The Petro is the Latin American revolutionary (literally!) version of Bitcoin (sort of) and it is the first sovereign crypto asset in the world. It is backed by oil assets and issued by the Venezuelan State. It was announced by President Nicolas Maduro in December 2017 and the pre-sale started on the 20th of February 2018. The project was conceived by Maduro’s government in the middle of one of the worst economic (and geopolitical) crisis in Venezuela and represents a challenge of historical proportions. The question everybody has in mind now is: will it work?
Petro (PTR) is the first State-issued crypto asset, by Venezuela
We all know that many people in the United States and Europe, within the crypto community and outside, hope the Petro will miserably fail. It will offer anarcho-capitalists another story covered in blood to support the (naive or hypocritical) idea that… “You see? Socialism doesn’t work!”. Decentralisation worshippers will think it is a proof that only totally unmanned monetary systems like Bitcoin deserve respect (anything serving a different purpose, like… people in a besieged country for example, is a violation of the dogma). Regardless, hatred against Venezuela is all over the place, well supported by a decent amount of ignorance and many years of mainstream media war propaganda and fake news.
We also know that many others, like me, really hope the Petro succeeds, helps Venezuelans recover and sets a good precedent for others.
Who dares to reject the threats of the US empire? Few dare. Venezuela is one of them. A dissident Latin American country with only 30 million people, the largest oil reserve on Earth, rich in natural resources like gas, gold, diamonds, Venezuela used to be a de-facto US colony for more than a century, before Chavez won in 1998 and became President. Under Chavez, most of the national oil industry was nationalised and US oil companies had to accept higher taxes. Exxon Mobil refused the deal and its CEO Rex Tillerson (yes him) decided to leave the country, losing a lot of money. In 2002 the US backed a coup, that failed. Since then, relations between the two countries have been “complicated”: they are commercial partners, but the US cannot accept a Latin country that wants to set the rules for the exploitation of their resources. As of today Venezuelans still have to fight for their sovereignty and freedom, at a great price, 200 years after they earned the independence from another empire. The legacy of Bolivar, “el libertador” (the liberator), the general who defeated Spain, is often used by chavistas as a symbol of their fight against US aggressive intromissions.
The US (and recently also Canada and the EU) applied several “sanctions” against Venezuela in recent years. Some sanctions prevent the country from getting loans in order to support the investments needed by the oil industry, whose production collapsed in the last years for that reason. Other sanctions aim to stop US dollars from reaching the Caribbean country by forbidding US companies and banks to deal with them, making trade and imports very hard (basically they are left without international currency, so they’re unable to pay). All sanctions have a single goal: starve Venezuelans in order to create the chaos and finally overthrow the (elected) government through a coup or even a war, with the support of the media. The Petro has a huge potential and could actually help Venezuela. But it all depends on many factors.
Tareck El Aissami (Vice-President), Nicolas Maduro (President), Hugbel Roa (Minister of Science, Technology and University) introduce the pre-sale of Petro (20th February 2018)
I tried to imagine why would the Petro succeed or fail.
Success
Mass adoption
The Petro white paper says that Venezuela will accept payments for taxes, fees, contributions, public services in Petros (and other cryptos). If even a small percentage of the Venezuelan population manages to get Petros or the government started paying public workers with the national crypto currency, the private sector could adopt it too. It would be the most used crypto in the world, and this could happen relatively quickly.
Big numbers
Venezuelan oil exports amount to 8 billion US dollars a year now, but before the oil price crisis (in 2013) it was around 25 billions. Petro was introduced to fight the US blockade that makes trade in US dollars and with US companies and banks impossible. By negotiating the adoption of Petro with trade partners around the world, Venezuelans could collect large amounts of fiat and crypto currency during the ICO. The Petro could also become a massively valuable asset for the international oil trade (and gold, diamonds, other resources and goods).
Crypto reserves and beyond
Petro does not come alone and it is not the only unprecedented thing Venezuela is doing. At the event for the pre-sale launch, Maduro described what sounds like a large scale operation aimed to collect (and mine) as much bitcoins as possible: the government will accept bitcoins and ethereum for taxes and public services and is trying to expand the adoption of crypto in the national economy while regulating the mining process by creating a register of miners (and, I suppose, collecting crypto taxes from them). State owned mining factories have already been introduced around the country, along with crypto trading courses to form young people to trade crypto online! Most of these initiatives are done in the universities and led by young workers and students.
A success of the Petro could set a dangerous precedent for the US dollar
Fail
ICO failure
The negative propaganda around the Petro in the western hemisphere of the crypto community reflects the decades-old war propaganda on Venezuela. Confidence is a key factor when it comes to reach investors. It is therefore unlikely that many people in the US and Europe will invest in Petro, at least during the ICO phase. On the other hand, the rest of the world, which includes companies and people in countries like China, Russia, India, Brazil and many others, could get excited and be willing to invest in the first State-crypto. This will be a huge stress test for the Petro and a serious failure could make the project unsustainable, mostly because 45% of the ICO money is supposed to support the development. Without that money, it is unlikely that the project will thrive.
Technical failure
Venezuela is the first country to create a sovereign crypto asset, it has never been done before. The technical challenge is huge, in terms of design, management, security. The government will need considerable resources to make sure they can afford a sustained development of the Petro network with the most talented and experienced minds they can get. Two companies (a Venezuelan and a Russian) were publicly introduced as the two main technical assets for the project, during the pre-sale launch. Many elements of the whole operation are certainly still in progress or kept secret, so it shouldn’t surprise if other companies or individuals were involved.
US sabotage, terrorism, coup or war
Both Iraq and Libya wars were motivated by the decision of their governments to get rid of the US dollar: this is confirmed and this was the main reason the US decided to overthrow those governments and kill their leaders. Both countries have been totally destroyed, hundreds of thousands, maybe more than a million people have died.
Things are changing rapidly though. China and Russia are quite unhappy with the US imperial overreach and authoritarian behaviour. The US are an oversized empire, threatening and sanctioning countries around the globe like a hysterical teacher who lost the respect of the class, but still causing devastating harm.
Some analysts say it is unlikely that the US will start a hot war in South America (other countries in the region could join the unhappy club), but many think Colombia will be military proxy against Venezuela, in particular the large number of Colombian paramilitaries active at the border with Venezuela. Venezuela has very good diplomatic relations around the world, but if the US manage to destabilise Venezuela to a point where its institutions collapse, the Petro will likely fail. And it would be a bloodshed.
Project Cybersyn, Cybersyn room (Image: Gui Bonsiepe, Source: link)
The consequences of both scenarios could inspire several science fiction novels. The blockchain technology is relatively new and it had never been used by a State. What creative ideas will come from this experience? Fighting so many threats from deadly hostile forces, while developing a huge technological challenge is a rare experience that reminds the Project Cybersyn, developed during Allende’s government and sadly destroyed by the subsequent US sponsored coup and dictatorship, with everything else. What digital security issues can arise with crypto reserves managed by a State and transactions of large amounts? What if the Petro network suffered a hack? Or, if things go well, what could it mean for the world if Venezuela redesigned its faith and successfully recovered despite the sanctions, thanks to the Petro? What if the US got beaten by the blockchain in their backyard? The historical acceleration Venezuelans are living could surprise or terrify the world already in the coming months and certainly years. Let me be optimist today and say yes, the Petro can succeed and Venezuelans with it.
Other reasons why the Petro could succeed? Or fail? Let me know what you think by leaving a comment!