History of Venezuela’s Petro Is Full of Misinformation and Failure

Misinformation #1 – Petro is a NEM token

PTR has many things in common with what is known in the crypto space as a ‘shitcoin’. However, the term ‘coin’ had been misleading in this case. At least when the Venezuelan government announced the creation of the Petro. As PTR was originally outlined to be only a token on the NEM network. NEM as a decentralized cryptocurrency did only acknowledge and confirm that the Petro would launch on its blockchain. However, it did not endorse it. If you mean well you could say that this move by Venezuela made sense in some way. It could enable trust in PTR as it is part of the network of a legitimate cryptocurrency. However, Venezuela decided to move away from NEM and build its own “cryptocurrency”. A lucky outcome for NEM.

Misinformation #2 – The fake pre-sale in early 2018

The latest version of Petro’s whitepaper does not mention NEM anymore. There had been no reports and no official announcements on this move. Apparently, the government of Venezuela silently sneaked away from NEM and built its own autonomous cryptocurrency. To call this move ‘shady’ is an understatement. As Nicolas Maduro himself tweeted in February already that the government collected $735 million Dollars in its ICO. Early in March last year, the number had risen already to $5 billion. CCN.com bought these fake news and reported about it although this trick is well known in the crypto space. Exchanges have done this frequently in the past when they bolstered their trading volume with fake accounts/trading bots.

A grandes problemas, ¡grandes soluciones! Desde el primer minuto el juego arrancó bien, y arrancamos ganando: 4.777 millones de yuanes o 735 millones de dólares es el resultado inicial de las operaciones de intención de compra del Petro. #AlFuturoConElPetro pic.twitter.com/LoaDgj4rr1 — Nicolás Maduro (@NicolasMaduro) February 21, 2018

Fast forward to the end of the year and the pre-sale ended only in November. The public sale began only on the 5th of November as you can see in the video embedded in the following tweet of President Maduro. How much more money was invested in the Petro in this period? Seemingly, the A cryptocurrency with a market cap of >$5 billion would be in the Top 5 of cryptocurrencies by market capitalization right now and almost in the Top 10 in March 2018. Even if the currency would have been hit hard by the bear market, there would have need to be a flooding of PTR on crypto exchanges at some point. The first blocks on Petro’s blockchain are way too small for that and a block from today is not much bigger.

¡Bienvenido El Petro! Llegó para fortalecer el Programa de Recuperación Económica y a revolucionar la criptoeconomía mundial como nueva forma de intercambio comercial, financiero y monetario. pic.twitter.com/2uERu523Ku — Nicolás Maduro (@NicolasMaduro) October 2, 2018

Misinformation #3 – The Whitepaper of Petro

Actually, this point is a series of misinformation as the PetroDollar’s whitepaper changed frequently even after the pre-sale of the token. At one time it was partly just blatantly copied from Dash. Currently, the whitepaper is only available in Spanish. It makes many claims about the cryptocurrency but you cannot review them as the code sits on a private repository.

The whitepaper claims that the currency relies both on PoS and PoW. You might think that PoW and PoS are enough to secure the network of the Petro and to facilitate transactions. However, the government wanted to be absolutely sure of the viability of Petro in October and as you can see in the video above it opened the “Superintendencía Nacional de Criptoactivos”. If you are not sure whether PoS or PoW is the best way to find consensus on your blockchain, just add a central institution and give it tasks for which either of these consensus methods have been created to make absolutely sure that your blockchain works. Better safe than sorry.

Misinformation #4 – Price & Backing of Petro

Perhaps the most ridiculous part in the Petro’s whitepaper is the passage about the initial price of Petro which is expressed in the formula on the right. The passage on the Petro states that the currency will not only be backed by oil, but also by gold, iron and diamants. In the ratio of 50-20-20-10. This makes the price formula necessary for the public sale as the price for any commodity fluctuates over time.

Unfortunately, it seems impossible to cite a price for the cryptocurrency right now. As it trades on none of the established exchanges and even Venezuelan exchanges do not give away a price (see #6).

However, it is obviously just a means to obscure the backing and the true value of PTR. A backing by a basket of commodities complicates the backing unnecessarily. It begs several questions. How will you be able to redeem the Petro? Will you receive a basket of the mentioned commodities? How high is the minimum amount for redemption?

Misinformation #5 – Redemption of Petro

Any value backed currency has zero value if you cannot redeem your money for the backing. Even if the redeemable amount is high. Tether and Digix Gold, therefore, offer such a redemption. The redemption of Petro is unclear and the website of the Superintendencía Nacional de Criptoactivos is scarce on information. It is no secret that the backing of Petro is questionable in a state that can barely provide its population with basic goods like food or medication. If it cannot provide basic goods, how would it be able to provide other goods solely used for monetary purposes? Besides that, those commodities need to be exchanged again for money, i.e. Dollar, Euro, Bitcoin. So in the case of Venezuela, the Petro is useless.

Misinformation #6 – A Medium of Exchange

It trades on none of the established exchanges and even “official Venezuelan exchanges” (official list) do not give away a price for the cryptocurrency. None of these exchanges are filed on coinmarketcap.com and the website ranks even exchanges with a volume of only a couple of hundred Dollars per day.

Conclusion

The Petro is perhaps the biggest scamcoin in history so far. At least no other scamcoin has received as much media attention as PTR. Perhaps the biggest scandal about this is that the Petro receives a lot of neutral reporting as well. However, there are so many dead giveaways to the fact that it is a scamcoin that the number of victims is probably marginal. The Petro seems to have only two use-cases: Force Venezuela’s defenseless citizens to use it and scam naive Westerners into buying into the scam.