Leon Markovitz is a serial entrepreneur and a marketing professional. Born in Venezuela, he now lives in Israel, where he is researching and marketing stablecoin projects.
I really approached cryptocurrencies when I heard about Venezuela's stablecoin attempt, the petro, at the end of last year.
The idea that the dictatorship was trying to use the blockchain to further centralize its power was terrifying, and prompted me to look for solutions that could work in the near future of Venezuela.
The petro was launched in March and, until recently, it was all but forgotten – with the project leader fired for not raising $ 5 billion for a national cryptocurrency project.
But at the end of last month, President Nicolas Maduro announced on live TV the cut of five zeros from the hyper-inflated currency, and announced an attempt to "Ave Maria" to revive the petro by linking the value of the new bolivar to it, calling a meeting with all the banks to improvise something.
The dictatorship in Venezuela is actually doing a favor to future generations by creating mistrust in the central authority, devaluing the credit card issued by central banks and educating people on cryptocurrencies. The ground is ripe for a real revolution in which power is torn from the government and entrusted to the blockchain. Venezuela does not deserve to continue its current path.
The country's economy has drastically reduced in the last five years, with a rampant hyperinflation of 1 million percent, and people dying on the streets of diseases like polio – yes, it re-emerged during the socialist revolution – the highest homicide rate in the world and the lowest wages in the region. This is the result of 20 years of a failed socialist experiment that printed currency like confetti, and an accomplice ruling class that is silent, almost absent, to the clamor of the people.
People use the bolivars as toilet paper because it's cheaper and the whole world has awakened the fact that the socialist revolution of the twenty-first century is a scam. Yet the corrupt henchmen of a dead man are willing to start the fraud with the petro again. They want to ride the blockchain wave, but blockchain is incompatible with this communist fraud.
This is a decentralized revolution, diametrically opposed to centralized control. The petro was born as a failure because it was designed to keep the centralized powers in control, and no one in his right mind would use it unless someone pointed a gun in his face. The project is dead.
But let's talk about this radical experiment in a hypothetical scenario. Assuming that the regime has left tomorrow, could this experiment work?
A decentralized alternative
For generations, Venezuela was drunk with petrodollars. People have become lazy and used to getting cheap dollars at preferential exchange rates to import 90 percent of the goods consumed. The current disaster is the consequence of generations of Venezuelans spoiled by the easy income of black gold.
But this is the past. Now imagine the next day in Venezuela, freed from the chains of communism, with the world ready to help. We would need at least a $ 80 million project to restart the economy, provide humanitarian aid and create a radically different market.
Since Venezuela's production capacity has been decimated, it will not borrow from the IMF, but re-branding the country as the blockchain nation could turn out to be an opportunity hidden in chaos and despair – the light to the end of the tunnel. How can we successfully use a cryptocurrency as a national currency? Decentralize.
Unlike the petro, Venezuela's ideal stablecoin would not need guarantees and certainly no central bank. Gold and oil reserves could serve as strategic insurance to repurchase the currency if demand declines. The issuance of the stablecoin would expand and contract on the basis of an "algorithmic central bank" that responded to the health of the economy (eg, nominal GDP targeting) and the shareholders, the citizens, would receive revenues backed by the interests derived from savings and bonds of a healthy economy. Above all, the portfolios of civil servants would be subject to public scrutiny.
If the regime abandons power tomorrow, there is an opportunity for the Venezuelan government to be radical and embrace decentralized information networks. Venezuela may be the first country to separate state and finance, but if a similar attempt to the petro is implemented (a centralized stablecoin), then we will be back to the starting point and nothing would change.
The next day the communist regime is gone, Venezuela will plead for the decentralization of power to unite and empower people, get incoming investments and bring transparency to governance and monetary policy. It can evolve from a nation known for its oil and gold, from one to digital gold and energy.
The petro is a horrible idea, but the people in Venezuela woke up to the power of the blockchain. There is an ever-growing community of engineers and miners locally – and millions more are watching from abroad.
Very soon the chains of communism will break and the crypto-space must be ready to defend the supporters of a decentralized national stablecoin when the day after arrives.
Venezuela is ready;
Bitcoin on the map via Shutterstock