Venezuela’s economy is tanking harder than crypto markets did in the first quarter of 2018 – yes, it’s become that bad. This crash has fueled the call for a cryptocurrency to take over and save the citizens from abject poverty. While many in the crypto world had hoped the country would adopt a mainstream crypto such as BTC, ETH, or DASH, Nicolas Maduro – president of Venezuela – decided to make his own government-backed cryptocurrency – the Petro. Allegedly pegged to the value of one Venezuelan barrel of oil, the Petro was supposed to save the people.
Several months on and Maduro has released a new fiat currency, which is pegged to the value of the Petro – a reverse stablecoin if you will. However, some Venezuelans are confused by the concept and its value, so the government has released an official calculator to help out.
Poor Example of a Cryptocurrency
The Petro has been slated from day one by the international crypto community. It was designed to help Venezuela deal with other nations, while the US imposes sanctions upon the country. However, when it tried to sell oil to India at a 30% discount for using Petros as the method of payment, Indian officials laughed in the face of Venezuela and declined the offer.
The white paper for the government-controlled cryptocurrency has changed multiple times since its inception, and it still fails to explain how the Petro is tied to the price of a barrel of Venezuelan oil. In fact, the international crypto community would sooner buy and hodl Ripple than it would the Petro – which given the latest trolling of Ripple is truly astonishing.
Reverse Stablecoin?
A stablecoin is a cryptocurrency pegged to the value of a stable asset – hence the name. While the Petro itself isn’t a stablecoin, Venezuela’s new fiat currency – the Sovereign Bolivar – appears to follow a similar model to a stablecoin. The new fiat is allegedly pegged to the value of the Petro, leading to a very complex situation.
Let’s say the value of a Venezuelan barrel of oil falls, so too does the value of the Petro and therefore the value of the Sovereign Bolivar. While you have to applaud Maduro and the Venezuelan government for its ingenuity in creating such a complex pegged currency system, it is doomed to fail – Wired has already called it a “scam built on top of another scam.”
Just Stick to Dash and BTC
Shop owners and service providers have been arrested for bumping up the price of goods following the implementation of the Petro and Sovereign Bolivar as a national currency. However, not all shop owners are willing to give in and are pushing for the use of real cryptocurrencies. Dash is emerging as one of the most popular cryptos in Venezuela thanks to the Dash foundation that has nurtured crypto adoption in the country. In return, Venezuela has become the second largest user of Dash thanks to its low costs and speedy transaction times. In addition to Dash, Venezuelans have been hard at work mining BTC thanks to the ultra-low electricity costs.
The new set of currencies all pegged to one another sound too confusing to try and calculate, so we are glad the government have built a calculator to help. While the idea is nice – and rather novel indeed – it most likely will end in failure and the citizens of Venezuela will be the ones to suffer. A traditional cryptocurrency such as BTC or DASH needs to be accepted as a national currency in order to restore the country to its previous status. Hopefully, Maduro learns this sooner rather than later, as it could spell disaster otherwise.
