This week, we perform an in-depth examination of the petro, Venezuela’s “oil backed” cryptocurrency, which is actually neither (it is not technically backed by oil, nor is it a cryptocurrency, but rather a token on the NEM blockchain). The petro raised an astonishing $5 billion, according to its ICO website, making it the most “successful ICO ever” in terms of funds raised. In terms of everything else, well, the project is quite questionable, and may eventually prove to be the biggest ICO scam of all time.

petro logo

From the Petro NEM Mosaic description:

Petro is a sovereign crypto asset backed by oil assets and issued by the Venezuelan State as a spearhead for the development of an independent, transparent and open digital economy open to direct participation of citizens. It serve as a platform for the growth of a fairer financial system that contributes to development, autonomy and trade between emerging economies.

“Petro is the future of Venezuela and the world. This cryptocurrency is linked to the future of economy, production and finances in the region.” – Nicolás Maduro

Nicolás Maduro, president of Venezuela, launched the petro – the first cryptocurrency backed by a national government in history – on February 20th, 2018. For the ceremony, broadcast on national radio and television from his residential palace in the capitol city of Caracas, the socialist president and his entourage dressed in suits and ties. Such outfits were not normally worn for these nationwide broadcasts, and were perhaps emphasizing its formality, more typically worn when speaking at a business conference.

petro conference

Maduro spearheading a conference about the petro. Source: bitcointalk user taseenb


The petro, a token to be released on the NEM blockchain, is a big deal: it is the first state-backed cryptocurrency, with its worth based in Venezuela’s vast oil reserves, of which they have the most of any country in the world. While not exactly exchangeable for oil itself, Maduro has huge plans for state-wide and international adoption of the token, with 44 million out of 100 million total being offered for sale to the general public (leaving 38.4 million for closed-deal pre-sales and 17.6 million for development, public works projects and operations of a regulatory body). Some of its intended future uses include:

Listing on cryptocurrency exchanges. Petro will be traded in the secondary market: exchanges around the world and in Venezuela.

Government services. Petro will be accepted for payments of taxes, fees, public services and more from its first day, therefore offering a large adoption (theoretically larger than any other existing crypto). Eventually, the state could even decide to pay public employees and social benefits with petros thereby expanding its use.

Oil sales. Petro will be accepted for Venezuela’s international oil trade (which is in the range of 8-25 billion US dollars). Domestic companies with Petros will then be able to buy oil at it’s normal price with Petros.

Private sector adoption. Private companies in Venezuela could start accepting petros once it is launched on the markets, further increasing local adoption.

Anti-inflationary measure. Because of its fixed creation amount (100 million) and anti-inflationary nature, the petro could be much more interesting for Venezuelans than bolivars while being more convenient and safe than US dollars.

The Rise of Nicolás Maduro

Maduro was known by former president Hugo Chavez as the most capable politician in his inner-circle, seceding him as president after Chavez’s death in 2013. He was officially elected to office a month later, defeating his opponent by a very narrow margin. Maduro ignored pleas by the opposition for a recount. On May 2nd, 2016, a recall measure was put in place to give the public a chance to vote on whether or not Maduro should remain in office, on the grounds that his presidency was not gained through democratic measures. By May 13th, Maduro had declared that his country was in a state of emergency brought about by massive conspiracy and started the process of dissolving the authority of those bringing the recall against him. By October, he was being internationally branded as a dictator and accused of ruling through absolute authoritarianism.

The country slid into a deep economic depression, in part due to crippling economic sanctions placed on Venezuela by several countries around the world, in part due to the continuation of inept policies set by the previous administration, and in part due to Maduro’s failure to change anything for the better. During a 2017 national referendum on the country’s constitution – put into place by Chavez in 1999 – which was meant to quell massive protests that claimed the lives of over 90 people, Maduro famously quipped about the protestors, “Votes or bullets, what do the people want?”

