Bolivar won't stand Bitcoin

How Venezuela fell in love with cryptocurrencies and ignored Petro

The uncomplicated political anamnesis of Venezuela is accompanied by an unexpected plot that not only dilutes the boredom of another conversation about the “orange revolutions”, but also sheds light on serious questions like the historically inevitable moral degradation of any revolutionary process.

The plot in question is the simultaneous rejection of the national currency "bolívar" and the people of Venezuela, and the government of Nicolás Maduro.

The exodus of ordinary Venezuelans into the Dash cryptocurrency is explained by common sense:

where else would you order to go in a state where the annual inflation of national money has reached 373,000 percent (!), and the use of the dollar is prohibited by law?

More difficult with Maduro's motivation. The temptation is great to fall into conspiracy theories and assume that the state cryptocurrency Petro is a false flag operation aimed at discrediting the very concept of cryptocurrencies.

Fortunately, such behind-the-scenes knowledge does not stand up to criticism (I will demonstrate this below), and the appeal of the authorities to cryptocurrencies has the same mundane and mercantile raison d'être as the population reduced to poverty: this is a gesture of last hope.

If there is anything conspiratorial about the Venezuelan cryptocurrency games, it is the jumble of terminology. People's favorite Dash is a real and uncompromising crypt, but the brainchild of Maduro Petro is a profanity - either consciously or by thoughtlessness.

It all started with the fact that in the tenth year of the socialist revolution, the national currency "bolívar" was renamed into "strong bolivar" (bolívar fuerte), unscrewing three zeros from the face value, which had grown in the struggle against world imperialism.

The strong bolivar was fixed at 2.15 per dollar. In 2010, the rate was lowered to 2.60. In 2011 - up to 4.3. In 2013 - up to 10. In 2014 - up to 50.

Since the national currency of the Bolivarian Republic of Venezuela was not freely convertible, “Soviet” games began in 2015: on the black market, the dollar was already given 150, but the official exchange rate of the bolivar fuerte was raised to 6.35.

On August 20, 2018, Nicolás Maduro carried out a second financial reform: he exchanged a strong bolivar for a sovereign (bolívar collected) at the rate of 100,000 "strong" notes for 1 "sovereign".

There was also a revolutionary component in the second devaluation: the sovereign bolivar was pegged to Petro, a national cryptocurrency coined in December 2017.

However, the peg did not benefit the sovereign bolivar: if in March 2018 they asked for 0.75 “strong bolivars” for a cup of coffee in Caracas, today they take 2,800 “sovereign bolivars” for it.

If you remember that five zeros were unscrewed in the summer, it turns out that a cup of coffee costs 280 million old (“strong”) bolivars.

I am listing the figures only because against their background all sorts of talk about the "people's love" for the leader Madura fade. Love for power, which brought the cost of a cup of coffee to 280 million "strong" (sounds like a mockery) bolivars, is an oxymoron, and along the way - and the dry remnant of twenty years of socialist lawlessness in the once richest country in South America.

How did “loving” citizens react to hyperinflation, lack of medicines and toilet paper, restrictions on daily cash withdrawals from bank accounts and accrual of pensions in Petro, which are not accepted in any store? Three million have left, the rest are trying to survive locally.

The topic of cryptocurrencies would never have arisen in Venezuela if the authorities had not banned citizens from using freely convertible money. Of course, despite the prohibitions, a black currency market operates in the country, so, it would seem, you exchanged rubbish of sovereign bolívars for enemy dollars and enjoy life.

The problem, however, is that inside the country people have nothing to exchange.

The average salary is four dollars a month, and it is also paid in bolivars. By the time you reach the local currency speculator, the notes will depreciate to three dollars.

The entire parish, which there is, is the earnings of relatives and friends who emigrated to Colombia, Argentina, Brazil and further throughout America. How, however, to send their money to Venezuela, if it is forbidden to use convertible currency?

This is where cryptocurrencies come to the rescue. At first, bitcoins were used, although this decision might seem strange: didn’t bitcoin depreciate on the exchange from 19 thousand dollars in December 2017 to 4 thousand today?

The Venezuelans, however, compared the exchange depreciation of bitcoin with a cup of their native coffee for 280 million bolivars, and the emotions were removed like a hand.

Problems with bitcoin arose where they were least expected. It was not weak anonymity, not high commissions and slowness of transactions, but technical complexity that turned ordinary Venezuelans away from the cryptocurrency pioneer. Blockchains, virtual and cold wallets, exchanges, exchange offices, and most importantly, an indispensable condition for owning a computer or smartphone - these are the circumstances that prevented the mass distribution of bitcoin in Venezuela.

What kind of computers and smartphones can we talk about in a country with an average wage of four dollars? A small part of the population, of course, resolved the topic and adapted bitcoins to solve problems with savings and cross-border payments, but most Venezuelans were left out of this holiday.

