The Petro: Sovereign Cryptocurrency died at birth

By Luis Manuel Aguana

From that article written in September of 1970 by Peter J. Denning in the ACM Computer Surveys, "Virtual Memory", that revolutionized in 37 pages the IT industry, maybe the post of Satoshi Nakamoto in his mailing list of cryptography would do the same to the global payment system in May 2009 by publishing "Bitcoin: A Peer-to-Peer Electronich Cash System" (see original in https://bitcoin.org/bitcoin.pdf) in 9 pages. That is why I have always thought that it is not the quantity of what is written but the importance of what is written. Fundamental difference ...

Nakamoto, apparently the pseudonym of a group of experts in cryptography, invented a technology that, according to The Economist, "could radically alter the international financial system ... It would eliminate the need for trusted third parties such as central banks in the transmission of money, could reduce the cost of credit cards and other fees in transactions, and attract those who defend privacy "(Satoshi Nakamoto, in https://en.wikipedia.org/wiki/Satoshi_Nakamoto).

Pero esto último –la privacidad- claramente se perdería si alguien controla el sistema. La idea precisamente es que el mecanismo este construido sobre la base de que nadie lo controle a fin de que no pueda existir la emisión inorgánica de dinero, así como la identidad de quienes transan operaciones financieras a través de ese sistema.

Esto es lo que precisamente desean realizar algunos países como Rusia, China, Irán, India, Estonia y ahora Venezuela, al crear las ahora llamadas “Criptomonedas Soberanas”. Efectivamente Maduro y su régimen pretenden burlar el sistema de pagos internacional creando una criptomoneda denominada Petro, a la que al parecer pondrán un peso específico importante para transar lo único que exporta Venezuela: Petróleo.

From a recent interview taken from the Eurasia Group's periodic bulletin, Signal (https://medium.com/signal-geopolitics-made-simple/bad-algorithms-fake-money-and-pissed-off-princes-c98c37adf73b) entitled " Bad algorithms, Fake Money, and Pissed-Off Princes ", its editor Willis Sparks, expert in current geopolitics and US foreign policy, interview Kevin Allison specialist in the intersection between technology and geopolitics of the group. From there we extract some interesting answers in relation to the Petro:

“Hey Kevin, what’s a sovereign cryptocurrency?

Good morning, Willis. It’s digital money that uses clever computer code to let people buy things without going through a bank or other financial intermediary. Bitcoin, the first cryptocurrency, was created as an alternative to government-issued fiat money. But a sovereign digital currency would be issued by the state — in the case of the petro, a government in Venezuela that has presided over disastrous hyperinflation.

How is a cryptocurrency different from the money in my wallet?

Your cash, known as fiat money, is backed by a central bank, which can fire up the presses and print more. Cryptocurrencies are backed by code, which makes their total supply a design decision. The total number of Bitcoins that can ever be “mined” was hard-wired into the programming from the start. Other currencies, like Ethereum, don’t limit the number, but that could change. Governments will have to decide whether their cryptocurrencies’ supply would be fixed or variable.

Why would a government want a sovereign cryptocurrency?

To revolutionize commerce and governance by creating a decentralized, tamper-proof method of registering changes in — OK, just kidding. Venezuela’s government probably just wants to raise cash, evade sanctions, and counter US influence. By cutting out financial middlemen like banks, cryptocurrencies exist outside the global payments system, which runs on the US dollar. While some countries are eyeing other benefits, there’s a reason why it’s Venezuela, Russia, and Iran that are most aggressively investigating sovereign cryptocurrencies.

Why would I want to buy a sovereign cryptocurrency?

You’re right to wonder. Is the cryptocurrency secure? Is it easily convertible into cash? Would transactions be anonymous, or would they be tracked? These are open questions.

Should I care about this?

It will create financial opportunities that might not be available today in countries with underdeveloped banking systems. We should all care about that. On the flip side, national cryptocurrencies might also make it easier for governments to track what you buy and sell. That should worry anyone who cares about privacy.(highlighted our).

The creation of a digital currency involves a system of trust in the code that is scattered on thousands of computers around the world that deal with carrying the reliability of the transaction you are making. It is not backed, as Allison rightly points out, by a Central Bank like the money we have in the bank. It is clear that unlike Bitcoin and the other current cryptocurrencies, this new sovereign cryptocurrency would break with the decentralized control scheme that seeks precisely to escape those who have shown to have violated the value of money for all.

Already for that fact alone, why would anyone outside would want to buy or trade with Petros or any sovereign currency? The scheme has already indicated that payments for crude oil shipments would be traded in Petros. This means that buyers should go online to look for Petros to pay the Venezuelan government for crude oil. But would the suppliers of goods and services required in Venezuela be willing to receive Petros for their goods? Will it be easily convertible to dollars for them?

The regime would have to create the day before yesterday a system of international trust such that the world's suppliers would be willing to risk trading their dollars for Petros just to provide this country whose credibility is in the ground only because some advisers told Maduro that this was the solution to the financial disaster we are in. And that trust is not overnighted by a Miraflores decree.

From a technical point of view, the government can put its technicians to work to "mine" Petros. But it also has to get many people to do so around the world, not only here in Venezuela, precisely to create the incentive to trade that sovereign criptocurrency in a real exchange currency like the dollar, which it requires in order to make payments in the international financial system. But what would be the use of that if there is no market confidence?

Finally, and most importantly, privacy: will providers around the world want to submit to having their transactions carried out and monitored by a system of a totalitarian, Castro-communist regime through an electronic system of sovereign payments? I think that question buries Petro as a Sovereign Cryptocurrency before birth...

Caracas, January 15, 2018

Twitter:@laguana

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