The First National Cryptocurrency is Here. But is it Working? 6 6811

A few months ago, Venezuela became the first nation to adopt a crypto as their primary currency.

Announced in December 2017 and launched in February, the Petro became official legal tender on April 9th. Unlike many tokens, the Petro is reportedly backed by natural resources. And it’s not gold. Each token sells for the price of a barrel of oil (about $74). President Nicolás Maduro claims to have raised $735 million in the initial sales of pre-mined coins, but has offered no supporting evidence.

The maneuver could pave the way for other countries to officially adopt cryptocurrencies. But the unstable situation in Venezuela makes the Petro’s future far from certain, even by crypto standards.

Petro’s Problems

The Petro, which ICO bench rates at a dismal 1.4 out of 5 stars, is “an instrument for the Bolivarian Republic of Venezuela’s economic stability and financial independence.”

Though allegedly backed by the country’s estimated 5 billion barrels of oil, the Petro’s legitimacy on global markets is shakey. President Trump reinforced US sanctions with Venezuela by signing an executive order to ban all US citizens from dealing in Petros. US officials were quick to call the cryptocurrency a scam, and some major media publications have stepped up to circulate that party line.

Vote for Petro

The Petro also faces resistance within Venezuela, notably from the opposition-lead National Assembly, part of the government’s legislative branch. The Assembly declared the ICO illegal and unconstitutional, saying Maduro did not receive their approval to launch it, a step made necessary by Venezuela’s own laws. They went even further, warning potential investors of threat. National Assembly deputy Marialbert Barrios publicly decried Petro promoters as “smoke peddlers,” while fellow deputy Jorge Millán stated “this is not a cryptocurrency, this is a forward sale of Venezuelan oil. It is tailor-made for corruption.”

So who voted this in? President Maduro, who some say fraudulently re-elected himself in May for another 6 year term, pushed the program through himself. He hasn’t pretended the Petro isn’t a way to circumvent international sanctions, calling it a crypto that can take on “Superman” (e.g. the US). But critics aren’t buying it. Some assert that in addition to not really being a cryptocurrency, Petro isn’t even backed by oil.

Can Petro Feed Venezuela?

The ICO is ostensibly a last ditch effort by the Maduro regime to salvage Venezuela’s destitute economy, which has been teetering toward total collapse over the past few years. Inflation went up 4,068 percent in 2017. Some hungry Venezuelans are crafting handbags out of the worthless banknotes they can no longer use to buy food and medicine, trying to literally weave some value out of their paper money.

The people of Venezuela continue to protest, flee the country, or struggle to survive ordinary life. Jonathan Wheeler, a former Goldman Sachs employee and Bitcoin enthusiast, has taken it upon himself to “teach Venezuelans ‘how to fish’” by sending them a Bitcoin infusion.

Clearly, a solution needs to arrive yesterday. Petro may or may not be it.

The World’s Eyes on National Cryptocurrencies

If the Petro doesn’t work, does that mean national cryptos generally won’t work? Not exactly.

Japan already accepts Bitcoin as legal currency, and many stores accept it as payment. Russia, China and Israel are all exploring the potential of a national crypto.

Tunisia was early to the table. Though not a cryptocurrency, it launched a digital form of its national currency in 2015. Sweden is developing the e-Krona for release next year.

The Petro will be a coin to watch not because it’s a good investment, but because of the larger implications it could have on the international stage. When other nations are putting the blockchain to work, we’ll get a clearer picture of the intersection between global governance and decentralized currency. But for now, we have Venezuela as the world’s first example.

Previous ArticleNext Article
I grew up in the Silicon valley under the technological mentorship of Steve Wozniak. I'm a proud member of the Choctaw Nation, I've lived, worked and traveled all over the world, and I now write in the Pacific Northwest.

6 Comments

  1. What’s Happening i’m new to this, I stumbled upon this I have found It absolutely useful and it has helped me out loads.
    I hope to contribute & aid different users like its helped me.
    Good job.

  2. Hey there! I’ve been following your site for
    some time now and finally got the bravery to go
    ahead and give you a shout out from Atascocita Texas!
    Just wanted to mention keep up the good job!

Leave a Reply

Your email address will not be published. Required fields are marked *

Bitcoin Uses As Much Energy As Austria, Could Add 2°C to Earth’s Atmosphere 2,187 14286

Bitcoin mining, it turns out, damages the earth more than more traditional environmental assaults like actual mineral mining.

According to a paper published Monday in Nature Sustainability, the power-hungry Bitcoin mining process consumes more than triple the amount of energy needed to mine the equivalent amount of gold, more than quadruple what’s needed for copper, and more than double what it takes to mine platinum.

Other coins didn’t fare much better. By their measurements, Ethereum and Litecoin consume 7 megajoules of electricity to produce the equivalent of $1, the same energy expenditure as copper mining but more than that of platinum or gold. Monero eats up 14 megajoules to produce $1.

Naturally, these measurements refer to the notoriously variable dollar valuations of such tokens. “While the market prices of the coins are quite volatile,” write researchers Max J. Krause and Thabet Tolaymat, “the network hashrates for three of the four cryptocurrencies have trended consistently upward, suggesting that energy requirements will continue to increase.”

Bitcoin’s Growing Electricity Bill is Bigger Than Some Countries

We’ve long known that Bitcoin is unsustainable. In a 2015 article for Motherboard, Christopher Malmo pointed out that a single Bitcoin transaction used 5,033 times as much energy as a Visa swipe, and could power 1.5 American homes for a day.

