This article was recently published by the New York Times. It tells the story about who and how the State backed cryptocurrency known as Petro came to be.
When Petro was originally announced (Nov 2017?), it sounded quite nice and very close to typical cryptocurrencies. I remember that December being honestly surprised (because access to foreign currencies was forbidden) and there were rumors that it would have a limited production, run decentralized as a token on the Ethereum blockchain executing rules defined by an ERC-20 smartcontract.
Then surprisingly, everything changed. A Russian team was brought instead, it would still be a smartcontract token but running in the NEM blockchain instead. Also the price was somehow pegged to the barrel of oil, like "stable" coins do. The gov made an ICO presale event and raised hundreds of thousands of dollars, at this point i gave them the equivalent of $100 in bitcoin, i never saw that money again...
Indeed after the event and the unknown amount of money was raised all went silent. A few months later, the guy in charge (Carlos Vargas, mentioned in the article) and the Russians with their NEM token were kicked out from the project. Months later we learned that Maduro gave the project to yet another team, they turned to Dash and made Petro (again) from that. By a completely unrelated source, i was told this was hacked and had to be redone (again) a 4th time, which is the current Petro iteration the government has been running. Of course, ignorant of technology (same way they are ignorant of economy), they chose to hide the source code (in violation of their own law that mandates that ALL State developed software projects must go public domain) and centralize operations to a very few nodes and a single online wallet without releasing any software so that nobody else could participate with nodes or wallets.
In any case this article reveals many interesting things about how Petro came to be, in its first iteration which was the one we were talking and discussing about in the beginning. At some point we were even told it would be possible to mine it, which of course never happened. It is also unknown how many people lost their money in the Petro ICO presale event of 2018, or what happened to the Russian NEM team...
But you are also going to read something interesting, about how things are handled by the government of Venezuela. Some of you might be surprised for us it has been so long of the same things (abuse) that we somehow got used to it them, but for a foreigner they might get (rightly) shocked. No, they are not exaggerating to sell more newspapers, when they portray the government as a sort of criminal gang that is quick to extort and threaten people when things aren't done exactly how they want it, no matter how mistaken that might be. Its the very reason Venezuela economy went so low, the regime does not tolerate anyone but "Yes men", or else...
And its why you see crazy nut things happening all the time (ie. Maduro just ordered that nobody pays rent for 6 months, not even commerce). Maduro himself does not like books or reading much, but what little political formation he got, came from a Leninist party that was disbanded during Chávez regime to join the larger PSUV (which the Communist Party refused to join into). In any case what little insight Maduro might have of the economy, is basically either the one practiced in the now gone eastern bloc "Real Socialism" central planned (command) economy, and/or the idea that destroying the coin and the economy destroys capitalism so its even better... Too bad in practice what gets destroyed are people's lives instead, as the wealthy have the means to either flee or survive by bribing their way into the new regime.
Anyway here are some excerpts from the article, do read it entirely if you can. Ask if you have doubts. No i never met in person anyone involved, and as is always the case in these situations, the truth takes
years to come out due to the risks involved. I must admit the Petro creator Gabriel Jiménez, having previously participated in anti-maduro activities (in the US, no less) was pretty suicidal accepting such a State commission. Its truly a miracle he wasn't imprisoned and the keys thrown as is often done here to political opposition, foreign journalists or even mere policy dissenters, often among their own ranks.
Oh and while this is about the Petro, do note that the same happens with
everything in this country. Same attitude, same results.
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But whatever Mr. Jiménez felt about the regime, he felt just as strongly about the potential of cryptocurrency. When the Maduro administration approached him about creating a digital coin, Mr. Jiménez saw an opportunity to change his country from within. If a national cryptocurrency was done right, Mr. Jiménez believed, he could give the government what it wanted — a way to fight hyperinflation — while also stealthily introducing technology that would give Venezuelans a measure of freedom from a government that dictated every detail of daily life.
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“The actual goal of the project was to change the economic model of the oppressive regime,” he told The Times recently. “This was my mission and my gamble, in a bet that ended costing everything I had in my life: my friends, my partners, my reputation, my love, my company and my country.”
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The situation rekindled Mr. Jiménez’s long-running interest in cryptocurrencies. He began paying his employees in a digital coin; even with the crazy volatility of the crypto markets, it was more stable than a Venezuelan bank account, and it wasn’t subject to the Maduro regime’s diktats.
