Dash’s success in Venezuela was recently highlighted by a Business Insider article that discussed how Dash is supplanting other currency options in the country.
The article started off by mentioning how Venezuela is set to see one million percent inflation this year and how there is confusion around the government’s attempted solution. The article then proceeds to talk with Ryan Taylor, CEO of Dash Core Group, about how Dash is “seeing tens of thousands of wallet downloads from the country each month”. The article then went on to talk about how Dash is able to offer its fast transaction speeds, low fees, security, ease of use, and DAO to provide services to consumers and merchants to improve their lives, which includes being a relatively better store of value when compared to the Bolivar.
Ryan highlighted how “at the beginning of July, [merchant adoption] was around 400, and we’re already at 800”, and Dash is “signing up more than 200 a month.” Ryan also added that Dash has “seen 94 new Venezuelan merchants added to DiscoverDash.com since last week, which is about double the normal rate of about 50 merchants per week [over] the last couple of months”. Dash’s success in Venezuela raises the question of what has lead to the success and how it can be replicated in other countries with less extreme inflation.
Dash is able to grow where others cryptocurrencies struggle
Venezuela has provided a unique opportunity for Dash because their currency has become so broken that many consumers and merchants are more risk tolerant to try new technology that offers to help them. So despite cryptocurrencies’ fluctuation with most fiat pairs, Dash is relatively more stable than the Bolivar. This has provided a relatively correlated chart that shows Dash merchant adoption increasing as inflation continues to worsen in the country.
While correlation does not mean causation, and absent doing a full regression that would require additional data, it can be hypothesized that inflation is causing more users to adopt Dash. Thus, it would be wise to look at how inflation in other countries is affecting other cryptocurrencies. Below are charts for Venezuela, Turkey, Argentina, and Nigeria constructed with inflation data from tradeingeconomics.com and Bitcoin trade volume from LocalBitcoins via coin.dance – not perfect indicators for usage, but an adequate gauge for separating usage via countries with limited data. Also, despite merchant adoption being different from trading volume, it can still be hypothesized that since both Dash and Bitcoin adoption is still very young, that merchants whom accept cryptocurrencies will eventually have to trade back into fiat to at least pay some of their bills and suppliers and thus, this will affect volume. This hypothesis argues that merchant adoption numbers are somewhat correlated with trading volumes since the former is built into that latter. Plus, merchant adoption of Dash can be viewed as a proxy for consumer Dash transactions within Venezuelan borders. These hypotheses allow a comparison between the charts above and below.
As seen in the charts, Bitcoin trading volume changes on LocalBitcoins is not strongly correlated with the inflation rates over the past few months for each country. How then is Dash seeing exponential increases in merchant adoption with rising inflation in Venezuela? Once again, a full data-intensive regression has not been performed so there could be many included and omitted variables at play that were not analyzed here. Nevertheless, the pseudo-control of the second Venezuelan chart shows that Bitcoin trading volume on LocalBitcoins is also not strongly correlated with inflation data. This indicates a preliminary conclusion that Dash is seeing merchant adoption because of unique factors that make Dash different from Bitcoin, rather than simply being a cryptocurrency alternative. Dash offers additional features such as lower transaction costs, faster confirmation times, better ease of use, and the DAO Treasury system. These hypotheses would be worth more data collection and regression testing, an intensive task beyond the scope of this article, to further support or disprove this conclusion.
Dash’s focus on merchant adoption and usability in everyday life provides a vital service to those living in countries with hyperinflation – purchasing power stability. This becomes less of an extreme and not as necessary in countries that only have some inflation, as opposed to hyperinflation, but it still provides an opportunity for Dash expansion since Dash can still offer a degree of purchasing power stability along with lowering costs for consumers and merchants. Dash has seen success in Venezuela due to the multiple features that its network offers as a payment system and currency and these services are also needed in areas that do not have hyperinflation.
As Dash grows, its velocity increases and thus its stability increases as well, which is partly necessary for a currency. Due to the fact that Dash is only a few years old, it has not had time to grow and stabilize so this feature of Dash can only be revealed in countries with hyperinflation like Venezuela where the competing currency is extremely poor. However, Dash is striving to be a payment method and currency in everyday life around the world, which will become possible as its adoption continues to grow in order to stabilize its exchange price and its advantages as a currency can be seen in lower inflation countries.
Dash grows because of its uniquely strong network
Dash has been able to become so appealing in Venezuela because of its structure that not only gives it stability, but also allows it to lower the switching costs from the old financial system. The Dash DAO Treasury is able to professionally fund developers to ensure Dash maintains its record low transaction fees, fast confirmation times, security, and ease of use. This also allows Dash to fund community outreach groups to ensure that individuals whom do not have the time to learn about Dash or cryptocurrencies are able to understand how Dash uniquely solves their problems, along with technical troubleshooting. These are vital services since many individuals in countries with high inflation, let alone hyperinflation, will already have a full plate of just working to maintain their economic well-being. Dash is structured to have low switching costs so individuals can easily adopt Dash without changing their daily tasks or having to dedicate time to learning about Dash.
These attributes plus Dash’s strong community have enable Dash to see rapid adoption in Venezuela, as well as increasing success in Colombia, Panama, Brazil, Mexico, and Argentina. Dash is also rapidly expanding throughout Africa, Australia, parts of the United States, Canada, and Europe. This wide reaching adoption, including countries with inflation, is possible by the extensive network of the Dash community. As Dash continues its rapid adoption (over 2000 merchants around the world are on DiscoverDash), this will create a network effect. Then the significant Dash adoption will create even more usage and velocity within the Dash network, which will provide even better stability and allow Dash to help even more individuals around the world.