Por Moris Beracha.- The announcement of the creation of a cryptocurrency that will be called Petro has raised many expectations. However, knowing the nature and characteristics of this digital asset made it clear that it is not a digital currency – as the well-known Bitcoin – but a decentralized payment mechanism controlled by the government.
The Petro cannot be regarded as a cryptocurrency because, firstly, it is issued by a government, that is, it lacks a global community of people better known as Blockchain.
Blockchain is a database created and designed that cannot be modified. For this, there is a system called trusted timestamping and it is linked to a previous block.
By definition, the Petro cannot be considered a cryptocurrency, since these digital currencies can be exchanged and operated like any other traditional currency without the control of governments and financial institutions.
A few days ago the Venezuelan government announced the issuance of 100 million “petros”, and as it was expressed is a digital currency unit that the Executive has defined as “the cryptocurrency of Venezuela” equivalent to the value of the barrel of Venezuelan oil in the international market.
If applicable, the Petro is not a cryptocurrency but a payment mechanism, something very different from the definition and concept of digital currencies.
According to the concept of Petro, the absence of anonymity and the existence of an intermediary are the key to its distribution and commercialization, which makes it something unrelated to virtual currencies.
The Petro cannot be mined freely
Unlike the virtual currencies existing in the world. In addition to this, the allocation mechanism will be through a system similar to that of auctions managed by the government.
Mining is a mechanism through which cryptocurrencies such as Bitcoin or Ethereum are generated using certain algorithms. To obtain these currencies and carry out transactions, it is necessary to create new blocks and approve transactions.
Hence, the existing premise is that in any traditional currency system, governments simply print more money when they need it. Instead, cryptocurrencies are not created but discovered. Thousands of computers around the world “mine” bitcoins competing with each other.
The Petro lacks a backup asset, because Venezuela’s proven reserves, according to the constitution, cannot be sold or compromised in the future.
The Venezuelan government has demonstrated complete incompetence in the management of the economy, both macro and micro. If the actual oil production in Venezuela has decreased in recent years due to lack of investment and management, the Petro will not build confidence and security.