- Petro is cryptocurrency, created by the Venezuelan government to control inflation.
- Its value is tied to the price of oil in an effort to keep it stable.
- Venezuelans are using Dash instead, due to its speed and reliability.
Venezuelan president Nicolás Maduro just ordered every bank in the country to adopt its new cryptocurrency: the petro.
Maduro has hailed petro as a savior to Venezuela’s economic trouble, but the US authorities call it a scam. So what exactly is it and are Venezuelans using it?
An answer to hyper-inflation?
Venezuela’s economy is crippled by hyper-inflation. In July alone, prices rose by 82,766%. The country is now on track to hit 1,000,000% annual inflation.
Millions have fled the country, food and medicine supplies are low, and the army is guarding the Brazilian border.
Maduro’s solution was to replace the hyper-inflated “bolivar” with a new currency, “sovereign bolivar.”
The sovereign bolivar was then pegged to a cryptocurrency, petro.
Petro is backed by oil
The idea is to keep petro (and therefore the new sovereign bolivar) stable by tying its price to that of oil.
One petro is worth roughly $60, the same price as one barrel of Venezuelan oil. The concept was outlined in the project’s white paper, with a view to creating a currency backed by raw materials.
The Venezuelan government set aside five billion barrels of oil to back the currency.
Petro is entirely controlled and produced by the government. It was pre-mined before Maduro announced a crypto sale.
According to the government, the pre-sale generated billions, but there is no record of this claim.
Why is petro controversial?
When Maduro created the new sovereign bolivar and petro, it devalued the old currency by 95%. Although it aims to bring stability, Venezuelans are being forced to adopt a wildly devalued currency.
Some have claimed the petro is also being used to sidestep international sanctions. The country is reportedly using the petro to conduct deals with Brazil, although Brazil has not confirmed this.
Donald Trump issued an executive order banning any US companies making transactions in the cryptocurrency.
Why Venezuelans are using dash instead
Despite the hype around petro, Venezuelans are flocking to dash. Dash was built on bitcoin’s source code and aims to be a global, digital form of cash.
The adoption in Venezuela is so rapid, the price has risen 10% in the last 24 hours alone.
According to Ryan Taylor, CEO of Dash Core Group:
“We are seeing tens of thousands of wallet downloads from the country each month. Earlier this year, Venezuela became our No. 2 market, even ahead of China and Russia, which are, of course, huge into cryptocurrency right now.”
Retailers like Subway and Calvin Klein are now accepting dash in Venezuela.
But why dash? The cryptocurrency is faster than bitcoin and more decentralized than petro. As the crisis in Venezuela continues, expect cryptocurrencies to make further headway. Just don’t bank on it being petro.
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