Venezuelan President Nicolas Maduro announced the pre-sale for its Petro cryptocurrency hit $735 million on the first day.

The Venezuelan economy has plummeted since 2013 when Nicolas Maduro was elected to replace the beloved dictator, Hugo Chavez. Now Maduro is issuing the world’s first ever state-owned digital currency, called the Venezuelan Petro cryptocurrency. 

The drop in the value of oil triggers Venezuela’s economic depression.

In 2016, the Venezuelan crisis deepened to alarming levels. The world witnessed wealthy Venezuelans flee en masse, while the remaining Chavistas and Anti-Chavistas engaged in demonstrations and riots. The conflict stemmed from the corruption of Maduro’s regime, food shortages, and a drop in the value of oil, which once accounted for 95% of the states’ export revenues.

Without the oil revenue, Venezuela was forced to shutter many of its state-sponsored social services to cut costs. The situation became so dire that in 2016, inflation rose 800%, and the average Venezuelan lost 19.4 pounds. The scarcity of living necessities, high unemployment and general economic uncertainty led to rampant violence and social unrest, birthing social movements and riots alike.

Inhibited by sanctions placed against the Venezuelan government by Obama in 2015, U.S. aid organizations were unable to intervene, though 30 million Venezuelans were already on the brink of a humanitarian crisis. Given the chaos encompassing Venezuela from shortage-caused riots and accusations of state corruption, few have hope for a return to economic stability.

Maduro announces Petro cryptocurrency to save the Venezuelan economy. 

Running short of reasonable options to save their crumbling currency and international purchasing power, the Venezuelan government has announced a desperate bid to reboot the economy. Earlier this week, Venezuelan President Nicolas Maduro announced the creation of an oil-backed cryptocurrency called the “Petro.” Each Petro costs about $60, the price of one barrel of oil. Maduro claims that trade of the currency generated 735 million USD in its first day of presale last Tuesday.

When cryptocurrencies experienced an unprecedented boom in the fall of 2017, the world became fascinated with the trade of digital tender and its wealth-creating potential. The initial boom was followed by a slide that left many investors scrambling to trade their “coins”. Others, through close watch of the digital market and a bit of luck, made fortunes.

Maduro’s move to base an entire country’s economy on a digital currency is a risk that even the most seasoned financial forecasters have difficulty predicting.

Do we even know enough about cryptocurrency to be able to use it without bringing economic disaster upon ourselves? What is cryptocurrency, anyway?

Bitcoin is the most well-known cryptocurrency, but there are over 1,500 cryptocurrencies currently available on the web. Bitcoin and other cryptocurrencies can seem abstract to the layperson, but digital tender can be put quite simply: cryptocurrency is open-source international tender. Like exchanging cash for goods or services, cryptocurrency is anonymous, but unlike cash, it isn’t regulated by any bank or government.

Independence from regulation makes the trade of cryptocurrency virtually impossible to halt as well. There is no governing body to freeze or even seize a bank account, no state nor any of its agencies has jurisdiction of web-based cryptocurrencies. Cryptocurrencies have been rendered induplicable due to intricate design; their codes have been perfected by years of tests and revisions. The resulting creation can be exchanged for fiat currencies, or national currencies, and have value on the international market, just like legal currency.

Digital currencies first popped up in 2009 and were designed as a peer-to-peer currency system, relying on the participation of users and trade of currency to operate. The system was created by “Satoshi Nakamoto,” a unknown person or collective.

In its early years, cryptocurrencies’ main use was on the black market for buying and trading illicit substances, weapons and trafficking women and girls. For this use, currencies like bitcoin were perfect. A user anywhere across the globe could use Paypal or another similar service to purchase bitcoins. While the initial bitcoin purchase is trackable on a public ledger, purchases made thereafter via bitcoin is where the trail ends.

Russia and Iran express interest in Venezuela’s Petro cryptocurrency. 

Though cryptocurrencies remain extremely volatile, Russia and Iran have shown interest in Venezuela’s Petro cryptocurrency. Russian and Venezuelan officials met last week in Moscow to discuss the Petro’s launch, though it remains unclear to what extent Russia will be involved.

Iran, too, is voicing its intent of developing a state cryptocurrency like Venezuela’s. Though the Iranian Central Bank denies such intentions, MJ Azari Jahrom, the Iranian Information and Communications Technology Minister, tweeted that the bank was planning to “implement the country’s first cloud-based digital currency using the capacity of the country’s elite.”

Perhaps, Maduro’s Petro cryptocurrency plan will flop. Despite the early success he claims the Petro is having, many expert economists believe the currency will eventually implode and trigger a crash in the Venezuelan Petro akin to the Bitcoin crash in 2017. Others think Venezuela might be onto something, but only time can tell.

The real question is, would you invest in Venezuela’s Petro cryptocurrency?

Related:

Maduro Announces Plan For Venezuela Cryptocurrency “Petro”

Bitcoin, Ethereum, Ripple, Oh My! How Cryptocurrency Works 101

What is Happening In Venezuela? A Constitutional Crisis, Food Shortages and Dueling Political Parties