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PostVenezuela's Petro and Block-Chain Currencies (José Ignacio Soler, Venezuela, 10/08/19 12:02 pm)
In a recent post (October 2nd) about fiat money, John E remarked that the "crypto-currencies" are the most "fiaty" of all. He wrote further, "if the [Venezuelan] Petro was/is based on the block-chain model, doesn't this mean they can be 'mined' by insomniac computer whizzes?" And finally, "if [with the Petro] there's an underlying barrel of oil, then there's no need for the block-chain feature."
These are three interesting questions.
First, it seems correct that the crypto-currencies are in principle currencies with no real backup. The original inspiration of this kind of money was to protect the user from a Central Bank's arbitrary use of fiat money with the high risk of inflation or losing its value. These currencies were also a means for anonymous transactions. With a decentralization system (block-chain or distributed ledger), anonymity and a limited amount of money available, the risk is apparently reduced or neutralized.
Second, of the more than 1000 "cryptos" currently being used, only a few are endorsed by some kind of asset. It seems this backup is unnecessary, because the basic idea of these currencies is to give assurance through its "supposedly unbreakable" and highly sophisticated crypto graphical systems with a set of programmed rules to follow. The reasons some currencies, such as the Petro, use some kind of asset to back up the currency is maybe to create confidence among future investors or users when the currency is initially launched and to assure the public that they are not pyramid (Ponzi) schemes.
However the Petro, being under the Venezuelan government's control, uses a barrel of oil as a one-to-one backup together with block-chain technology probably to disguise the system as a crypto-currency. In reality it is probably a way to finance itself, which otherwise would be illegal according to country's laws. It seems correct that the use of block chain technology would be unnecessary.
Finally, if I understand correctly, the main function of the crypto-currency mining process is to issue new currency units, to confirm transactions in the system and to maintain the security in the system. The fact that most crypto-currencies use "blockchain" as the cryptographic encryption system does not necessarily imply "mining" is allowed by the system. This would be the case for the Petro.
JE comments: José Ignacio, do Venezuelans have any confidence in the Petro? I'm quite certain the answer is no, but I'd like to know more. Latin America has a long tradition of "parallel" currencies, such as the Chilean Unidad de Fomento (UF), which is used for real estate and other large purchases:
So...how about the WAISo? Every unit is backed by a WAIS post! At present, we have 41,820 units in circulation. More are added daily. With apologies to our friends in Korea, here's the symbol:
Coming soon! The WAISo