The newly re-denominated Venezuelan fiat currency, the Sovereign Bolivar (VES), is supposed to be backed by the Petro, which is the official cryptocurrency of Venezuela. The government of Venezuela began the public sale of the Petro on 29 October 2018, and it has been over a month since then, but based on the accelerating hyperinflation it appears nothing at all is backing the VES. In-fact, there is no firm evidence that the Petro is an actual cryptocurrency, and is more likely a non-fungible paper certificate, as will be explained in the rest of this article.

The Cafe Con Leche Index, which measures Venezuelan inflation by buying the same cup of coffee at the same Venezuelan cafe at regular intervals, witnessed 100% inflation during the week of 28 November through 5 December. This is the most rapid inflation rate in Venezuela to date, and is an omen of an imminent currency collapse. The annual inflation rate that has been directly recorded by the Cafe Con Leche Index is 285,614%. This averages in the rest of the year which had a slower inflation rate. If 100% inflation per week continues, with no acceleration of the inflation rate, the cup of coffee will cost 400X(2^52) VES in one year, which equals VES 1,800,000,000,000,000,000. Clearly, a re-denomination cannot save the Bolivar this time around, and the Bolivar will soon cease to exist.

If the Petro actually was a real cryptocurrency, it would be a great mechanism to ensure that Venezuela continues to have a native currency even in the event the VES becomes unsalvageable. However, there is a litany of evidence which suggests the Petro is an ICO that never launched its coin. The Petro block explorer has no blocks and no transactions, only a block counter at the bottom which shows 3,707 blocks having been mined in about 5 weeks. The Petro white paper says the Petro is supposed to have 1 minute block times like Dash, and the block explorer is showing ~15 minute block times on average.There is a page to download the Petro wallet where it says click the image to download, but it displays the message “This wallet will be available soon for your operative system.” Since people cannot download the wallet and run a node, even from the official government website for the Petro, it seems unlikely there are any Petro nodes in the world.

The Petro white paper details how the Petro is backed by 50% oil, 20% gold, 20% iron, and 10% diamonds, and this is why the plan was to use the Petro to back the VES. However, there is no information available on the complex and secure infrastructure that would be needed to actually back the Petro with these mineral assets, and a deep dive study by Reuters found that the oil backing the Petro is simply the estimated reserves in an area with no oil infrastructure.

Another piece of damning evidence is that when the Petro public sale began, it was apparent that people were receiving paper certificates and not cryptocurrency. Further, President Maduro has declared that anyone who buys the Petro after 2018 ends cannot exchange the Petro for any fiat currency or cryptocurrency. This simply would not be possible if the Petro truly was an X11 cryptocurrency like the white paper indicates, since users would be able to exchange the Petro regardless of a government decree. The only way for the Venezuelan government to ban the trading of Petro purchased after the end of 2018 is if the Petro is a non-fungible paper certificate. This theory is further supported by the fact that President Maduro is setting the price for the Petro, indicating there is no free market exchange of the Petro.

All evidence points to the reality that the Petro is a non-fungible paper certificate, and is as easy to print as any other fiat currency, and has no attributes of a cryptocurrency. The Venezuelan government is accepting all sorts of fiat currencies, as well as Bitcoin and Litecoin, in exchange for the Petro, despite all of the evidence that the Petro is not a cryptocurrency like it is supposed to be. Effectively, this may be an ICO scam on a national level, occurring right as the native fiat currency of Venezuela nears the day when it will totally cease to be worth anything. The total collapse of the Bolivar will perhaps precipitate the collapse of the Venezuelan government, since they will no longer be able to fund their activities via money printing, and perhaps eventually it will be clear that the Petro is a last ditch attempt by the Maduro regime to earn a warchest of cash and cryptocurrency for the struggle that is inevitably coming.