Is the Petro a cryptocurrency? What is cryptocurrency anyway?

Blockchain post-it. An article about the Petro and the concept of cryptocurrency.
Photo by Hitesh Choudhary on Unsplash

Below are the sidebars I wrote for the article “A Complete Guide to Petro – Venezuela’s Cryptocurrency Driven Attempt to Attain An Edge“, which ended up published by Hackernoon, a tech publication with a specialized audience that probably didn’t need basic information like this. You, on the other hand, definitely do. So here it is. You’re welcome.

If you’re interested in the Venezuelan cryptocurrency, jackpot, you found the motherload.  And even if you’re not, there’s a lot of valuable, easy-to-digest data ahead:

Cryptocurrency as a concept:

For a simple explanation we quote the Oxford Dictionary, cryptocurrency is: “A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.” For a more complicated/ complete one we go the now mythic “A Letter to Jamie Dimon”, Adam Ludwin defines them as: “a new asset class that enables decentralized applications.” 

That one leads to a couple of questions. To explain what an asset class is, Ludwin provides these useful examples: “Corporate equities serve companies/ Government bonds serve nations, states, municipalities/ Mortgages serve property owners/ And now: Crypto assets serve decentralized applications.” And he defines decentralized applications as: “a way to create a service that no single entity operates” and also “a new form of organization and a new form of software. They’re a new model for creating, financing, and operating software services in a way that is decentralized top-to-bottom.”

On the other hand, Investopedia follows the money and leads with: “A cryptocurrency is a digital or virtual currency that uses cryptography for security” and that makes it “difficult to counterfeit”. And then they are the first ones to mention the blockchain, that other buzzword: “Many cryptocurrencies are decentralized systems based on blockchain technology, a distributed ledger enforced by a disparate network of computers.” To close it, they celebrate its “organic nature” by declaring: “it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.

What is the Petro exactly?:

For this definition, let’s go straight to the source, according to the whitepaper the Petro is: “the first digital coin promoted and issued by a state, backed by the natural wealth” and by that they mean “internationally certified Venezuelan commodities.” It’s “objective is the democratization of the economy worldwide” and it will “facilitate the commercial exchange, Venezuelan commodities acquisition, and resources generation, improve import and export, increasing the exchange and access of currency or any crypto coin.” [sic

According to Investopedia the goal of the Petro is to circumvent US sanctions and “The idea was to enable transactions in currencies other than the US dollar.” In their report, Reuters informs: “Oil is the heart of Venezuela’s economy. In choosing to back its petro with petroleum, the country has joined a small but growing number of cryptocurrency issuers linking the value of their tokens to physical commodities.” To get even more details we go to Al Jazeera: “Petros will be “pre-mined”, meaning the government would produce and control it” and its price “will be tied to the cost of a barrel of Venezuelan oil”. Or at least it was, at the beginning.

Parking lot prices in Petro, part of the Venezuelan madness. This is an article about the concept of cryptocurrency, focused on the Petro.

But… is the Petro a cryptocurrency?:

If we go by the Oxford Dictionary, it seems to be. The Petro uses “encryption techniques” to regulate its functions, but to accept it as a cryptocurrency we’d have to ignore the part about being independent from a central bank. If we use Adam Ludwin’s definition: “a new asset class that enables decentralized applications”, then it’s not. The Petro doesn’t support any application, which may be the reason why Bitfinex proclaimed: “We see the PTR as having limited utility.” 

If Investopedia is to be trusted, at first glance the Petro seems to be a cryptocurrency: it’s digital, it uses cryptography and it’s hard to counterfeit. They also use the word “many”, as in “not all”, in the phrase: “Many cryptocurrencies are decentralized systems based on blockchain technology.” So far so good, but the argument falls down when they categorically claim that it shouldn’t be: issued by any central authority.” and it should be “immune to government interference or manipulation.” The Petro is none of those things. 

But what do our experts say? Arturo Castro is unequivocal, he feels that it isn’t: “Not only because it’s centralized. Its value doesn’t fluctuate on a free market, it is set by the issuer at their convenience. Its commercialization can’t be audited. The issued amount isn’t defined, the issuer creates them at will as in any Fiat currency.” Mariana Lizardo agrees with him: “The control the government has over the Petro undermines its credibility as a cryptocurrency”. On the other hand, José Lanz says: “The Petro’s low credibility is caused by a strong campaign against it, but I don’t think it has fewer merits than any other of the thousand altcoins with low capitalization that people support”.

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Now you have the basics and are ready to read the whole piece. You’ll also find information about the people quoted in that last paragraph, our panel of experts.

Anyway, seriously, read: “A Complete Guide to Petro – Venezuela’s Cryptocurrency Driven Attempt to Attain An Edge“.

One thought on “Is the Petro a cryptocurrency? What is cryptocurrency anyway?

  1. Pingback: ARTICLE: “A Complete Guide to Petro – Venezuela’s Cryptocurrency Driven Attempt to Attain An Edge” | Samples and Examples

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