Venezuela is launching a cryptocurrency backed by oil, gas, gold and diamonds

[captain_to_fire]

Source: CNBC

 

Quote

 

Venezuelan President Nicolas Maduro looked to the world of digital currency to circumvent U.S.-led financial sanctions, announcing on Sunday the launch of the "petro" backed by oil reserves to shore up a collapsed economy. The leftist leader offered few specifics about the currency launch or how the struggling OPEC member would pull off such a feat, but he declared to cheers that "the 21st century has arrived!"

 

"Venezuela will create a cryptocurrency," backed by oil, gas, gold and diamond reserves, Maduro said in his regular Sunday televised broadcast, a five-hour showcase of Christmas songs and dancing.

 

The petro, he said, would help Venezuela "advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade."

 

Venezuelan President Nicolas Maduro looked to the world of digital currency to circumvent U.S.-led financial sanctions, announcing on Sunday the launch of the "petro" backed by oil reserves to shore up a collapsed economy. The leftist leader offered few specifics about the currency launch or how the struggling OPEC member would pull off such a feat, but he declared to cheers that "the 21st century has arrived!"  "Venezuela will create a cryptocurrency," backed by oil, gas, gold and diamond reserves, Maduro said in his regular Sunday televised broadcast, a five-hour showcase of Christmas songs and dancing. The petro, he said, would help Venezuela "advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade." Opposition leaders derided the announcement, which they said needed congressional approval, and some cast doubt on whether the digital currency would ever see the light of day in the midst of turmoil. The real currency, the bolivar, is in freefall, and the country is sorely lacking in basic needs like food and medicine. Still, the announcement highlights how sanctions enacted this year by President Donald Trump's administration are hurting Venezuela's ability to move money through international banks.

 

Maduro's pivot away from the U.S. dollar comes after the recent spectacular rise of bitcoin, which has been fueled by signs that the digital currency is slowly gaining traction in the mainstream investment world. The announcement bewildered some followers of cryptocurrencies, which typically are not backed by any government or central banks. Ironically, Venezuela's currency controls in recent years have spurred a bitcoin fad among tech-savvy Venezuelans looking to bypass controls to obtain dollars or make internet purchases.

Is there anyone in the forum who is an economist or is currently taking macroeconomics even just a semester? Because this one from Venezuela looks a lot like the "gold standard". Prior to the fiat based greenback, the US actually used the gold standard.

 

But then Richard Nixon ended the convertibility of US Dollar to Gold back in August 15, 1971 that's why the current dollar's value (an most currencies around the world) derive their value from government decree or the faith of the people to it as a medium of exchange for goods and services, hence it's called "fiat currency". 

 

I used to ignore this cryptocurrency thing until now that almost everyone is talking about it and there are many kinds of cryptocurrency like Bitcoin, Ethereum, Monero, etc and as it turns out you can make money out of it either by mining it yourself or using someone else's computer to mine it for you without consent. I myself still wouldn't consider mining cryptocurrency as my electricity is not free and expensive. Now, Venezuela is trying to bring back something from the past but instead of just precious metals like gold and silver, it will include diamonds and fossil fuels. Correct me if I'm wrong but I think the reason people resorted to paper currency because it's lighter than gold. Hundreds of years ago, people are using gold and silver as a medium of exchange and banks that time are gold keepers and the banks issue pieces of paper stamped corresponding to the amount of gold they deposited. If a person wants to buy something, they have to go to the bank and have their paper certificates presented to have their gold back. But then, people realized that exchanging those pieces of paper is so much easier and more convenient that having gold so they just used those paper certificates as a medium of exchange which led to the "gold standard". 