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Initially, the Maduro regime saw Bitcoin as a threat. The technology, after all, used a decentralized network to create and move money, and no authority was in charge. But then some members of the government noticed that this cut both ways. Cryptocurrency could also be a way for Venezuela to escape sanctions levied by the United States and international organizations.
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In September 2017, an official loyal to Mr. Maduro floated the idea of a digital currency backed by Venezuela’s oil reserves. This was unorthodox: One of the tenets of Bitcoin is that its value does not derive from a natural resource or government fiat, only the laws of mathematics. But the distinction faded in the face of Venezuela’s desperation. The official, Carlos Vargas, read about Mr. Jiménez’s crypto work in a local publication and asked for a meeting.
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The vice president was friendly and curious, and suggested that this was Mr. Jiménez’s project — they were just there to learn from him. Mr. El Aissami wanted to know how many Petros there would be, and whether new ones could be mined like Bitcoin. Mr. Jiménez thought that the officials didn’t have a particularly clear idea of how cryptocurrencies worked.
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Mr. Jiménez opted to base the Petro on Ethereum, Bitcoin’s leading competitor, which would allow it to trade in the kind of free, publicly visible market that was otherwise forbidden in Venezuela. No one on the government side seemed to be worried about this — or even aware of it.
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When the president gave Mr. Jiménez the floor, he went over the basics of the Petro, including an initial issuance of $200 million. Then the finance minister spoke up, and for the first time, Mr. Jiménez’s plans were challenged. The minister took out a manila folder with a map of the Orinoco Belt and said he wanted the Petro to be backed on an ongoing basis by certain oil reserves there, which were worth orders of magnitude more — many billions of dollars.
Mr. Jiménez pushed back: It was one thing to tie the Petro’s initial price to oil, but if it couldn’t trade freely after that — at whatever price investors felt it was worth — then it wouldn’t be a revolutionary product. A Petro whose price always reflected oil reserves would essentially be a bond
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Mr. Maduro announced that the currency would, in fact, be tied to a specific block of the Orinoco Belt — exactly what Mr. Jiménez had argued against. He complained to Mr. Vargas, but was shot down: “You cannot contradict the word of the president.” Mr. Vargas told Mr. Jiménez to rewrite the Petro’s white paper to reflect Mr. Maduro’s decision — and to do it quickly.
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When he tried to resist sharing a digital copy of the white paper, he said, the minister told him by phone: “You have to understand that this is now a project of the state. If you don’t hand over the file, I won’t be responsible for what happens to you.”
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The government told his team that they would need to compete to have a role in the Petro’s launch — against a Russian group of murky origin.
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In any event, the Russians showed little interest in doing any work. Mr. Jiménez and his company were left to handle almost everything as the Feb. 20, 2018, Petro launch date approached. That is how Mr. Jiménez found himself feverishly coding all night under armed guard, and then summoned to the presidential palace early the next day.
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On live television, Mr. Jiménez saw no way out. He scribbled his signature and gave a forced grin as photographers moved in.
Mr. Jiménez took a seat and wondered what he had just done. The president said that Venezuela had already collected $725 million from investors. He thanked Mr. Jiménez by name, as well as The Social Us. “It’s a company founded and run by young geniuses from Venezuela,” the president said. “You stay crazy.”
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The Petro never really got off the ground. On March 19, President Trump signed an executive order barring Americans from using it. The same day, an Associated Press article about Mr. Jiménez noted that he had helped create the Petro for Mr. Maduro only a few years after interning for an anti-Maduro member of the House of Representatives. The congresswoman, Ileana Ros-Lehtinen, immediately wrote a letter asking the Treasury Department to investigate “whether Venezuelan national Gabriel Jiménez meets the criteria to be sanctioned under the appropriate authorities.”
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In Caracas, Mr. Jiménez was barraged by criticism from the political left and right. The Social Us found it impossible to get new business. In July, a lawyer delivered a 68-page document to the National Constituent Assembly, asking that Mr. Jiménez be investigated for “treason against the homeland.”
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In April 2019, he sold his 2007 Toyota Autana and bought a ticket to the United States. When he arrived, he moved in with his father
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Mr. Jiménez still had essentially no money, but a crypto start-up in the San Francisco Bay Area allowed him to work out of its offices, eat from the fridge and stay on a couch in the chief executive’s apartment.
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