Corruption and Economic Mismanagement in Venezuela

Recently, Venezuela was listed as #1 in terms of most taxpayer money lost to government corruption, a figure estimated to be in the ballpark of $350 billion (the next highest country total is $100 billion). Venezuelan citizens also have the second biggest sum of money deposited into Swiss bank accounts of any country in the world, leaving little doubt as to where the missing money was going. Because of this, confidence in Venezuelan government officials’ ability to properly fulfill their function as public servants is shockingly low. Out of 180 countries, Venezuela is ranked #169 in terms of the cleanliness of how the government operates, putting them in a not-so-coveted spot between Iraq and North Korea in terms of government corruption.

One such instance of Venezuela’s interference in operations normally left to the open market to decide is the fact that the government sets the exchange rate for all currencies, which actively harms the value of its own currency the bolivar. The introduction of bitcoin allowed Venezuelan citizens a new means to store value and protect themselves against the hyperinflation that has rocked the country for several years. Those who had the means could instantly convert salaries and savings to bitcoin as piece of mind, knowing their wealth wouldn’t undergo a massive decline following an unexpected devaluation of the bolivar. However, the Venezuelan government soon caught wind of this trend and imposed their own price system on bitcoin, calling it the Bitcoin Dollar. Any nationally-registered cryptocurrency exchange or bank dealing in bitcoin must use the bolivar/BTC exchange rate set by the government or face severe penalties if they wanted to continue operation.


The current exchange rate of bolivars to dollars is about 306,000:1. While bitcoin has its ups and downs, its rather steady decline in 2018 is no match for that of the bolivar, which is expected to see an inflation level close to 13,000% this year. This figure alone makes BTC a spectacularly stable store of value compared to the state fiat currency of Venezuela. How does hyperinflation happen? By the excess printing of money, of course. The policy of printing money to pay for debt had been a practice utilized for decades before Maduro’s ascension to power, and as a result the bolivar is now near worthless.

More and more Venezuelans are turning to cryptocurrency investments and mining as a way to combat the falling value of the bolivar. This trend has not gone unnoticed by government officials, who were quick to impose restrictions on the import of ASIC mining equipment and shut down large-scale bitcoin mines under the guise of “electricity theft.” Those who continue to conduct off-board cryptocurrency trading and mining operations either do so in complete secrecy or by paying bribes and extortion money to the police. “Authorities basically do whatever they want,” said part-time Venezuela resident Alejandro Machado in an interview with bitcoin podcast YouMeAndBTC. “It’s a coin toss to actually send stuff to Venezuela,” he said, explaining that private couriers would not risk sending ASICS because most of the time such a shipment would end up as a total loss. “The authorities are getting better at spotting these things.”

Petro ICO

petro 5 billion



On its very first day of presale, Maduro claimed that the petro raised $735 million from 87,200 investors across a staggering 127 countries – not too shabby by ICO standards. By its end, figures from the official website stated that some $5 billion had been raised, fulfilling the petro’s goal of being the “biggest ICO in history.” Money raised from sales would go to fund a wide variety of projects, including humanitarian aid, much needed job provision and of course technical development of the petro – that part was all very-well planned out. However, details of the operation of the petro itself aren’t quite as clear, and to date not one petro has been released to any investor. Also confusing about the ICO process is the fact that the petro’s whitepaper is incredibly vague regarding the specifics of what type of a coin it will be, mentioning it to be released on Ethereum and NEM, while also detailing plans to find a petro mining operation (tokens can’t be mined).

