Don’t Centralise Me: The Birth of the Nationalised Cryptocurrency
The birth of the “nationalised” cryptocurrency has begun — an oxymoronic statement in itself. For a cryptocurrency to become nationalised, it loses the core, unshakable attribute it was born with: decentralization.
Cryptocurrencies were intended to distribute individual ownership, monetary rights, and remove the restrictions surrounding access to financial services. To place this power back in the hands of a centralised institution — such as the government — smacks of disorientation, hypocrisy and a blatant absence of logical thought. However, if we can somehow avoid the centralisation aspect — it makes perfect sense.
Venezuela —so far, so not good. Not the best example of a nationalised cryptocurrency. If such an entity ever was to pass the genesis stage, it’ll require more transparency and faith than is currently allotted to the Petro — the existence of its oil backed securities fading into impossibility, fuelled by uncertainty and a fundamental lack of evidence.
The story so far…
The problem with Venezuela’s economy: a result of US sanctions and political mismanagement, or a natural devolution which cannot be prevented? The base problem: hyperinflation. Caused by? A corrupt government (which blockchain and bitcoin are supposed to solve), a shrinking economy (which bitcoin is supposed to solve — financial participation), authoritarianism (if not solved by blockchain, artificial intelligence may be able to nip this in the bud), a drop in oil production (blockchain could have prevented that, surely). Company closures and rising unemployment (could be solved by blockchain, definitely) have contributed to the worsening crisis.
The pushing of Petro
Petro, as we’ve all guessed, displays a strong resemblance towards Dash: the similar mining algorithm (X11 — meaning a proof of work hashing function), master nodes, instant send, consensus combination… large chunks of the Dash whitepaper appear to have been extrapolated onto Petro, with a sprinkling of finesse and a blatant ladling of copyright. It’s almost a clumsy, patched together amalgamation of popular and effective cryptocurrency traits, held together by an elusive backer, and wielded by an autocrat.
The problem with a nationalised cryptocurrency?
The fundamental problems with a nationalised cryptocurrency: it requires backing from the government, or a centralised authority of some kind. For example, if we were to have a nationalised cryptocurrency in Britain, the Bank of England would need to authorise it in some capacity: and this defeats the organic, original purpose of Bitcoin, formulated within the nebulous days of the 2008 financial crisis. No central authority, exerting its clouded, toxic waste fumes of dominance over autonomous individuals. Financial transactions — financial policy — should not be carried out beneath a wave of deceit and a lack of transparency. However, this is the current climate surrounding Venezuela and the Petro — instead of a peer-to-peer electronic cash system, we have a cryptocurrency wielded as a weapon of the government controlling it, sporadically exchanging bolivars for Petro without the consent of its constituents: as demonstrated by the unsolicited exchange of pension funds from bolivar to Petro, saddling pensioners with an unusable currency, their own finances kept beneath lock and key, inaccessible.
How exactly would the British government — and by extension, the Bank of England — handle this situation? If Brexit is a truthful reflection of their limited capabilities, the the answer is — appallingly. CBDC (Central Bank Digital Currency) is just what it is: a central bank issued digital currency, which, when looked at plainly, amounts to nothing more than a digitally produced currency, a replication of the tattered bits of paper, plastic and metal which still remain in circulation today, miraculously enough.
A change to the traditional currency model? No — just an extension of the flawed system currently in existence.
But…Estonia? Senegal? Brazil? Egypt?
Could the issuance of a CBDC really accomplish anything? In certain cases, it already has. A CBDC, if well managed, could potentially contain the slim tide of poison within our current cryptocurrency system, such as the corrupt ICOs, the unjust influence of whales and movers within the market, and the ambiguity surrounding regulation. Senegal, an early adopter of a centralised digital currency known as eCFA — named after CFA franc, the regular Senegalese currency, was issued in 2016 and appears to be progressing well. eCFA is fully dependent on the central banking system and can only be issued by an authorised financial institution, although it has been developed separately: it is the product of the collaboration between local bank Banque Régionale de Marchés (BRM) and eCurrency Mint Limited, an Ireland-based startup that assists central banks in creating their own digital fiat currencies. eCFA’s success is based on its high security and impermeability, as a result of its blockchain-based foundations, and has been designed to “secure universal liquidity, enable interoperability and provide transparency to the entire digital ecosystem in the West African Economic and Monetary Union”.
Brazil? According to a recent research report for R3 by JP Koning, a Brazilian CBDC could adopt several different design interpretations: a cash-like digital bearer instrument; an account at the central bank; or a hybrid approach that combines features of cash and accounts.
Egypt? The Egyptian Central bank is currently looking into the viability of a CBDC, considering whether it will be solely bank-to-bank issued currency, or available for consumer usage as well. However, the launch of a CBDC — at least, in Egypt’s case — is not an intention to fully disrupt the financial system, but as a prompt, or a catalyst, designed to ease Egypt’s transition into a cashless society.
Estonia? Estonia has been considering launching its own CBDC, known as Estcoin. However, it seems to have abandoned the idea after facing EU regulators’ criticism. The concept was introduced by the president of the Estonian e-residency program, Kaspar Korjus. The currency was intended to help Estonian citizens certify their documents remotely from anywhere in the world, whilst addressing other areas of citizenship needs.
The Venezuelan EOS outreach plan: proves the success of cryptocurrencies, with the exception of the nationalised model
Although the Petro itself appears to have failed, cryptocurrencies — and their liberating qualities of decentralization — have not. Although Egypt’s central bank denigrated Bitcoin earlier this year, openly stating that Bitcoin has been used to fund terrorists (true or not, so has fiat currency), they have been unable to ignore the benefits of distributed ledger technology, and its ability to sustain a healthier, if not simpler, financial arrangement between consumers and central banks.