Why did ordinary Venezuelans choose Dash among more than 1600 cryptocurrencies?

The question itself is wrong here: it was not the Venezuelans who chose Dash, but Dash chose the Venezuelans!

The organizers of this cryptocurrency have made truly heroic efforts to make it understandable and accessible to the general population.

Dash as a cryptocurrency is certainly endowed with objective merits: it is an open and decentralized payment system with true anonymity, an instant transaction service, symbolic commissions and the absence of intermediaries. However, Monero, and Zcash, and XLM, and IOTA, and a couple of hundred more cryptocurrencies have the same advantages.

The Dash Skate is a unique form of adaptation designed specifically for Venezuela. In August 2018, the Dash team entered into an agreement with smartphone manufacturer Kripto Mobile, which added a budget model to its lineup with a built-in set of applications for using this cryptocurrency as a payment instrument.

The next step is the launch of the Dash Text service and an agreement with the largest mobile operators in Venezuela, Movistar and Digitel, on the use of SMS messages to create a wallet, send and receive cryptocurrency.

It was Dash Text that gave this cryptocurrency a decisive advantage over competitors in Venezuela, as it allowed users to store money and make transfers for users who did not have computers, tablets, or smartphones.

To fully work with Dash in Venezuela, a cheap feature phone is enough.

Let's talk about Petro now. The national cryptocurrency was announced by Nicolás Maduro in December 2017, right at the peak of the exchange crypto bubble, and this temporary coincidence certainly strengthened the revolutionary rhetoric of “monetary sovereignty” and “breaking the financial blockade”.

The key problem of the Venezuelan economy of the last 20 years stems from one juicy inconsistency in power. On the one hand, the revolutionary government fought fiercely against world imperialism, not only in words but also in deeds, by nationalizing foreign property.

On the other hand, the puppeteer and bugbear of this very world imperialism - the United States of America - until the very last moment remained the main trading partner of Venezuela.

At some point, the puppeteer's patience ran out, and in response to another batch of revolutionary curses, he slammed the feeder.

In the conditions of the most severe economic and financial crisis, the Maduro government could only prolong the agony by gaining access to cheap loans. And then some technologically advanced minister came up with a cunning trick with the "cryptocurrency" Petro.

I use quotation marks not for the sake of style, but to emphasize the true state of things. Petro has never been a cryptocurrency , but has always been a token , besides a vague etiology.

Cryptocurrency is a unit of account, transactions with which are carried out in a decentralized, cryptographically secure database - blockchain.

A token is a debt obligation or a contract for the provision of services in the present or in the future.

Petro never had its own blockchain. At first, it was stated that the “national cryptocurrency of Venezuela” would exist on the Etherium blockchain, that is, in the form of an ERC-20 token. Then the documentation was changed, transferring the "cryptocurrency" to the NEM blockchain. At the last moment, they changed their mind again and "registered" in Etherium.

There is no need to talk about any decentralization of Petro: formally, the Maduro token is pegged to the cost of 1 barrel of Venezuelan oil, but this cost is determined not by the market rate (which runs in the range of $42–72), but by decrees of the President of the country. In addition, the oil reserves of the Ayacucho 1 field in the Atapirire region, which have never been developed by anyone, are offered as collateral for the “cryptocurrency”.

In August 2018, the Petro was declared "legal tender", mandatory for acceptance in Venezuela, tied to it "sovereign bolivar" (1 Petro = 3600 "sovereigns"), and then - prices and salaries.

In December, pensions began to be accrued to pensioners in Petro, which it is not clear how and it is not clear where to buy goods: local stores do not accept pseudo-cryptocurrency.

To top it off, the National Assembly (the one with Juan Guaido) stated that the Petro project violated three provisions of the Constitution at once: a ban on the creation of alternative means of payment, a ban on burdening the state with international debt obligations without the permission of parliament, and a ban on the use of raw materials as security pledge of international obligations.

Outside of Venezuela, there are no discrepancies in understanding the essence of the “national cryptocurrency”: analysts define Petro as a veiled attempt to forward the sale of Venezuelan oil. In the crypto industry itself, even greater clarity reigns:

An independent public catalog of initial offerings of tokens (ICOindex) rated Maduro's brainchild with a Scam rating (scam, financial fraud).

This story is instructive primarily because it demonstrates how flexible terminology is today. It would seem: how can you call a cryptocurrency something that is devoid of the key features of a cryptocurrency - decentralization and anonymity?

It turns out that it's possible. Read the mainstream press and you will see that the Petro token, whose exchange rate is determined by presidential decree, is persistently referred to as “cryptocurrency”, thereby misleading readers.

One thing pleases: these terminological distortions have nothing to do with the Venezuelans. For Venezuelans, Petro was and remains a fiction, and the last refuge from poverty is given to them by the most real crypt - Dash.