The petro ICO launched on March 20th, 2018 (click here for some ICO specifics). It had problems right from the get-go, and not unique to an undertaking of its magnitude (crashing web servers, DDoS attacks, unstable platform operations). However, unlike most ICOs, the problems for this one could be blamed on foreign powers trying to intervene and sabotage it. Most of the 52 page-long thread for the petro ICO announcement on bitcointalk is an argument between 3-5 people, with 2 staunch supporters of Maduro and the petro and everyone else questioning the credibility of the former. The arguments made by opponents in the thread were of no conspiracy at the behest of a foreign national power. Instead, they were mostly individuals interested in trying to get a gauge of whether the petro would be a legitimate, worthy investment, who found themselves getting caught up in political argument after argument.

petro bct 3

source: bitcointalk


Most news source-backed claims made by those in opposition to the Maduro regime were quickly dismissed as anti-government, pro-Western influence propaganda, with posters not of Venezuelan origin being derided as brainwashed know-nothings who were only exposed to one-sided, anti-Venezuelan rhetoric in their local medias, largely due to what they insisted was coercion by their respective government.

petro bct 1

source: bitcointalk


Petro Not Really Backed by Oil

A few compelling reasons why the petro is not technically “backed” by barrels of Venezuelan oil at 1:1 ratio:

  • the oil designated to “back” the petro has yet to be dug up or extracted
  • it is only estimated that the oil field containing such reserves contains enough oil to back each petro token at a 1:1 ratio
  • the going rate of (approximately) $60 per barrel of Venezuelan oil is not a wholesale price, which is likely considerably lower (somewhere between $10 and $30 per barrel)

If the petro is not backed by oil, and cannot actually be redeemed for oil, then what is it exactly? An analyst at Bloomberg offers a more fitting description of an “unsecured oil-indexed debt.” Yet it is being marketed by Maduro as “backed by oil.” More accurately, as per a formula outlined in the whitepaper, the petro is being backed by a combination of the price of Venezuelan oil and the petro/bolivar exchange rate, two numbers entirely state controlled and subject to internal manipulation.

petro formula

Maduro’s relative silence about the petro after his re-election has many individual investors worried, left wondering if the coin was actually even developed or will ever be distributed to its purchasers. Venezuelan vice president Tareck El Aissami has spoken about the petro more recently, speculating recently at a government conference that cryptocurrency prices are actively being manipulated in order to undermine the petro’s value, which is a bit hard to do given that it has not yet been distributed to its initial purchasers and therefore is not traded. “It turns out that they migrated to try to mark the referential dollar through the speculative market of cryptocurrencies, to try to hit the Petro; this new economic offensive that represents part of the new Venezuelan economic beginning,” he said. Although cryptocurrency is far from immune to price manipulation, the chances of a coordinated attack against a coin for which does not as of yet have an established value (the petro) are highly unlikely, and the words of the VP are being considered paranoid ramblings by the crypto community, certainly unhelpful to the cause of establishing the petro’s legitimacy.

For now, things certainly do not look good for the petro, though it cannot be written off as a “scam” just yet. The one petro-friendly exchange officially endorsed by the Venezuelan government appears to be nothing more than a shell of a website, with all links to important information redirecting back to the site’s homepage. As of yet, no tokens have been distributed to any investors, despite an animation on the ICO page stating the process would start “in a few days” (this animation has been up for over a week already).


Dismayed members of the bitcointalk forum are beginning to write off their investments as a loss, due to the ever-surmounting pile of evidence that suggests the ICO was just a ploy to raise money by what appears to be an extraordinarily corrupt government.

petro bct 2

source: bitcointalk


Even if tokens are eventually distributed, it will be a long time before they begin to creep into the circulation of Venezuela’s every-day economy, as they are already being rejected for use by major oil partners. When they do reach the hands of the general citizenry, it is unlikely anybody will be able to do anything with them, because they will also require amounts of NEM (XEM) in order to cover their transaction fees (the process of how to obtain XEM, or that it was even required, is information totally absent from the petro whitepaper). Long story short: while the petro arises from the novel goal of conducting an interesting experiment, the centralization of an inherently decentralized commodity, such as a cryptocurrency, will likely prove to be unfeasible for use by the general public. From the perspective of those raising the funds, however, it was apparently a massive success.