political and economic circumstances favorable to Bitcoin adoption have achieved it,” he noted. “The countries which seemed to have achieved escape velocity tend to be those which also have a minimum threshold of internet penetration, smartphone penetration, and technical literacy. Venezuela, Nigeria, South Africa, and Ghana are good examples.”
“Some countries you might think would have higher levels of Bitcoin adoption by now such as Turkey, Argentina, and India have not achieved it. This goes to show that the issue is complex and individualized by country according to their laws, culture, and ingrained habits. Additionally, if a country already has alternative methods to achieve wealth preservation, capital flight, remittance, etc, then it may not need Bitcoin as much,” Ahlborg detailed, setting out what appears to be a truism.
Complex though it might be, he believes there’s a trend forming. Over time, he writes, “in one form or another, UP(O)EP values have been steadily rising in countries with determined poor levels of economic freedom, and they have been doing so at an accelerating pace.” Up until 2015, developed countries were dealing in bitcoin more. Attributing the fact to a kind of knowledge gap, he argues the “trend suggests Bitcoin’s utility is higher in countries which are economically oppressed,” while acknowledging outliers.
Whatever else his numbers show, clearly people in developing countries are indeed looking for alternatives to government systems of finance and arrangements officially sanctioned by their politicians. “To be sure,” Ahlborg concluded, “this data reflects only a part of the Bitcoin ecosystem and much remains to be proven, but I hope that it may come to serve as a modicum of persuasion to those who still have their doubts. The final story in this analysis is that, in totality, nearly six years of aggregate data paint the picture that Bitcoin has utility and that its promise is beginning to be realized for the types of people Satoshi said it would.”
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