Yes, you can do it too if you learn about cryptocurrencies. Navigating high inflation is one of the most prominent use cases for cryptocurrencies. Here’s how a tech-savvy guy in Argentina sidestepped a soaring 124.5% inflation.
I recently wrote about how Argentina has grappled with profound inflation and faced economic instability. As of now, President Javier Milei has not closed the Central Bank of Argentina. However, he has expressed his intention to do so, stating that the closure of the central bank is a "non-negotiable matter.” He has also made Bitcoin legal tender. Argentina is a prime example of how badly cryptocurrencies are needed in some countries.
In August 2023, Argentina reached its highest annual inflation rate since 1991, soaring to 124.4%. What can you do as an ordinary person living in a country with such a bad economic situation?
Many people in Argentina prefer to keep their savings in U.S. dollars because it is seen as a stable and widely accepted currency. However, due to government restrictions and the official exchange rates not keeping up with the real market values, a black market for U.S. dollars has emerged. Imagine cash being so useless that a whole nation starts to exchange it into another currency. But this guy found another way.
Meet Mariano Conti, who is famous in the blockchain industry. His approach to navigating Argentina's high inflation was centered around adopting decentralized finance (Defi) strategies. Here's a breakdown of how he used cryptocurrencies to avoid the effect of inflation and live a normal day-to-day life.
Instead of receiving his income in the local currency or traditional forms, Conti told his employer he wanted to get paid in DAI. What’s that? MakerDAO is a decentralized finance platform on the internet that lets people create a stable digital currency called DAI. This currency always aims to be worth around the same as a US dollar, providing a reliable option for online transactions. It's useful because it offers stability in the often-volatile world of cryptocurrencies, making it a predictable choice for individuals and businesses.
Conti’s decision shielded him from the drastic fluctuations and devaluation experienced by the Argentine peso. At the time, inflation in Argentina was around 40%.
Conti used Ethereum Defi platforms to manage and grow his funds. He also converted a portion of his DAI earnings into pesos using a credit card to cover basic monthly expenses. This step allowed him to address immediate needs while preserving most of his income in a stable cryptocurrency. Afterall we still need to be a part of the traditional fiat system to live a normal life.
A portion of Conti's income in DAI was invested in various crypto assets through Defi platforms. Yes, this can be risky but please consider that a 40% inflation is absolute. Basically, he participated in lending and other financial activities within the crypto ecosystem and earned interest in a stable currency. His financial portfolio grew.
Conti had a strong belief in investing in the Ethereum ecosystem, but I would have invested in Bitcoin as a long-term investment strategy. What I am saying is that it’s possible to limit the effect of inflation and a faltering economic system with the use of crypto.
When I study how Conti used Ethereum Defi platforms to avoid inflation, it is striking how much knowledge one must have before we can easily use cryptocurrencies to fully use its potential. Firstly, Conti himself is an Ethereum developer with expert knowledge of the ecosystem. Of course, he would use it as much as possible considering Argentina's economic challenges. But anyone can do it, and a great deal has happened in the space since. Today, crypto is getting easier to deal with.
As I witness countries grappling with higher levels of corruption, political instability, and weak fiat currencies, the potential for wider adoption of cryptocurrencies is clear. Alternatives to traditional financial systems become a lifeline. After all, economic unpredictability is causing real-life human misery.