Authoritarian ICO: How Venezuela’s Government Is Abusing the Blockchain

Maduro’s new Petro token is consolidating power and crowdfunding oppression.

“Imaginary evil is romantic and varied; real evil is gloomy, monotonous, barren, boring. Imaginary good is boring; real good is always new, marvelous, intoxicating.”

Simone Weil

Last year, token sales raised approximately $5.6 billion. The crypto-method of crowdfunding has opened the floodgates to decentralized funding, which is helping support some amazing ideas that will no doubt change the world for the better.

The Cryptocurrency of Hugo Chavez

The Venezuelan Petro is a tokenized, oil-backed digital currency. Denominated as “PTR,” the cryptocurrency is proudly touted as the realization of president Hugo Chavez’s idea of “a strong currency backed by raw materials.”

  • Broadened media censorship policies as a measure to “democratize” the country’s airwaves (HRW)
  • Withdrew from the American Convention on Human Rights, an international humans rights instrument for seeking redress when national courts fail to provide it (HRW)
  • Nationalized (expropriated) the biggest Venezuela oil company (PDVSA), kicked out the majority of international oil companies, as well as nationalized many of the country’s main factories, companies, etc.

The Venezuelan Petro (PTR)

The Petro is described as “a sovereign crypto asset backed by oil assets and issued by the Venezuelan State.” This simply means that it is completely centralized and controlled by the government — a total antithesis to blockchain’s original thesis of a decentralized and disintermediated future.

International Funding When It’s Convenient

Ironically, in 2010 Venezuela’s (corrupt) Supreme Court ruled that individuals or organizations receiving foreign funding could be prosecuted for “treason.” It was an effort to prevent foreign states from undermining Venezuelan democracy by supporting local (Venezuelan) NGOs (HRW). In fact, The National Assembly passed legislation prohibiting organizations that “defend political rights” or “monitor the performance of public bodies” from receiving international funding (HRW).

Crowdfunding Oppression Between Sanctions and Sales

The President of Venezuela, Nicolas Maduro, claimed that the first day of the PTR pre-sale generated over $730 million alone, but, at that time, there was only 4.2M token transacted, which would mean buyers accepted a price point of $173.80 per token — the highest token pre-sale price point recorded in history. Since PTR, originally, was an ERC20 token (based on Ethereum), we can rely on Etherscan, an Ethreum blockchain transaction explorer, to report the true story of transaction volume. What we find is that 95% of PTR transacted is owned by an address different than the original smart contract address, totaling $5.7 billion in holding at the proclaimed, white paper PTR price of $60 per token.

Total PTR Token Holders as of 3/14/18

A Token Sale that Could Double the Nation’s Cash

The Petro white paper parades the cryptocurrency as a viable asset that could be leveraged by the average Venezuelan, but the only thing Venezuela has in abundance right now is chaos.

Abusing the Blockchain

Blockchain technology and cryptocurrency are naturally amoral. The humans that architect and transact value on top of these systems are the ones that inject purpose. Whether that purpose is virtuous or iniquitous is the question. Participants within these systems can succumb to and perpetuate dangerous agendas if they aren’t vigilant and informed. In the case of Venezuela’s Petro, market participants are not just bystanders but active contributors to and co-conspirators of injustice.

CEO of Emerging Impact, Former Head of ConsenSys Social Impact, @Goldman Alum, @Cisco Alum, @TFA Alum, Activist, Intense Autodidact