Much anticipated Venezuelan Petro white paper released
Eager eyes will be watching to see how the Feb 20 Petro ICO will be received on global markets.
The very first cryptocurrency issued by a sovereign nation has edged closer with Venezuela releasing its much anticipated Petro white paper. For the cryptocurrency community, a national cryptocurrency lends significant support to the ongoing adoption of cryptocurrencies worldwide.
From late 2017, a nationally backed Venezuelan cryptocurrency had been announced as being in its developing stages.
The announcement has carried heavy criticism from opposition sources within the Venezuelan Congress, where the planned cryptocurrency has not been recognised as legal tender.
During much of 2017, Venezuela was crippled by violent protests surrounding hyper-inflation and proposed changes to the country’s political process. Some of these issues have stemmed from sanctions imposed by the United States (US) under the Obama administration and expanded on since.
With that in mind, the Venezuelan government has pushed ahead with the Petro, designed to escape “Western sanctions”.
For the broader cryptocurrency market, the Petro (PTR) initial coin offering (ICO) at US$5 billion will represent the largest ICO in cryptocurrency history, equalling the entire revenue from all ICOs in 2017.
It is highlighted in the white paper that the PTR holds the greatest potential of any cryptocurrency right now to be widely adopted, considering the 31 million strong population of Venezuela.
The actual Petro itself is a pre-mined ERC20 compliant token that will be based on the Ethereum blockchain. There is a release of 100 million units which are further divisible into "Mene" and equal to one hundred millionths of a Petro.
There is the possibility of a Proof of Stake option for transaction authentication which would allow permissioned nodes to verify and process transactions. That could only be enabled by the “Superintendancy of Currency of Venezuela” and interestingly, with approval of the holders of PTR.
At first, this means that transaction authentication will be controlled centrally by the Venezuelan government on a computer network operated locally.
The Petro will be freely traded on cryptocurrency exchanges throughout the world and will be traded against other cryptocurrencies through a process called atomic swaps.
With a proven reserve of over 300 billion barrels of oil, PTR is said to be redeemable for the national reserves of oil. The white paper said that PTR will be tied to the cost of a barrel of oil making one PTR equal to roughly US$60.
According to the Petro white paper, the Petro will be considered legal tender for tax purposes. As yet, it is unclear if the Venezuelan government will pay salaries and pensions in PTR.
Naturally, the world’s first national cryptocurrency brings controversy with it. Appeals from US lawmakers to the US treasury secretary have focussed on the potential of the Petro to “clearly thwart the intent of US-imposed sanctions”.
For the embattled Venezuelan president, Maduro, the Petro will “serve as a platform for the growth of a fairer financial system that contributes to development, autonomy and trade between emerging economies”.
It is difficult to tell whether economic mismanagement or financial sanctions are causing economic hardship in Venezuela. But the country has been racked by a hyperinflationary Bolivar, food shortages and a material drop in living standards.
In 2017, the Venezuelan government led by Maduro oversaw constitutional changes amid sweeping protests that saw the creation of the Constituent Assembly, effectively neutering the opposition-controlled Venezuelan Congress.
Obama-era sanctions have largely excluded Venezuela from sourcing US dollars in traditional debt markets. This makes accessing market liquidity for Venezuelan importers difficult, resulting in a reduced national trade.
With the Maduro government actively looking to place PTR on global markets, the outcome may be that access to global funds will be made less difficult.
The effects of PTR will be unknown for some time, but the 20 February pre-sale will be watched closely.