Crypto, Identity & the Need for Self-Sovereignty
August 22, 2018
Last week I wrote about how geopolitics can impact demand for public blockchain cryptocurrencies such as bitcoin. Cryptocurrency can serve as a (relatively) stable store of value when local currencies are devalued or taken out of circulation – most recently witnessed in Turkey.
In Venezuela, where citizens have flocked to bitcoin in light of hyperinflation, the government countered by announcing a state-controlled cryptocurrency called the petro. President Nicolas Maduro claimed to have raised over $700M for the oil-backed coin in February, although that account has not been verified. The petro also does not trade on any exchanges. Last Friday, he announced new economic measures as the IMF warned that Venezuela’s inflation could hit 1 million percent by the end of 2018:
- Removing five zeroes from the Venezuelan currency — dropping the Bolivar’s value more than 90%. The new currency is called the “Bolivar Soberano” (“Sovereign Bolivar”) and is pegged to the petro cryptocurrency
- The Sovereign Bolívar will supposedly move in line with changes in the petro, which is linked to movements in oil prices
- The petro is currently valued by the Venezuelan government at about $60
- Maduro also announced a 3,000% increase to the minimum wage (to the equivalent of $30/month), an increase in value-added tax by 4%, and the end of some gasoline subsidies
The announcement was met with a deepening refugee crisis, with many neighboring countries tightening restrictions on their borders as more Venezuelans tried to flee worsening economic conditions.
I’ve been on my annual “workcation” catching up on reading and seeing friends. Fittingly, two of the books I read over the past week are Keynes Hayak: The Clash That Defined Modern Economics and Violent Borders: Refugees and the Right to Move.
It’s hard to fathom how Maduro’s new policies will ease economic conditions, especially after putting a large new burden on business owners. The people are responding by leaving the country. With tighter border restrictions in place, the only citizens that will be allowed to start over somewhere else are those that have passports (a small % of the population given the expense of securing one). For those that do make it across the border with formal ID, they will be carrying a worthless currency and will not have their verifiable education credentials nor documented work history with them.
As long as government leaders exist who value their own self-interest above those of their countrymen and women, we need to have mechanisms in place that allow those who want to be productive members of society to move freely. This is one reason I was drawn to bitcoin and blockchain technology – and am fortunate to be funding entrepreneurs who are building towards that world. That is not to say this will be an easy path, as witnessed by other news of the past week. While bitcoin’s price stabilized, altcoins continued a downward trend; and governance continues to be the Achilles heel of token offerings. However, the amount of talent in the sector continues to grow, and I see paths to long-term progress being built day by day.
Complete Newsletter linked here: The FPV Blockchain Weekly #27, August 21, 2018