Issuing a national cryptocurrency opens up a can of worms. Venezuela is finding this out the hard way. Their Petro cryptocurrency is not gaining the traction nor the reputation government officials had hoped for. This only adds more problems to the uneasy financial situation in the country.
The Petro is not Performing as Planned
A lot of things have gone wrong for Venezuela over the years. Financial is management caused the bolivar to become all but worthless. Solving this problem by issuing the Petro cryptocurrency has not played out that well. It is tied to Venezuela’s vast oil reserves. Unfortunately, the cryptocurrency cannot be used for most mainstream purposes.
Fighting hyperinflation is never easy. In Venezuela, many different options have been tried and abandoned. The sovereign bolivar is the latest example of a very desperate attempt. The sovereign bolivar has its value tied to the Petro. This adds even more problems for Venezuelans attempting to escape the downward spiral of economic setbacks. It does not address the core issues plaguing the country today.
Being the first-ever state-backed cryptocurrency is a valuable label for the Petro. Unfortunately, it will also determine the potential fate of similar projects currently being mulled. The current model in use in Venezuela does not instill a lot of confidence. In fact, it may dissuade other governments from exploring this option altogether.
Impact on the Blockchain Industry
One could argue the Petro will impact the blockchain industry as a whole. If that is the case, things do not look overly promising. The state-backed cryptocurrency lacks all aspects which should make it tick and appealing. There is little to no transparency, it has no real use cases, and cannot be redeemed for a barrel of oil.
Because of the “dodgy” nature of the Petro, this project gives blockchain a bad reputation. This technology is designed to be transparent and establish trust. Unfortunately, no one really trusts the Petro or the “blockchain” powering this venture. With no primary selling points to speak of, it highlights the lack of understanding of how the technology works.
For the cryptocurrency industry, this is not a good development either. Consumers already distrust Bitcoin, let alone the altcoins. This government-issued Petro only adds more fuel to the proverbial fire. Its entire concept borders on fiction, rather than usability and economic change. Those are aspects other cryptocurrencies struggle with as well, despite their honest intentions.
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