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Venezuela's government wants to launch a cryptocurrency this month, but analysts are not giving it much of a chance. The program is called "petro": The value of each unit of currency is to be covered by one barrel of crude oil. In addition, President Nicolas Maduro said in his weekly television show "Sundays with Maduro" that other commodities such as gold, diamonds and gas would serve as security. If "petro" were to be launched in this form in January, it would arguably be the first cryptocurrency whose value would be covered by raw materials.
It would also be the first cryptocurrency to be issued by a state. This would make petro a novelty in two respects. The Venezuelan government is already celebrating its role as a pioneer. Bitcoin, cryptocurrencies — how do they work? However, it is by no means the only institution that has come up with this idea. A cryptocurrency with constant purchasing power, secured by the fact that it can be converted into a selection of several raw materials. As a result, Hanke says, cryptocurrencies could take over the three main functions of money: As a means of payment, for preserving value, and as a unit of value.
At present, they are almost pure speculative investments. Venezuela could well use such a currency because the Venezuelan national currency has long since lost its functionality: According to Hanke's calculations see Tweet , as a result of the economic crisis, the bolivar lost more than 97 percent of its value against the dollar in alone.
The Venezuelan Parliament's finance committee has reported a loss in purchasing power of almost 2, percent for the past year. The government itself has not published figures on inflation for years.
According to the economist, Hanke, the Petro currency is doomed to failure, because the Venezuelan government is completely incapable of providing the promised raw material security. They have a lot of oil reserves, but oil production is declining," he says. Despite the world's largest verified oil reserves, the South American state is on the verge of bankruptcy. On Wednesday, the Wall Street Journal wrote: On the other hand, a commodity-based cryptocurrency such as Hanke imagines, would have a physical and therefore measurable equivalent - it would be a kind of quickly tradable commodity-ETF based on Blockchain technology.
An ETF exchange-traded fund is an investment fund that is traded on the stock exchange. Bitcoin and most other cryptocurrencies are also based on the so-called Blockchain technology.
All transactions in a chain are recorded anonymously in blocks, so that every attempt at manipulation becomes immediately obvious to the users. On the basis of this principle, cryptographic currencies function without a supervisory authority such as a central bank. Of course, such a currency would also be subject to certain fluctuations in exchange rates. Compared to the bolivar, however, it would be as solid as rock. Commodity protection or not - if Venezuela actually launches the Petro in the next few days, it would probably be the first government with its own cryptocurrency.
However, it should not remain the only one for too long. Virtually all major banks are looking closely at Blockchain technology. And even in a small country such as Estonia, they are working on it. On New Year's Day, the "Financial Times" reported that Sergei Glazyev, economic advisor to Russian President Vladimir Putin, was talking about a "cryptorubel" that should help to circumvent the West's economic sanctions.
This would make the country independent of the so-called SWIFT system, which currently has a de facto monopoly on international payment transactions. The Venezuelan government could have something similar in mind with petro. Although, the country has not been threatened with an exclusion from SWIFT, which makes Maduro's declaration that he wants independence from the international financial system in order to save the Venezuelan economy less plausible.
A working cryptocurrency would give them the opportunity to access their money again. A solid petro may therefore be Maduro's urgent concern. But the technology behind it is quite sophisticated. JHU economist Hanke is scornful: He told the English-language online newspaper "Peru Reports" that the basic structure of a cryptographic currency is not too difficult, since almost all existing cryptographic currencies are open source projects with open programming codes.
Miners provide the system with the processing power of their computers and thus form a decentralized control authority. The more users and miners a cryptocurrency has, the more secure it becomes. But that is exactly what petro could lack, because first of all, mining requires a lot of computer capacity and thus electricity, which is already extremely scarce in Venezuela. The second prerequisite would be the trust of these users and miners. But if a government has a history of injustice against the population, it will hardly change its behavior because it attaches itself to a buzzword like cryptographic currency.
