How is cryptocurrency going to change the economy of Venezuela?

Let’s admit the fact that the last decade has showcased us some of the most extreme changes. One such change which the world is talking about is the cryptocurrency. Undoubtedly, it has revolutionized the economy of the world.  Many banks are now considering making cryptocurrency as a part mainstream transactions. However, the real applications of the same are still on the table for discussion.

It would not be wrong to say that the world is now becoming, pre economically unsafe. This does not mean that we are not growing, what I want to emphasize here that, the world economy is a roller coaster ride. We are well-aware with the status of the economy of Greece, and the latest buzz is about Venezuela. The country is witnessing the downfall of the economy. Well, I am not going to discuss this in depth, but in context to what I am trying to exemplify, we need to know about the downfall of the economy in Venezuela and why are they shifting their focus to cryptocurrency- Petro.  But, before I begin, I would like to say that economic machinery of any nation is like a glass jaw, one punch and it all crashes down.

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Economic crisis in Venezuela

Amidst all the development that is taking place in the world, there is a country which is currently under the debt of $140 billion. I am talking about Venezuela. Once a flourished South American nation, Venezuela  is now undergoing a  financial crisis. Many economists believe that the country is witnessing hyperinflation where the prices have shot up by whopping 2300 percent. The food and the medicine have become scarce, wages have not risen, and there is a shortage of medicine. It has led to the socioeconomic crisis in the country. Apart from this, the falling oil prices are also responsible for the poor economic condition of Venezuela.

Another factor that has hit the nail in the coffin is the US sanctions imposed against some of the members of the government for corruption and drug trafficking.  Furthermore, the price of Bolivar against Dollar is also fallen steadily leaving the nations dumbstruck. 3,100 bolivars to buy one U.S. dollar at the beginning of the year

What is the government looking at ?

With so many problems surrounding the nation, the country is now looking at the new currency or I should say, digital currency as a solution to their economic crisis.

We know that cryptocurrency has garnered the eyes of everyone, it has gained traction in finance. At the time of writing, the price of Bitcoin reached $111172. This whopping rise in the price of Bitcoin shows the increased acceptance of this currency. More and more companies are now shifting towards this currency. Many banks and financial institutions have also taken a note of it and are figuring out ways to merge digital currency into the mainstream economics.

For example, Barclays, Canadian Imperial Bank of Commerce, Credit Suisse, HSBC, State Street, MUFG, UBS, and BNY Mellon, are now working on blockchain to clear and settle the transactions. IBM is yet another company which is harvesting this technology and working out on blockchain solution for financial institutions,

What is in it for Venezuela?

Being a nation webbed by problems, they are now backing on cryptocurrency as a solution for their problems. The president, Nicolas Maduro announced Petro, the new cryptocurrency that would help the nation fight the socioeconomic battle.

What is Petro?

A lot is being talked about cryptocurrencies; they are the virtual coins which are mined by computers using the complex algorithm. Currently, Bitcoin is the most talked about currency and is gaining global acceptance. However, there are others in the league.

Some of the popular cryptocurrencies in the world(not ranked in the hierarchy) :

  • Bitcoin
  • Ethereum
  • Litecoin
  • Dash
  • Ripple
  • And many others in the

 

The latest addition to this is Petro. It is a bitcoin-like currency and will be backed by oil, petrol, gas, and diamond reserve. Venezuela is a country rich in these resources and is introducing Bitcoin as a solution to their economic crisis.

 

How will it help the economy?

Well, not much is out about Petro or how it is going to be mine, we only have the information that it will be backed by natural reserves of Venezuela like oil, petrol, and gas. But when we come on a global platform, then many banks and business are now working on making cryptocurrency a part of the mainstream economics.  Backed by Blockchain technology, the transactions in cryptocurrencies are recorded in the ledger which is accessible to all the people in the network. It brings in more security, and all the transactions and modification are registered and updated, thus enhancing the security and safety.

With the help of Petro, Venezuela is trying to take advantage of the current advancement in the field of cryptocurrencies, however,r the country still needs to figure out how it is going to help them to move out of the economic crisis.