May 7th, 2018

El Petro

A guide to the world of Venezuelan national cryptocurrency

El Petro

May 7th, 2018

A guide to the world of Venezuelan national cryptocurrency

What should be known about El Petro and what myths about it should be destroyed?

What is already known about El Petro (PTR)?

  • The idea of national cryptocurrency based on oil assets was first shared in October 2017 by the Central Bank of Venezuela. According to The Merkle, it was called a necessary measure to fight economic problems faced by the country (especially with hyperinflation);
  • In December of 2017 Nicolas Maduro, current president of Venezuela, stated that this cryptocurrency would help Venezuela overcome Western sanctions and consolidate monetary sovereignty of the national currency called bolivar (VEF);
  • The pre-sale of PTR took place on 20th of February and the ICO was held on 20th of March, according to the El Petro White Paper.

Here is the first glance at this cryptocurrency and what’s so wrong if we look closely:

El Petro is a cryptocurrency

What’s wrong with this? The ideology of cryptocurrencies is based on decentralization. This means all token operations are anonymous and can’t be controlled by any third party. Nevertheless, Venezuelan authorities seem to be taking on the role of a transaction intermediary. Moreover, El Petro should be sold on a governmental exchange for a governmental rate, which is contrary to the cryptocurrency basic principles.

El Petro is legal

What’s wrong with this? This statement has already provoked many discussions even inside the Venezuelan government. The opposition-run Congress called the token sale based on national oil assets illegal and unconstitutional. This position was supported be Venezuelan lawyers, who claimed these operations would be out hydrocarbon laws.

El Petro is oil-based and valued

What’s wrong with this? According to Vitalik Buterin, the white paper of El Petro says this cryptocurrency doesn’t offer oil, instead it offers bolivar, based on the oil price. It isn’t a currency supported by any real world assets or even an oil-based forward, it is just an attempt to make national currency more stable and less affected by inflation. The price of tokens during the pre-sale was $60, but there is no reasonable explanation for that fiat money equivalent.

El Petro is trusted

What’s wrong with this? As the director and senior economist at Longview Economics Harry Colvin told CNBC, Venezuela had been known for misappropriation of assets and cryptocurrency creation might provoke trust and transparency issues. Alex Van de Saude, the Ethereum Foundation developer, gave a comment to The Washington Post, saying Venezuelan authorities didn’t really understand how cryptoworld works. The U.S Treasury Department has also warned people about investing money in El Petro.

There was also a lot of confusion around the blockchain platform El petro is based on. Initially, it was announced as a currency based on Ethereum as a smart contract, subsequently it switched to the NEM platform with “more socialistic philosophy”. What’s interesting is that in the Spanish version of white paper, El Petro is still connected wto Ethereum rather than NEM (in the English version the platform has already been changed).

The issue of trust has also appeared during the token pre-sale. Firstly, not everybody got an confirmation email after signing up on El Petro platform. Secondly, three scams took place during the pre-sale: two of them (one on Twitter, another on 4chan) pretended to be Venezuelan Petro, the third one was unrelated to the national crypto pre-sale, but nonetheless almost doubled its price. Moreover, the amount of money raised on pre-sale might be less than Maduro had announced, according to the reasoning in Alejandro Machado’s tweets.

There are many analogies between El Petro announcement and KODAK or Long Island Ice Tea Company cryptocurrency experiences. These examples are united by high expectations and a strong statement without any stable perspectives or results.

El Petro is for miners

What’s wrong with this? After El Petro announcement in early December, Maduro claimed he would create a community in Venezuela to mine a new national currency. To back this up he created a registry for miners to sign up before January 20th. However, if El Petro is an Ethereum-based crypto and is fully controlled by the government, there is no need for miners. This means the government doesn’t really understand the difference between mining and tokens emission. Subsequently Carlos Vargas, the head of the General Directorate for Digital Currencies in Venezuela, said that registration of miners meant just simply registering miners”. It is public information about people who are engaged in cryptocurrency mining, noted “El Universal”.

El Petro ICO

On 21th of March the El Petro started ICO, as it was announced its the official Twitter account and written by Agencia Venezolana de Noticias.  

As it is written in the El Petro’s White paper, the token sale is realised in different ways:

  • The 44% of 82.4 million PTR are offered in a private presale and during the ICO;
  • The next 38.4% of tokens can be bought by private individuals;
  • The remaining 17.6% are taken by the Superintendence of Cryptocurrency and Related Venezuelan Activities (Supcacven).

The pre-sale took place from 20th of February to 20th of March with 127 countries having participated in it, as stated by the AVN. Some of them were Afghanistan, Argentina, Brazil, Bolivia, Ecuador, Russia, Chile, Colombia, South Korea, Cuba, Spain, the United States, France, Japan and China.

(Tweets as the comments to the El Petro ICO start, I think that El Petro was born and then died)

(Marco: Good afternoon! The day before yesterday I completed all the steps to buying El Petro, one time the system has generated the link to send BTC, I’ve sent them, but after 24 hours nothing appeared in my Petro Wallet

Raphael Peraza: They have already awarded their petros??)

On  April 26th Nicolas Maduro, the president of Venezuela, said at the Expo Venezuela Potencia 2018  that $3.388 billion had been received as a result of the cryptocurrency pre-sale. He explained how the money will be spent:  

  • $1.738 billion of the funds raised will be used to purchase food and industrial resources,
  • Another $ 1 billion will be used to strengthen the floating exchange market system (Dicom).

During the meeting a new announcement broke in about licenses to be issued for 16 exchangers to work with El Petro. The aim of this measure is to support the national cryptocurrency turnover  inside the country.

Myths about El Petro

  • El Petro isn’t used as a measure of payment in the deals with the Russian truck manufacturer KamAZ;

“We have not received any official offers yet. Prior to their perception and acquaintance of the partnership conditions, it is premature to talk about any interest from KamAZ “, Oleg Afanasyev, the head of the press-service of PJSC KAMAZ

  • El Petro isn’t used as a payment measure for Venezuela’s public debt in Russia.

“We continue the internal procedures. The borrower (Venezuela) is in a difficult financial situation”, Konstantin Vyshkovsky, the Director of the Department of Public Debt and State Financial Assets of the RF Ministry of Finance

What is new?

Nicolas Maduro announced a bank launch for students and youngsters. Its fund will be derived from the national cryptocurrency El Petro, writes Telesur. The governor said that the new institution will open with close to $1.2 billion.  Will it be a productive measure or will it turn into another myth? Only time will show.