The First National Cryptocurrency is Here. But is it Working? 0 5596

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.

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A tribal member of the Choctaw Nation, Brian grew up in the Silicon valley under the technological mentorship of Steve Wozniak. He's lived, worked and traveled all over the world, and now writes and makes films in the Pacific Northwest.

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The Block Talk Award Winners Announced 1 1110

Thanks to everyone for submitting your favorite blockchain innovators and influencers. Our editorial team had a great time learning about new projects and individuals that are building a foundation for our future with blockchain technology, and realizing amazing technological feats in the present.

While it was difficult to select just one project or individual in each category, we’re excited to announce the winners of our first inaugural Block Talk Awards.

  • Best ICO Analysis & Commentary – Tatiana Koffman, Various Outlets
  • Most Engaged Community – Rod Turner, Various Outlets
  • Favorite Blockchain Blogger – Rachel Wolfson, Forbes
  • Best Crypto Journalist – Jordan French, The Street
  • Innovative Female Founder – Amber Baldet, Clovyr
  • Best Podcast Host(s) – Joel Comm and Travis Wright, Bad Crypto
  • Favorite Blockchain Event Host – Adryenn Ashley,
  • Top Crypto Speaker – Ian Balina, Crypto World Tour
  • Most Innovative Blockchain CEO – Trevor Koverko, Polymath
  • Top Social Entrepreneur – Evan Caron, Swytch

Winners in each category will receive a $1500 media credit on The Block Talk, access to a network of TBT Award honorees, and VIP access to TBT events in 2019.

Defrauding Crypto CEO Josh Garza  Sentenced in Landmark Case 0 98

The disgraced former CEO of fraudulent crypto company GAW Miners has reached the end of a legal saga spanning more than three years. Josh Garza has been sentenced to 21 months in prison and payments of $9,182,000 in damages. His prison term will be followed by three years of supervised release, including six months of home confinement.

US Attorney for the District of Connecticut John H. Durham announced the sentence, which follows Garza’s guilty plea to wire fraud.

How GAW Miners Lost Their Zen

GAW Miners started as a cloud mining service. Fraud allegations began to emerge in 2014, and formal charges followed. The SEC accused GAW with acting as a Ponzi scheme by selling more crypto mining power than they really had. Around that time, GAW also peddled its token, PayCoin, which they promised had a $20 ‘floor.’ That floor dropped out in 2015, to the ire of beswindled token holders. By the end of January, one PayCoin was worth less than $2.

According to the Department of Justice, Garza “stated that the market value of a single paycoin would not fall below $20 per unit because Garza’s companies had a reserve of $100 million that the companies would use to purchase paycoins to drive up its price. In fact, no such reserve existed.”

Nor did an $8 million transaction in which GAW’s parent company allegedly purchased controlling shares of ZenMiner (another company founded and operated by Garza). “Garza made multiple false statements related to the scheme,” the release states, “to generate business and attract customers and investors.”

The PayCoin collapse initiated the undoing of GAW and ultimately of Garza. GAW tried to bounce back with some unsuccessful endeavors like a crypto exchange called Mineral and a platform for making Amazon purchases called CoinStand, before the company went into default for failing to pay their power bill.

The truth eventually began to come to light after internal emails and documents surfaced, after GAW went under separate investigations by the SEC and the DOJ. A few years later, these investigations have finally resulted in Thursday’s sentence.

Justice and Fraud in CryptoSpace

The sentence is a win for the Department of Justice, which has been puzzling over how to govern the crypto world, and could set precedents for following cases, including investigations already underway.

A Bloomberg study has found that over 80 percent of ICOs are scams. Meanwhile, TechCrunch reports that over 1,000 crypto projects have failed in 2018, and $1.1 billion in cryptocurrencies have been stolen this year, according to CNBC.

The crypto landscape and the justice system clearly have some reckoning to do, but investors need to exercise serious caution in the meantime. Although Garza’s sentence sets a precedent, it’s based on a situation that’s not necessarily unique.

Garza’s Sentence May Not Satisfy Defrauded Victims

Critics of the sentence have pointed out how with good behavior Garza could be out in 18 months, a light load considering his fraudulent acquisitions through PayCoin could’ve totaled $20 million by some estimates, and considering the 20 years of prison time per infraction Garza was facing in court. The lighter sentence was part of a plea deal.

While Garza denied all charges at first, he expressed remorse about his actions in a courtroom statement Thursday, according to CoinDesk. Garza is ordered to report to prison on January 4th, 2019.

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