An historic event has occurred this October the 1st when the president of Venezuela announced “from November the 5th, the Petro will go on sale to the Venezuelan public in sovereign bolivars.”
Making this the first state backed crypto in a grand experiment that plans to transform Venezuela’s monetary system over the next teen years.
“We are launching the national blockchain of the petro that will have its headquarters here in Venezuela, and has been developed by Venezuelan national professionals and scientists,” Venezuela’s president, Nicolás Maduro, said.
Making this a third pivot. At first they planned to launch on ethereum, but then changed to a private blockchain called NEM.
We looked at that blockchain back in August and found the tokens were sold or produced on May 6th 2018 and had not moved since.
We then tried to see where Petro trades, but with no success as we could not find any market for it. This public scrutiny, perhaps, made them change their plans again to now a “national blockchain.”
A new whitepaper has been launched for it which currently is only available in their native language. Some suggest that whitepaper shows the national blockchain is a copy-clone of Dash, yet what little sense we can make of Spanish, it may be the Dash part is shown as just an example of a blockchain.
It may also be that this national blockchain is a private blockchain with validators/administrators limited to the government itself.
If that is the case – we do not yet know – then the government may well maintain complete control of the supply, which they might abuse as they have with their paper money.
What Venezuela needs most in money matters therefore, trust, may not easily be found if this is a permissioned private blockchain which they can easily control just as a database.
The other component of that trust is the backing of the token with commodities: 50% of the petro’s price will hinge on oil, 20% on gold, 20% on iron, and 10% on the price of diamonds.
Making it a nice basket, in theory. Managing this peg in practice may however be a different matter especially considering petro’s fixed supply.
Fixed stated supply. Whether it is actually so we probably wouldn’t factually know if they are locking up the blockchain part behind government doors.
That may be a temporary decision however until ethereum is able to handle such demand potentially now in 2019-20 when they can transport the state backed currency onto ethereum’s public blockchain. Something which would give the market complete confidence of no foul play.
As it stands, much is hazy. In its foundations, it is probably like any other crypto as far as end-user interfaces. That being a light/spv non-validating wallet probably connects to the government run admin node with the token then presumably transferable through the internet.
If that is the case, then it probably will soon find its way to a decentralized exchange where we can finally see whether any of this is real.
Not that we have much reason to doubt it. The situation in Venezuela is a modern tragedy. Whatever the political aspects, one can assume Maduro would like to end such situation as soon as possible not least because there have been assassination attempts.
It may therefore be safe to say they are trying to solve the situation and petro may be a solution. To increase its chances of it being so, they may even open their blockchain or we might be wrong and it is in fact a public blockchain, perhaps a fork of Dash.
In the latter scenario (ignoring the many faults of Dash’s centralizing masternodes), then the grand experiment would be very interesting and its outcome may have wide reaching implications.
Certainly geopolitically, and while there may be plenty to say there, we have to remain neutral because like electricity, like cars, this is just a technology usable by all. The political elements therefore are a different layer.
The technological elements are fascinating at a country level. Maduro is apparently to force international airlines arriving in Venezuela to buy fuel and other airport services with petros. That’s just an example of many to show, at least going by statements made, that the government of Venezeula plans to make petro effectively a national currency for every day use.
That begins this November the 5th, a symbolic day by itself when Brits go out in the cold to drink mould whine and watch fireworks in reflection of an old plot that has now taken a different symbolic meaning in celebrating the spirit of revolt.
And a revolt petro would be if it is executed properly. It would be a revolt against the current global financial system which has been weaponized and politicized. In rejecting it, Venezuela will in effect be building its own global financial system if they do really plan to genuinely take the leap into digital money-assets.
Money-assets which would easily be transferable to anyone anywhere, unstoppable by anyone, codable potentially, and easily exchangeable for other more hard money-assets, like bitcoin or eth.
The popularity of bitcoin in particular has exploded in Venezuela recently where trading volumes have considerably increased in the peer-to-peer localbitcoin market place.
The adoption of such hard cryptocurrencies may accelerate with the public launch of petro in Venezuela, not least because exchanging that token for other cryptos would be as easy as one click in one of the many decentralized exchanges.
Internationally there will be political friction as America has banned petro, but the token would be running on a blockchain and would easily be exchangeable for other assets.
Moreover, if it does become a national currency then it is difficult to see how the ban can be maintained especially if the Venezuelan government forces all to accept it for payments.
A decision that shouldn’t be taken lightly because grandma might not have much of a clue of how to transact in petros. She can learn, perhaps, or there can be petro coins minted with the private key contained in the coin. Likewise there can be petro paper wallets.
That may make the transition easier, but this leap is a grand experiment paving a very new path. Hiccups may be expected.
On the other hand, this may be just the beginning of a transformation in the financial systems, with other countries eventually, albeit more gradually, perhaps following Venezuela into a very new world where money takes a different shape, both physically in being code, and more symbolically in being under public control.