The electricity used to crunch Bitcoin code—and its environmental cost—has been growing with its increasing popularity. Digiconomist’s Bitcoin Energy Consumption Index shows Bitcoin currently consuming 73.12 terawatt hours (or 263.232 billion megajoules) of electricity annually. To put that in context, it’s comparable to the amount of energy it takes to power Austria for a year.

That means there are 175ish countries on earth using less energy than Bitcoin (to say nothing of crypto on the whole), while 66 countries consume less energy per capita than one Bitcoin transaction (it takes 94 thousand kilowatt hours of electricity to mine a single Bitcoin).

Iceland, a major hub of Bitcoin mining farms, spends nearly as much energy on Bitcoin as it does powering its residential homes. In this case, the damage is mitigated because most of Iceland’s power comes from renewable energy.

Canada’s Bitcoin emissions are also on the lower end due to renewable energy sources. They’re using this to court mining companies from China, where mining emissions are about four times that of Canada’s. Montreal International attracts foreign investment by calling Quebec the land of “green bitcoin”. This has caught the eye of some Chinese mining companies looking to go overseas as the Chinese government has discouraged expansion and shut down some mining operations altogether.

Depending on Bitcoin’s growth, some have projected that it could use as much energy as the entire world by 2020.

Digital Currency Has a Real Carbon Footprint

Krause’s and Tolaymat’s research reminds us of the sobering reality that all this invisible wealth has real world costs.

For the 30 months they measured between January 2016 and June 2018, they estimate their four featured tokens collectively belched out at least 3 million tons of CO2 emissions, possibly as much as 15 million tons.

These findings follow another study, published last month, which determined Bitcoin alone could add two degrees Celcius to global warming within the next three decades. That’s enough to raise ocean acidity by 29 percent.

Solving Bitcoin’s Energy Consumption Crisis

So what is the solution? If the world were to switch to 100 percent renewable energy overnight, the problem would be moot. But we can’t hold our breath for that. There could be ways of incentivizing clean energy so greener mines reap more coins, or of implementing clean energy in other ways.

It’s also possible to adopt less computationally intensive mining algorithms so the mining computers don’t guzzle as much juice. This would disappoint a lot of old school Bitcoiners who have invested in hardware, but their feelings don’t really outweigh that 2 degrees celcius that everyone will have to live with (or die by).

Whatever the best solution turns out to be, something needs to change soon. Bitcoin is growing up, and it’s time for it to mature into something more sustainable.

Kenya Looks to Blockchain for Affordable Housing Project 9 11442

The “Silicon Savannah” is moving deeper in direction of tech. The Kenyan government has announced a plan to manage the property allocation and funding of 500,000 affordable housing units with blockchain technology.

The units, which the government aims to build by 2022, will be set aside for households with an annual income below 100,000 Kenyan Shillings, about $990 USD. The World Bank estimates Kenya’s gross national income per capita at $1,290, according to Business Daily.

Blockchain will help ensure that the affordable housing is in fact going to those who fall below the average income bracket. Land title fraud has caused problems for Kenyans, as land grabbers target homes and even schools for illegal sales and development. Blockchain’s ability to store verifiable proof of title could help safeguard against fraudsters.

“Kenya will use blockchain technology to ensure the rightful owners live in government funded housing projects,” said Principal Secretary of Housing and Urban Development Charles Hinga, speaking with the World Bank on Monday.

Hinga said the plan will be financed by the National Housing Fund, which will raise over $59.5 million per month to get the project underway. But Cabinet Secretary for Transport, Infrastructure, Housing and Urban Development James Macharia said it will take $31.7 billion to build a million homes, each of which will cost between $3,000 and $30,000. Macharia called for support from private sector financing.

Under the financing plan, working Kenyans will contribute 1.5 percent of their salary, which will be matched by their employers. “On affordable housing one should not spend more than 30% of their disposable income for housing,” Hinga tweeted yesterday. “Anything above 30% is not affordable.”

A Trustless Relationship Between People and Government

The initiative represents a considerable push to solve housing and title problems for the nation’s lower income families. But how will the government decide to whom the housing units will go? With so much talk about financing underway, people are already calling on the government to outline a plan for how they’ll distribute the affordable housing units.

The government will need to deliver the housing projects in a time when, Hinga acknowledges, the public is skeptical. Earlier this year $78 million went missing in a corruption scandal involving the National Youth Services. Where there is little trust between the people and their government, Kenya hopes to establish transparency through the blockchain’s distributed ledger system.

Kenya’s Move Toward Tech

In March, Kenya’s Ministry of Information, Communications and Technology appointed a blockchain taskforce to explore the ways the nation could use blockchain technology in the public and private sectors. They called it the Distributed Ledgers and Artificial Intelligence taskforce, and by September its chairman, Bitange Ndemo, was calling on the government to tokenize the economy.

Ndemo also proposed government implementation of blockchain to certify the authenticity of retail goods, so consumers can be sure of where their food is coming from, for example.

Governor of Kenya’s central bank Patrick Njoroge has also voiced support for the use of blockchain technology to strengthen service delivery, although he’s opposed the use of tokens and digital currencies.

But the affordable housing initiative could be the Kenyan government’s first real world implementation of the blockchain.

Most Popular Topics

Editor Picks