 

Now with Venezuela, how is this going to play out? You have a cryptocurrency that also doesn't have intrinsic value and would like to use that as another medium for exchange but it is backed by precious metals, stones and fossil fuels. How is this going to shore up one's economy? I'm no economist but as far as I'm concerned, if money supply is inflated without a proportional increase of goods and services will lead to currency devaluation. Would the effect be the same with cryptocurrency? Since the likes of BTC and ETH are purely digital without equivalent paper currency and minted coins, would it offset economic crises as long as it's backed up by oil or diamonds? I don't think so but I could be wrong. I think what Maduro is proposing is a rehash of the "gold standard" but I could be wrong. This is something I personally would keep an eye on. UK and the EU are regulating BTC in order to fight money laundering and terrorism. https://www.theguardian.com/technology/2017/dec/04/bitcoin-uk-eu-plan-cryptocurrency-price-traders-anonymity

Edited December 4, 2017 by hey_yo_

[Nicnac]

Now, can I run my oil rigs in sli for petro mining?

[captain_to_fire]

Just now, Nicnac said:

Now, can I run my oil rigs in sli for petro mining?

Probably in Middle East 

 

 

[Ryujin2003]

#BloodCoin

 

Hm.. wonder what kinds of war we will wage for virtual resources?

[captain_to_fire]

1 minute ago, Ryujin2003 said:

#BloodCoin

 

Hm.. wonder what kinds of war we will wage for virtual resources?

Hacking war possibly. It can also be a state sponsored APT to steal cryptocurrency just like this one. https://www.cnbc.com/2017/09/28/north-korean-hackers-attempts-to-steal-bitcoin-are-a-huge-wake-up-call-commentary.html

[Ryujin2003]

Just now, hey_yo_ said:

Hacking war possibly. It can also be a state sponsored APT to steal cryptocurrency just like this one. https://www.cnbc.com/2017/09/28/north-korean-hackers-attempts-to-steal-bitcoin-are-a-huge-wake-up-call-commentary.html

Grocery store list:

Roll of tinfoil

Popcorn

 

 

But seriously, this is very interesting. How is the Venezuelan government going to control this? My understanding, Bitcoin isn't handled like physical currencies. How is something that doesn't exist get hacked up but something else?

 

Also, in the state side, I know Venezuela gets some... "support" from counties like Russia and China. Do you think these partner more cyber powerful Nations would be required to support an online economy? I'm not sure how this is sustainable

[captain_to_fire]

9 minutes ago, Ryujin2003 said:

But seriously, this is very interesting. How is the Venezuelan government going to control this? My understanding, Bitcoin isn't handled like physical currencies. How is something that doesn't exist get hacked up but something else?

That is something I try to understand. If there's something common with gold standard and fiat currency is that they're both regulated by the government but paper bills under the gold standard can be exchanged for gold whereas fiat is not as its value comes from the faith of the people. What Venezuela is planning to do is kinda similar to gold standard but they're using a virtual currency that isn't exclusive to a single country so I'm not sure how they're going to regulate it.

 

With fiat currency, money supply can be expanded or contracted by the central and commercial banks by manipulating interest rates on loans. Would regulating cryptocurrency be the same as regulating fiat currency or at least something similar to that effect? I don't know.

[Dissitesuxba11s]

18 minutes ago, hey_yo_ said:

That is something I try to understand. If there's something common with gold standard and fiat currency is that they're both regulated by the government but paper bills under the gold standard can be exchanged for gold whereas fiat is not as its value comes from the faith of the people. What Venezuela is planning to do is kinda similar to gold standard but they're using a virtual currency that isn't exclusive to a single country so I'm not sure how they're going to regulate it.

 

With fiat currency, money supply can be expanded or contracted by the central and commercial banks manipulating by interest rates on loans. Would regulating cryptocurrency be the same as regulating fiat currency or at least something similar to that effect? I don't know.

I think that by the definition of a fiat currency, "petro" cannot be considered as such because it is backed by a physical commodity (i.e. gold and oil). It's growth will most likely not fluctuate as much as other cryptocurrencies since the value is tangible. Unless the value of those tangible resources skyrocket, the value of petro will stay stagnant. This might as well be the Venezuelan bolivar, but all in digital form.

 

But, I could be wrong. Since they do not have a clear definition of what it will do other than be backed by those resources, then it could go one way or the other.

[Ekst4zy]

59 minutes ago, hey_yo_ said:

Some nations like the UK and EU are regulating BTC in order to fight money laundering and terrorism.

EU is not a nation man EU is a union of nations.

