Venezuela is the first state to release an official crypto-currency. State-issued crypto-currencies can be an important step towards stability and acceptance for crypto-currencies in times of high volatility. However, an analysis of the official whitepaper (http://www.elpetro.gob.ve/Whitepaper_Petro_en.pdf) is a cause for concern.
The idea behind the Petro
At first glance, the concept has a certain charm: „The PETRO (PTR) will be backed by the Bolivarian Republic of Venezuela and the wealth of its large crude oil reserves.“ (http://www.elpetro.gob.ve/index-en.html) Thus, the PTR would be a classic asset-backed currency, analogous to the previous gold coverage of government currencies.
The whitepaper first outlines the vision of the state-issued crypto-currency:
PTR as an independent asset-backed crypto-currency
The covering of the PTR is to be ensured by the huge oil reserves of the country
Oil coverage reduces the volatility typical of crypto currencies
Venezuela sees itself as the spearhead for building a new independent, transparent and fair digital economy for the benefit of emerging countries and their citizens
After a general discussion on the benefits of blockchain and a token economy, a more detailed description follows on the function of the PTR as a medium of exchange, digital platform, and investment tool.
The PTR token itself has the following properties:
Initially, 100'000'000 tokens will be issued
The issue of further tokens takes place only by means of voting by the tokenholders
The distribution of PTR tokens
PreSale: As of February 20, 2018, there will be 38,400,000 PTR sold as part of a PreSale. The price will be based on the oil price for a barrel of Venezuelan oil (end of January approx. 60 USD)
Initial Coin Offer (ICO): As of March 20, another 44,000,000 PTR are sold
The remaining 17,600,000 PTRs go to the state authority "Superintendencia de Criptomonedas y Actividades Conexas Venezolana (SUPCACVEN)"
During the entire sales phase there will be declining discounts for early investors.
The use of the funds raised is provided as follows:
15% innovation support (related to Blockchain)
15% ecosystem development projects
15% further development of the "Petro" platform
55% independent fund
The unique selling proposition to other crypto-currency mentioned several times in the whitepaper is the state acceptance and the covering by oil reserves. This is realized according to the white paper as follows:
The PTR is recognized as a national currency for taxes and fees
Venezuela guarantees the exchange of the PTR in Bolívar at the respective oil price of the previous day minus a percentage "deduction"
The exchange between PTR and Bolívar takes place via state authorized dealers
Points of criticisms
The analysis of the whitepaper raises the following criticisms:
PTR is not an asset-backed currency
The idea of an asset-backed crypto-currency is not new and especially interesting as a state-guaranteed currency. However, the PTR is in no way covered by the oil reserves. Instead, the state of Venezuela is merely making a promise to exchange the PTR at any time for to the current oil price in Bolivar with a deduction. This promise, as with all promises of payment, depends on the creditworthiness of the guarantor. In case of Venezuela's state bankruptcy this promise will become obsolete. The creditworthiness of Venezuela is considered bad (http://www.zeit.de/news/2017-11/04/venezuela-standard-and-poors-stuft-venezuelas-kreditwuerdigkeit-weiter-herab-04081203)
Even if an investor can exchange his PTR in Bolívar at any time, it must be mentioned that due to heavy trade regulation, it is difficult to exchange the money for USD, EUR or other currencies.
Deduction to the oil price
According to the whitepaper, the exchange of PTR into Bolívar will be deducted. How high the deduction will be and who determines the level of deduction remains open. The speech is of at least 10%. With this parameter, Venezuela can make the exchange in Bolivar unattractive at will.
In several places there is talk of a voting system for the owners of PTR. This democratization for shareholders is considered an achievement of future crypto-currency. This places the responsibility for the "money policy" and the ecosystem in the hands of the users.
The whitepaper remains largely unclear as to how the voting system should work. However, two quotes make it clear that only proposals that are submitted by the state authority SUPCACVEN may be voted on:
„This feature will be initially disabled and can only be activated on the initiative of the Superintendency of Currency of Venezuela with the approval of the holders of Petro“
„...which will be proposed through SUPCACVEN and selected by Petro holders by voting through the blockchains“
This practice should result in submitting only proposals that are acceptable to the Venezuelan government.
Use of funds
55% of the money raised flow into a separate fund. No further information is given on this fund. After all, this could be be more than $ 2.5 billion, which usage is largely intransparent and almost certainly will not serve to build and expand the PTR ecosystem.
The promise of an "independent" and "oil reserves" backed crypto-currency is not kept. Likewise, a large part of the funds taken is not used for the construction of the eco-system, but flows into non-transparent channels. In addition, it is not clear how the heavily battered Venezuelan population should benefit from this venture. For investors the value of the state guarantee is also highly questionable.
State-issued crypto-currencies have enormous potential. However, this project gives away the chance of a “good” crypto-currency and threatens to damage the reputation for state-issued crypto-currencies.
Personally, I see it as the moral and economic duty of all crypto investors to let this project fail - as with any other dubious ICOs. Responsible investments deter notorious free-riders and pave the way for a sustainable token economy.
Note: This article reflects only the personal opinion of the author.