Making a sudden change to an established system is no small feat. If the change is large enough, and the system in question broad enough, you can easily foresee catastrophic failure at multiple points. If the system in question happens to be political, economic, or social then you might as well reconcile yourself at the onset of catastrophic system failures and have some form of contingency plan available.
And yet, no one ever seems to do this. It’s always “So, we topple the Government, establish our new system, and everything is fucking beautiful from now on.”
No one ever seems to operate on the conscious understanding that your revolution, justified or not, is going to be tampered with by foreign powers who have a vested interest in the success or failure of your endeavor. Notice how I’m not making value judgments here, I’m just stating the facts. If you think that you are going to knock down an existing, entrenched system, you’d better pack a lunch and be ready to get punched in the face.
When you threaten someone’s livelihood you run the risk of getting your ass kicked. And a government involves a lot of people doing a lot of jobs. When you threaten those jobs, you should expect pushback. This is something the crypto community doesn’t seem to fully understand with regard to the established financial industry, but that’s not what I’m here to discuss today.
In December 2017 Nicolas Maduro, the President of Venezuela, told the world his government was going to create a national cryptocurrency called the Petro. The purpose of this innovation, he said, was to provide Venezuela with a new degree of economic sovereignty. By securing the crypto with tangible assets like gold, oil, and diamonds the Petro would provide a means of using that vast mineral wealth to finance their homeland and not line the pockets of foreign companies.
In theory, this should have worked. A top-level decision to force adoption of a new system, broadcast over existing well-established communications channels…on the surface, it looks like a solid plan. As always, however, the devil is in the details.
It begins with the White Paper that was changed at the last minute switching blockchains from Ethereum to NEM, a significant change. In addition to technical factors, there are also different cultural mores between the two crypto ecosystems. This is definitely not the sort of thing that you should expect from an established enterprise, but okay we’ll play along because the potential payoff could be significant. To the moon! In the parlance of our times.
The US State Department was not amused by any of this. The Petro was seen as an attempt to skirt US economic sanctions (I think that’s a given) and US President Donald Trump signed an Executive Order banning any American entities, people or corporations, from owning any of the new Venezuelan cryptocurrencies. I think we can all agree that this lack of speculative capital certainly hindered the experiment.
Please note that I do not make any value judgments, I’m just stating the facts in evidence.
So what happened now that the Petro was the forbidden fruit for American crypto traders? Did they ignore the unpopular US president and instead embrace the pre-sale for these new tokens? As it turns out, there was an underwhelming interest in this new venture. And it’s not really hard to understand why when the Venezuelan opposition Parliament called it a fraud.
I won’t go so far as to say that the Petro was, indeed, a fraud, I think that Maduro had noble intentions. Bypassing the economic blockade that the US has imposed on Venezuela is not an easy thing to do when you’re moving money in the billions. So crypto seemed like a great idea, people brought news of this “Bitcoin” thing and people looked at the price history. That was the extent of their research, a graph showing the growth rate of Bitcoin and a commensurate increase in price. No one has read a book about the history of Bitcoin and why the price swung as wildly as it did, they just looked at some charts and got an elevator pitch on what the new technology was.
You may recognize this behavior from the average Internet user you’re interacted with. This mentality is what spawned the sudden success of Dogecoin; to the moon! But for most people, there is no moon because Bitcoin is a rare and unique thing. And the creators of the Petro didn’t understand what they were looking at, they just saw flashing dollar signs and a hope to raise some ready cash to finance their country.
Unfortunately for them, the “crypto community” was quick to abandon Venezuela and the Petro died a quick, undignified death deserving of a half-assed effort that failed to seize an opportunity. And while they failed to inspire an economic revolution, Maduro and his allies succeeded in making complete fools of themselves stumbling blindly with this novelty. With only the vaguest notion of what a cryptocurrency is and how it works they managed to launch one at the national level with a plan of implementation that could have worked if they had only paid a little more attention to the finer points. The biggest, of course, was the actual source of value for the Petro. Was it to be valued in a commodity stack or a monetary unit like a gold/silver certificate? This situation only got more absurd when the Venezuelan government released “Petro Gold” which actually claimed to be back by one barrel of oil, which would be a significant ICO and could indeed lift an entire nation out of poverty.
Still, the failure of the Petro will serve as a case study for future cryptocurrency adoption because it is usually through dissecting a corpse that you learn the most. And the anatomy of this failure would aid a great deal for the next, inevitable, round of national crypto.
Make no mistake, there will be more examples of national cryptocurrencies, many issued by poor nations looking to generate a quick influx of cash, no doubt. There will be others, however, that will be issued by nation states that, despite well-documented corruption in their financial and political systems, continue to be held up as examples to the rest of the world to follow.
NASDAQ and Goldman Sachs now want to join in on crypto trading. This is going to move crypto from the fringes into the mainstream and that is where you will see the great innovations that lead to national crypto adoption. It is inevitable because this is the path the innovations take, this is the course that great ideas must travel. These are the trials that must be endured on this path.