NEM’s blockchain has a surprising new use case after Venezuela’s government announced it would be using it to build its very own oil-backed “petro” token.
Promising Concept, Poor Execution
Sitting on the most significant crude oil reserve in the world, Venezuela theoretically has ample supplies to back its 100 million PTR tokens with 100 million barrels of oil.
The project looked to be a fully-fledged cryptocurrency in every right, not only being a tradeable commodity but also useful for national tax payment, contributions, public services and more.
Complete with white paper, presale, and ICO, Petro (PRT) marked a definitive moment in the mass adoption of blockchain technology as the very first state-issued cryptocurrency.
At a time when the world’s powers still bicker about the future of crypto-assets, Venezuela’s move is bold on many, many levels.
The Venezuelan government is fully aware of the Petro’s significance, with the token’s landing page heralding:
“The most important contribution of PETRO to the cryptoassets’ market and the new digital economy will be the support offered by a sovereign state.”
What Does Petro Mean for Cryptocurrency Adoption?
While other governments may indeed follow suit, the Venezuelan project may not necessarily be the breath of fresh air needed for global society to see cryptocurrencies in a positive light.
For one, Nicolas Maduro’s authoritarian government may conveniently use Petro to dodge sanctions by the US and EU, and the US Treasury even goes so far as to label the cryptocurrency as “an extension of credit to the Venezuelan government.”
Petro’s use for state money-laundering is another hypothesis lying on the table, and with a track record that’s less than squeaky clean, the Venezuelan government may not be doing the legitimacy of cryptocurrencies any favors.
All dubious intentions aside, the project may fall flat on its face for a number of more tangible reasons.
First, there’s Venezuela’s waning oil production, which fell 29 percent in 2017- not to mention the earth’s declining use of fossil fuels in society, both of which cast doubt on the token’s sustainability as a collateral-backed asset.
Next, the questions of politics come into play; with an upcoming election in April, there are no guarantees a new government will back the national cryptocurrency.
All of these concerns boiled over into mass criticism from regulators and even NEM, who’s open-source technology was used in the project.
1/ Regarding the Petro project, NEM is open source + hence any projects built on NEM are not under our control. To be clear, the NEM Foundation is not directly involved with this project and we’re not in a position to control any open source projects. pic.twitter.com/XQ3XqYg0Ou
— Inside NEM (no ETH giveaways) (@Inside_NEM) February 21, 2018
On the other hand, the ideological premise of Petro can be considered a big win for cryptocurrency acceptance.
The concept of a currency backed by hard commodities will invariably appeal to state governments, and as the Venezuelan government so aptly points out, cryptocurrency is the future of state, corporate and individual finance.
All that remains now is a legitimate attempt by a notable government. Which country do you think will lance a similar project? Let us know in the comments.