Petro gold

From CEOpedia | Management online

Petro Gold is a cryptocurrency. It was created in 2018 by Venezuelian government. As declared, petro gold is pegged to gold, but it isn't clear is it pegged to country's reserve or gold produced in the country. It is a second cryptocurrency announced by Venezuela. The first was petro which was alleged to be pegged to Venezuelian crude-oil.

Petro gold on crude-oil market

Petro gold is also an idea alternative to petro dollar. Most of the crude-oil trade on the world is made in U.S. dollars. Among others due to this fact dollar is today the backup currency. However some countries declared to trade crude-oil using gold. In the past it were Iraq, Libia and Iran. Also China attempts to trade crude-oil with Russia without using U.S. dollar. That can lower demand on U.S. dollar and lead to emerging a new backup currency.

Genesis of the introduction of cryptocurrencies

Venezuela is the first and currently the only state that has introduced its own cryptocurrency. This is an unusual and courageous venture because digital money has so far remained outside the public sphere and it has not happened that the state authorities officially supported the functioning of cryptocurrency markets. Despite the largest crude oil reserves in the world, Venezuela is affected by a serious economic crisis. The country is struggling with hyperinflation and the community lives in extreme poverty. The irresponsibility of President Nicolas Maduro's socialist government has contributed to the dramatic situation in the country. The United States, in response to the lack of respect for democratic principles by the Venezuelan authorities, imposed sanctions on the country that led to its financial blockade. Therefore, the launch of Venezuelan digital money is to be a salvation for the country's dramatic economic situation.

Initial reluctance to cryptocurrency

The decision to introduce crypto currency in Venezuela was surprising, because the country initially fought with them. The drastic decline in Venezuelan bolivar caused the local community to become interested in the digital money of Bitcoin (C. Wulf 2018, p. 28). Bitcoin even more strongly hit the low value of local money, so the criticism of crypto-currency was common.

Expectations for the introduction of cryptocurrencies

Both "petro" and "petro gold" cryptocurrencies are supposed to be a source of money for the state budget. Cryptocurrencies are considered to be one of the most powerful innovations in the world of finance in the last centuries. They are said to be a way of exchanging wealth in society. The introduction of digital currencies by the Venezuelan authorities is aimed at attracting foreign investors, thanks to which it will be possible to finance the economy, independence from the dollar and US policy, social development of the country (G. Maihold 2018, p. 5). The specificity of the cryptocurrency market and the boom that accompanies them favors easier access to investors. The Venezuelan government wants to encourage people to use cryptocurrency to become so common that it can be paid throughout the country. It is also expected that in the course of time cryptocurrencies will replace the current local currency.

Advantages of Petro gold

Petro gold has some advantages that make it a great investment choice:

  • It is pegged to gold, making it a reliable and stable asset. This means that the value of the cryptocurrency is expected to remain stable, even in times of market volatility.
  • Petro gold is backed by the Venezuelan government, meaning that the government is committed to its success. This helps to ensure that the cryptocurrency will remain in circulation and continue to be supported by the government.
  • Petro gold is also relatively easy to purchase, with a number of exchanges offering the currency. This makes it accessible to a wide range of investors, allowing them to easily purchase and trade the cryptocurrency.
  • Additionally, Petro gold has been designed to be secure and private. The cryptocurrency is encrypted and uses a distributed ledger technology to ensure the security of transactions. This makes it a safe and reliable option for investors.

Limitations of Petro gold

Petro Gold has several limitations that make it difficult to use as a cryptocurrency:

  • It is not clear if Petro Gold is pegged to the gold reserves of the Venezuelan government, or to gold produced in the country. This presents a lack of transparency and makes it difficult to determine the true value of the currency.
  • The technology used to create the Petro Gold blockchain is not the same as the technology used for other cryptocurrencies. This means that it is not compatible with other coins and is not as secure.
  • The Petro Gold project is backed by the Venezuelan government, which is known for being unstable and unpredictable. This makes it difficult to predict the future of the currency and its success.
  • Petro Gold is not widely accepted by merchants and customers, due to its lack of trustworthiness. This means that it is not a good way to buy goods and services.

Other approaches related to Petro gold

One approach to dealing with Petro Gold is by setting up a gold-backed cryptocurrency exchange. This would allow users to trade Petro Gold against other cryptocurrencies and fiat currencies. Additionally, this exchange could be used to facilitate the purchase and sale of physical gold.

Other approaches related to Petro Gold include:

  • Creating a gold-backed token that is similar to a security token offering (STO). This would allow users to purchase gold-backed tokens that are backed by physical gold.
  • Developing a blockchain-based gold-trading platform. This would allow users to trade gold directly on a blockchain-based platform and could increase the liquidity of gold.
  • Issuing gold-backed bonds. This would allow users to invest in gold-backed bonds and would provide a way for users to earn a return on their gold investments.

In conclusion, these are some of the approaches related to Petro Gold that could be used to increase the liquidity and utility of gold. By using these approaches, Venezuela could potentially increase the circulation of gold and create a more robust gold-backed cryptocurrency market.

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Author: Anna Gołdyn