The current situation in Venezuela is dire, and most people are pointing their fingers at the government. Whilst certain aspects of hyperinflation could have been avoided, it’s now rife in the country and the nation’s fiat currency has been left in tatters. The Venezuelan government has a rather interesting countermeasure that it’s slowly putting into place. It created its own state-backed cryptocurrency – the first ever state sponsored cryptocurrency – and it is backed by state reserves of commodities such as oil, diamonds, gold, and gasoline.
The Origins of Petro
The Petro was announced back in December 2017, around the time when crypto mania was at its peak. Its sole objective is to help curb the hyperinflation that is plaguing the country, by circumventing US sanctions on its exports and as a means to facilitate international investments – mainly crypto traders who like altcoins. It was finally launched in February 2018 with a maximum supply of 100 million tokens. The official price of the tokens is set at $60, which values the entire issuance at $6 billion. However, stats from Crypto Compare indicate that a lot of Petros have been sold at a large discount. The average price of Petros works out at roughly $16.70, a far cry from the official price.
The cryptocurrency has been covered in a shroud of controversy from day one. Petro’s white paper has been changing almost daily since pre-sale of the crypto began and it is still changing frequently. In addition to this, all Petros are pre-mined by the Venezuelan government, meaning that no new tokens can be created. This all sounds a little murky, and slightly reminiscent of the ongoing battle Ripple is having with torrents of lawsuits claiming it’s a security – but we will save that for another day.
Is Petro Just Another Altcoin Destined to Fail?
Petro is supposed to get its value from the cost of oil and market demand. However, Weiss Cryptocurrency Ratings states that in the Petro white paper there is no method as to how the Venezuelan government will tie the cryptocurrency to the price of oil. In addition to this revelation, there are no crypto exchanges that allow you to trade Petro. Interestingly, the fact that cryptocurrency shows no method of tying its value to the price of a barrel of oil isn’t the reason people aren’t buying it. It’s the fact that you can’t actually buy it on any exchange. You have to directly sign up on the government’s website in a registration process that is far from clear.
Recently, the Venezuelan government tried to sell oil to India and offered a 30% discount if they paid in Petros, an offer that India quickly declined. It seems as if the intense trade restrictions that the US has placed on the country has crippled its abilities to trade with any country. These combined factors could have already sentenced Petro to a dismal existence amongst the growing list of failed cryptocurrencies. While certain cryptos could be a great solution to hyperinflation, it’s unlikely to be a government controlled, centralized crypto.
Petro Gains a New Lease of Life
Despite the immense shortcomings of the Petro in the crypto world, it appears as if the crypto is making a comeback as a champion of the people. The Venezuelan Minister of Habitat and Housing – Ildemaro Villarroel – has announced that the country’s government is planning to fund the construction of houses for the homeless with it. According to the slightly horrific website of the Great Mission for Venezuela Housing (GMVV) – the organization created to manage this project – over 2.1 million homes have been built. 33 companies are currently involved in the project and the Venezuelan President – Nicolas Maduro – has authorized a budget of 909,000 Petros, along with 75 billion bolivars ($750,000) for the project.
— Hábitat y Vivienda (@Minhvi_Oficial) 29 June 2018