Petro cryptocurrency
srikanthchowhan SIR IASGROUP
Context: Venezuelan has launched its own cryptocurrency, called the “Petro,” which will be backed by the country’s vast natural resource reserves. The country has also approved the creation of a BlockchainBase observatory to oversee the development and rollout of the new cryptocurrency.
Background:
OPEC member Venezuela boasts the largest proven reserves of crude oil in the world, but has struggled against the plunge in oil prices which began in 2014.
Purpose of Petro:
The purpose of Petro will be to advance the country’s monetary sovereignty, to carry out financial transactions and to defeat the financial blockade against the country.
Value of Petro:
The value of the new cryptocurrency will be pegged to the country’s vast reserves of oil and gas as well as its mineral wealth, including gold.
Way ahead:
With the new cryptocurrency, Venezuela hopes it can overcome the economic blockade which the U.S. has put on the country. The blockade has caused the country’s national currency, the Bolivar, to lose around 57% of its value in the last four weeks.
While it’s great to see yet another country deciding to set up a national cryptocurrency, Venezuela will likely garner some friction from the U.S. over the move. The Trump administration has already been railing against Venezuela and its socialist leadership in-between tirades against Iran and North Korea.
What you need to know about the cryptocurrencies?
Founded as a peer-to-peer electronic payment system, cryptocurrencies enable transfer of money between parties, without going through a banking system. These digital payment systems are based on cryptographic proof of the chain of transactions, deriving their name, Cryptocurrency. These employ cryptographic algorithms and functions to ensure anonymity (privacy) of the users (who are identified by an alphanumeric public key), security of the transactions and integrity of the payment systems. “Decentralised Digital Currency” or “Virtual Currency” is also interchangeably used for a cryptocurrency.
How are they used?
Cryptocurrency is fundamentally a decentralised digital currency transferred directly between peers and the transactions are confirmed in a public ledger, accessible to all the users. The process of maintaining this ledger and validating the transactions, better known as mining, is carried out in a decentralised manner. The underlying principle of the authenticity of the present to historical transactions is cryptographic proof, instead of trust; different from how it happens in the case of traditional banking systems.