In early 2018, in an effort to fight a collapsing economy and hyperinflationary currency Venezuela decided to jump on the BitCoin bandwagon and create its own cryptocurrency called the Petro. On December 3rd 2017, Venezuelan president Nicolás Maduro announced the petro in a televised address, stating that it would be backed by Venezuela's reserves of oil, gasoline, gold, and diamonds. Other reports claimed that the initial issue price would be based on the price of oil i.e. 1 Petro = 1 Barrel of Venezuelan oil. On 5 January 2018, Maduro announced that Venezuela would issue 100 million tokens of the petro, for a total value of just over $6 billion. The government stated the pre-sale raised … [Read more...]
How High Inflation Drives Countries Towards Crypto
What is CryptoCurrency? A cryptocurrency (aka. Crypto), is an alternative form of payment created electronically rather than through government fiat (decree). The idea behind it is that an algorithm creates a limited amount of currency that is available to individuals to use instead of cash, checks or credit cards. The technology behind it allows you to send it directly to others without going through a 3rd party like a bank. Initially, the untraceable nature of cryptocurrency led governments to suspect that it was being used for nefarious purposes. And some notable cases of purchases on the "dark web" were prosecuted like the "Silk Road" case which operated from 2011-2013. Since then … [Read more...]
Cryptocurrencies and Inflation
In our article, What is the Real Definition of Inflation? we explained that there is a major difference between the the cause and the effect of Inflation and unfortunately both are loosely called "Inflation". More accurately the cause is "monetary inflation" i.e. an increase in the money supply and the effect is "Price Inflation" i.e. an increase in the cost of goods and services. Can Cryptocurrencies "Cure" Inflation Since the dawn of money there has been fear of debasement. In the early years, when gold and silver were the primary forms of currency it was possible that another cheaper metal like lead could be mixed in with the molten gold and because of its near identical atomic weight … [Read more...]
Can Crypto Solve Venezuela’s Hyperinflation Problem?
It is important to note that Hyperinflation doesn't just happen to a country's currency for no reason. In What is Hyperinflation? we found that "Hyperinflation is an extremely rapid period of inflation, usually caused by a rapid increase in the money supply. Usually due to unrestrained printing of fiat currency." Generally, the increase in the money supply is because the government can't pay its debts so it simply prints more money, these debts are usually the result of War, Corruption, or Fiscal Mismanagement. In Venezuela's case, the problem is not that they don't have the assets (they have some of the largest oil reserves in the world), but rather it is a result of their economic … [Read more...]
