Venezuela has made history as the first country to launch its very own Initial Coin Offering. The long-hyped Petro cryptocurrency has been the center of controversy and curiosity to many in the crypto-world for the last several months, and now it’s finally here.
Or is it?
According to President Nicolas Maduro, the pre-sale has gone smoothly. Even major media organizations are suggesting that it has been a success, quoting Maduro’s figure of $735-million raised on the first day, which would make it the second largest ICO ever following Telegram’s $850-million pre-sale.
But let’s take a look at what’s really happening.
Leading up to the pre-sale, it was said that the Petro was to be an ERC20 token on the Ethereum blockchain, coded as a smart contract. The Spanish-version whitepaper still reflects this plan. Additionally, an ERC20 token called the Petro (PTR) was, in fact, created.
Then, in a meeting with the Organization of Petroleum Exporting Countries (OPEC), Maduro unsuccessfully attempted to pitch the Petro to the oil cartel. After failing to recruit allies to the cause, Maduro made a suspicious last-minute announcement that the Petro was to be listed as an asset on the NEM blockchain instead of the Ethereum blockchain, even updating the English-version whitepaper to reflect the change. NEM officials quickly confirmed this switch, though noted that the foundation does not make political endorsements.
Think the token madness stops there? Guess again.
Another completely unrelated coin called the PetroDollar (XPD) saw a near 100 percent increase following the launch of Venezuela’s Petro.
To make matters worse, a number of scams have popped up declaring that they’re the real Petro, attempting to pray on those legitimately interested in purchasing the token.
Motherboard suggested that the launch was “Amateur hour,” but are these huge missteps really just the result of a poorly planned project with little know-how?
In the Petro’s original announcement, Maduro proudly proclaimed that the cryptocurrency would be used to overcome Western sanctions, after which, officials worldwide issued warnings against the cryptocurrency. Even Venezuelan lawmakers shot the idea down, claiming that it would be illegal according to the country’s hydrocarbon laws.
“This is not a cryptocurrency, this is a forward sale of Venezuelan oil,” adding “It is tailor-made for corruption,” Jorge Millan, Chief of the First Justice fraction in the National Assembly, noted.
The Assembly’s ruling on the subject led Maduro’s team to rethink what would determine the value of the token, resulting in a seemingly random reference price of US60 per coin.
Venezuelan computer scientist-living-in-Panama Alejandro Machado noted: “They set it at $60 because they liked the number, easy as that,” adding “a Venezuelan barrel of oil isn't worth $60 on the ground, it isn't worth $60 even when loaded on a tanker”
Machado highlighted in his own article published yesterday that nothing has moved from the Petro NEM wallet, making it incredibly unlikely that the $735 million figure commonly quoted is accurate.
Vitalik Buterin noted: “I recall the whitepaper says it doesn't offer oil, it offers bolivars based on the oil price. On top of risk of total default, this gives them opportunity to do a partial default by manipulating the official bolivar rate, which they have a history of doing.”
Clearly the Petro launch has been little more than smoke and mirrors.
But perhaps the most shocking revelation of the entire debacle may be the government’s renewed crackdown on cryptocurrency miners.
Early in 2017, it was reported that Maduro was taking an especially harsh stance on bitcoin miners, charging some with cybercrime, electricity theft, exchange fraud, and even funding terrorism. While his position on cryptocurrencies may have changed, it’s apparent the regime has found, not only a new use for, but a new source of crypto-mining rigs.
In preparation for the Petro launch, Maduro announced that he will be recruiting cryptocurrency miners to participate in the network, but in speaking with Alejandro Machado, it seems the recruitment campaign may have been more than just a simple job offering.
“Maduro operates a secret police and is intolerant of many activities,” Machado explained, “I've spoken with a few miners and the consensus view is that Maduro pretended to want to work with them and asked them nicely to sign up for a central miner registry,” adding “the ones who did are now being harassed, some have had their equipment stolen, some have been kidnapped.”
This report corresponds with others of a similar nature.
On Feb 20, twitter user @Gonzoucab reported:
Translated: I'm receiving in this moment complaints from the state of Anzoátegui, that people are being kidnapped by security organizations from the state, who know they have bitcoin in order to rob them. Please all the bitcoin owners take care. Beware! This this getting uglier than I could imagine.
Comments in the thread also confirm these claims.
And in a January 23 report from Hackernoon.com, the interviewee featured in the story recalls other incidents of kidnapping, extortion, theft, arrests and violence involving bitcoin miners.
When asked what the government does with the equipment taken from the miners during raids, Mr. X responded with: “Rumor has it they install them on government facilities,” adding “this is the worst case scenario, but I’ve heard multiple stories like this. If for some reason they don’t like you at all during the raid, they would confiscate your equipment and have you install it for them. They even “hire” you as an infiltrator and they make you rat out other miners.”
Between empty blockchain addresses, lack of support, a broken website, pushback from its own government, stories of violence and extortion, and high-profile government charades, it’s almost as though the Petro isn’t doing as well as major news organizations are making it seem.
Vitalik Buterin in response to the ongoing drama explained: “This is why the crypto community needs to move away from "yay, blockchain" and zoom in specifically on what is the trust model of each project. This one is definitely quite centralized, and dependent in multiple ways on a central party (venez gov) that seems not very trustworthy.”
As the world’s first state-sanctioned cryptocurrency, one can’t help but think that a centralized, state-sanctioned crypto might not be the best idea, after all.
Featured image from Shutterstock