Petro and everything you need to know about the crumbling economy of Venezuela

Venezuela’s crisis situation has just gotten worse with the Bolivar, Venezuela’s national currency, seeing a 95 percent drop in value and the government linking it to Petro, an oil-based cryptocurrency.

Recurring reports have shown that cryptocurrencies are not a new concept in Venezuela, with the country seeing a widespread adoption of Dash, another cryptocurrency, just a few weeks back. Sources had shown that over 540 merchants in Venezuela had adopted Dash taking the total number of users of the cryptocurrency to be more than ten thousand.

Sources within the country have also shown that the Bolivar’s value has not stopped its slide, taking inflation to an all-time high. Taking a step that some have labeled as a last-ditch effort, the government of Venezuela has dropped the idea of the established fiat currency system and has decided to bring in cryptocurrency in the picture.

The newly adopted Petro Dollar is stated to be called the ‘Sovereign Bolivar’, a move made by the incumbent president, Nicolas Maduro to restore the faith of the Venezuelan people. With many people questioning the legitimacy of ‘Petro’, pockets of free thinkers have released reports that show that latest economic turn will not do much to hit the brakes on the rapidly ascending inflation rates.

Officials have stated that the by the end of 2018, the inflation rate would have hit 1,000,000%, a grotesque figure even when compared to the times of the Great Depression. The latest move was announced to the people of Venezuela by Maduro, with him saying:

“As of next Monday, Venezuela will have a second accounting unit based on the price, the value of the Petro. It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”

The presence and tie-ups with the infamous PDVSA, Venezuela’s state-owned petroleum organization, is one of the major reasons why the locals do not trust the newly pegged currency. The PDVSA has been in the news several times over the past decade with reported insider trading, rampant frauds and the implication of state officials in the company’s inner workings proving to be the organization’s downfall.

Cryptocurrency enthusiasts, as well as researchers, have stated in unison that the addition of a digital asset to the flailing economy will not have any positive impacts but rather give cryptocurrency adoption a push back to the realm of non-acceptance. With the country’s financial structure lying in ruins, reports have shown that the population has no choice but to adopt Petro.

What is Petro?

Popular opinion across media platforms has tried to portray Petro as an established cryptocurrency, but verified reports have shown that it is anything but. CoinMarketCap, the platform that lists all tradeable cryptocurrencies in the world, does not display Petro but statistics have shown that a lot of users mistake it for the already existing PetroDollar.

Petro came into the picture for the first time in December 2017 when the Venezuelan government released its whitepaper on it. To build the value of the cryptocurrency, the government had allocated 5 billion barrels of oil to it. This move was intended to transfer the trust that people had in oil to the upcoming cryptocurrency. Sources have said that each Petro coin will be backed by the price of a barrel of oil, taking the country back to its oil-dominated economic environment. The value assigned by the government right now is $60 to each crypto coin, just above the currently assigned value of $42 for a barrel of oil.

The news drew a lot of criticism on social media channels with people giving statements such as:

“Hey, dropping zeros on all prices will ABSOLUTELY fix the ‘temporary’ problem down south… thank goodness the VZ’s have a bus driver at the helm when they needed him most… all is well… go back to your homes and don’t listen to you and your family’s stomachs growling…”