The news that the state of Venezuela has officially produced its own cryptocurrency was something that took the world by surprise some months ago. The news came from a country that is a frequent topic in the domain of international news and still, it managed to place a lot of experts in a position of uncertainty. No one knew for sure how would this project fare or what was its end-goal, aside from the stated objectives provided by the Maduro government.
But, after months of strife and years of economic disintegration, these guarantees and explanations were not believed either internally or in the international community that extensively. Yet, the country went ahead with its plans and at one point, the Venezuelan government launched the petro, a cryptocurrency that was designed to represent the country’s oil reserve.
Now, the petro has been around for some time and did not vanish as some expected and warned about. Its effects in the short-term are unclear, but there is a range of ideas of what does the petro mean, not just for Venezuela, but also for the future economy of the world.
A Tool of Dictatorship
Some might take offense at the idea that Maduro is presiding over a dictatorship in Venezuela. But, when the numerous violations of the human rights of the opposition are taken into consideration, it is hard not to see Maduro’s government as one in a permanent crackdown on parts of its struggling and poor population. The number of refugees coming from the country to its South American neighbors also shows the same trend developing in Venezuela.
This is why so many felt horror to find a dictatorship using blockchain to additional centralize its power in the country. The concept of cryptocurrency seems to be completely skewed in this sense, being that the original idea of the tech in the financial domain was to build something completely decentralized. Bitcoin, a widely used cryptocurrency, is the key example of this notion.
But, after Venezuela launched petro in March, it was something that was clearly shown to be both centralized and regulated. The government tried to raise over $5 billion that would be used for the national recovery, but the venture failed to reach that amount. However, this was not the end of petro as a mechanism that would be employed by the Maduro government.
Slashing of the Bolivar
Recently, the President Maduro announced that the country hyperinflated fiat currency is losing five zeros from its and he also announced a petro revival. This is supposed to come through the tethering of the petro value to the new Bolivar.
Now, some believe that this is an important step, even though it is still something that will not revive the regime. Crypto enthusiasts see the Valenzuela becoming the first nation to downgrade central-bank issued fiat currency and also educating its people about the value of the cryptocurrencies. In the case of this particular country, the economy has gone down the drain in a really rapped manner over the previous five years.
It had an annual hyperinflation of one percent and the highest rate of homicide in the entire world. The socialist dream of Hugo Chavez has clearly failed, but many believe they can restart it by using the petro as a means of gaining funds to do it all over again. But, what would happen to petro if the current government was somehow taken out of the picture?
An Alternative to Decentralization
For many generations, Venezuela was completely intoxicated on petrodollars. As one of the biggest exporters of crude oil in the world, it managed to attain a huge amount of cash by selling its products to the global market. The nation started importing over 90 percent of all of the goods it consumed.
The black gold allowed for a complex system of socialist safety nets to emerge, without actually bolstering the economy outside of oil production. But those days are well and truly gone, thanks to a drop in oil prices and with them, oil revenue.
Now, a post-Maduro Venezuela would need at least around $100 million in aid to start the economy and provide needed humanitarian aid. In that case, a loan from the IMF would not be sufficient. But, the petro, in that case, free from the direct rule of a government many other nations rejected, could offer a way out.
A stablecoin would be the perfect option in that case. Unlike the current cryptocurrency, a Venezuelan stablecoin would need to central bank or collateral. If the demand falls, its gold and petroleum reserves could be used to buy it back.
At the same time, its citizens would receive a revenue from it through the bonds and savings from a healthy economy. The citizens would also have a way of knowing the status and ventures of public wallets and with this, an insight into the spendings officials partake in.
Embracing a Non-Central Future
The opportunity for Venezuela lies in these decentralized information networks. In theory, it could be the first state to completely separate finance and goverment, but petro is not it. Any other venture that mimics petro would also bring back the process to square one.
The petro is nothing by a bad idea and it showed that it is not able to work now or in any other setup. However, it has been able to show the people of Venezuela what blockchain can do. Locally, a growing ecosystem of miners and engineers are working as a community. Abroad, millions are trying to see what the experiment will bring about. The current regime will not last forever and when it takes its leave, it will open up the doors to something new.
Now, no one can say for sure what that new thing is. Experience of complex communities in things like eSports and even eGovernance has shown that there are no easy means of successfully transitioning from one major element to another in a rapid manner. But, there is a lot of hope in this case and for all the good reasons.
Regimens have risen and disappeared in history. Now, for the first time, the next system in Venezuela will have something no government ever did – a blockchain and cryptocurrency infrastructure.