Hanke has already advised numerous governments on currency reforms and currently heads the "Troubled Currency Project" at the Cato Institute in Washington. For the Venezuelan government, he has a simple tip if it really wants a stable currency: He should get rid of the bolivar and replace it with the US dollar. Violent protests erupted across the country following a Supreme Court decision in late March to strip the legislative branch of its powers. Amid an international outcry, President Nicolas Maduro reversed the decision, but it was too late.
Thousands have since taken to the streets to call for new elections. They show no signs of stopping. Shopping trips now require stacks, or even bags, of cash to buy the bare necessities.
An estimated 80 percent of food items and other basics were in short supply by last year. Venezuelans spend more than 30 hours a week waiting in lines to shop, and are often confronted with empty shelves when they finally enter a store. President Maduro blames the crisis on US price speculation. The opposition, however, accuses the government of economic mismanagement. In Colombia, Venezuelans are collecting medical supplies to send home, as seen in this picture. Hospitals around the country have compared conditions to those seen only in war zones.
As patient deaths rise, health officials have sounded the alarm on the rise of malaria and dengue fever. Electricity blackouts and fuel shortages have also driven Venezuelans to desperation. Despite Venezuela's possession of the world's largest oil reserves, drivers face long lines at the gas pump. A percent collapse in oil prices in devastated the oil-dependent economy.
Lower poverty rates, better education and health, and economic growth: These are all part of the legacy of Venezuelan leader Hugo Chavez, who died in Equally part of the socialist's legacy was mismanagement.
Not only did he fail to keep the state oil company up to date under increased government control, but his government also overspent despite a drop in oil production after Chavez's hand-picked successor, Nicolas Maduro, has been in office for four years and has two more to go.
The opposition center-right coalition, which has controlled the National Assembly since , has accused him of "abandoning his post" by failing to stem the economic devastation. It has also denounced him for rights abuses. From the governor of Miranda to the mayor of Venezuela's capital Caracas, authorities have attempted to quash anti-government protests by arresting its opposition leaders.
Venezuelan authorities have detained Leopoldo Lopez, Antonio Ledezma and Henrique Capriles, considered the face of the opposition movement. Aside from protests, the opposition collected 2 million signatures for a referendum last year, roughly 10 times the number required.
And in a move against the Supreme Court - and in lieu of impeachment hearings - it also held a symbolic trial for Maduro. Numerous attempts to stymie its efforts to pressure the government have only emboldened these lawmakers.
Since the outbreak of explosive protests in April, scores of people have died and hundreds more have been injured. Rights campaigners say police have arrested thousands. Meanwhile, the government has pushed through with the election of an all-powerful constituent assembly, which critics are afraid will cement Maduro's grasp on power. Venezuela's pro-government constituent assembly has adopted the authority to pass legislation on a range of issues affecting security and sovereignty, effectively taking away the powers of the country's congress, which was under the opposition's leadership.
During its first session, the National Assembly fired former top prosecutor Luisa Ortega, who subsequently fled to Colombia. In response to the ongoing political crisis, the United States and European Union have imposed a series of sanctions against ruling officials.
The EU, meanwhile, has banned arms sales to the country and is lining up to freeze assets and impose travel restrictions. US and EU sanctions, however, have limited the chance of an agreement.
Whatever the consequences of a default, creditors will almost certainly go after the country's oil reserves. Cryptocurrencies have grabbed a lot of attention in recent days as the value of bitcoin skyrocketed to hit record highs and Venezuela announced plans to create a digital currency called "petro. Venezuelan President Nicolas Maduro has ordered the release of million units of a new digital currency, the "petro.
The Venezuelan president has announced plans to create a cryptocurrency backed by oil, gas, gold and diamond reserves. He said the "petro" will help combat the US' "blockade" against the oil-rich country. Venezuela is facing collapse amid multiple crises. DW takes a look at what brought the oil-rich nation to its knees. Some of the world's biggest auto companies have teamed up with tech providers and startups to form a consortium aimed at developing automotive uses for blockchain, the database technology known from cryptocurrencies.
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The contract electronics maker's entry has heated up the race for a phone aimed at digital coin aficionados. DW News presents the most important news — in brief, quickly and up-to-date.
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