[The Benjamins]

Currencies "backed by..." is a facade, a scam. You have to trust the person who backs the currency but if they can't be trusted or fail to back the currency then their is no fall back. Whats the point on having a fail safe if its never going to be possible to use it. If shit goes sideways for this coin, their is no way he can payback all the oil (or what ever)

 

Its like having a warranty on a product but the company goes bankrupt. their is no way the company can honor the warranty.

[The Benjamins]

Just now, VegetableStu said:

now the thing is is the president sincere with his intentions but a little misinformed on how things work? or......

Ya, the whole point of a cyptocurrency is to not need this.

 

And I feel the Backed By standard is just false hopes, a joke. 

[captain_to_fire]

25 minutes ago, Ekst4zy said:

EU is not a nation man EU is a union of nations.

Edited it now 

15 minutes ago, VegetableStu said:

now the thing is is the president sincere with his intentions but a little misinformed on how things work? or......

I’m going with the latter given how tumultuous and unstable Venezuela is at the moment. There’s no way a cryptocurrency backed by gold or fossil fuels be able to save a failing economy. 

[Ekst4zy]

Just now, hey_yo_ said:

Edited it now

Nice

[captain_to_fire]

25 minutes ago, The Benjamins said:

Ya, the whole point of a cyptocurrency is to not need this.

 

And I feel the Backed By standard is just false hopes, a joke. 

I can see a scenario where 0.000263 BTC can be exchanged for a gallon of unleaded gasoline. 

Edited December 4, 2017 by hey_yo_

[Dissitesuxba11s]

5 minutes ago, hey_yo_ said:

I can see a scenario where 0.000263 BTC can be exchanged for a gallon of unleaded gasoline and the gasoline. 

For context, at the time of typing this, that is about $2.93 USD.

Edited December 4, 2017 by Dissitesuxba11s
Messed up the decimal point

[The Benjamins]

6 minutes ago, hey_yo_ said:

I can see a scenario where 0.000263 BTC can be exchanged for a gallon of unleaded gasoline. 

we call those gas station in the USA.

[captain_to_fire]

Just now, Dissitesuxba11s said:

For context, at the time of typing this, that is about $29.33 USD.

I Googled $3 to BTC and it gave me that value. I didn’t realize crypto currencies change rapidly 

[Dissitesuxba11s]

Just now, hey_yo_ said:

I Googled $3 to BTC and it gave me that value. I didn’t realize crypto currencies change rapidly 

Sorry, I missed a zero. You're right.

[Matu20]

With all the inflation they have experienced, nothing can really go any worse probably, so lets hope for best that crypto can be the savior.

[Bcat00]

Oh man that country must have hit rock bottom if they wre resorting to this.

[vorticalbox]

1 hour ago, hey_yo_ said:

I Googled $3 to BTC and it gave me that value. I didn’t realize crypto currencies change rapidly 

Bitcoin can change value extremely quickly. I'm still undecided on the whole thing. I've used Bitcoin but it's so volatile. 

[suicidalfranco]

A cryptocurrency centralised and production control and managed by a government...

So basically a new normal currency without the paper for unlimited printing

[WMGroomAK]

Just a personal opinion on this is that it will probably fail miserably.  The biggest problem I can see is controlling the amount of Crypto that is produced, enforcing the use of that Crypto and having resources available to back it up...  If a company is unwilling or unable to go into Venezuela to extract the resources that are backing the currency, then they really have no backing and the more reputable resource extraction companies are less likely to invest in a country where they may not be making a profit or where their operation is more likely to be nationalized.  This could also lead to inflation problems as there will probably not be an easy way to control the flow and availability of the currency.  Basically, once you have the blockchain developed and in circulation, how would they go about removing it from circulation (especially without basically robbing the people who are a part of that blockchain)?  Maybe I'll be proven wrong on this, but I just don't see how this will succeed...

[DildorTheDecent]

Doesn't Venezuela have bigger problems?

[mr moose]

Imagine a single world currency, totally traceable to the last cent?   No more ransoms, no more banks artificially controlling currency values, supply/demand being the driving force again.