🇻🇪 Venezuela’s New Crypto 🐍 Scam Roundup
Muted week as markets give up recent gains. Bitcoin hovering around the $10,000 mark. It feels like there’s plenty of uncertainty in the crypto markets, much like the financial markets. Interestingly we’re seeing Korean and Japanese prices going from a uniform discount back to a premium, indicating bulls are returning in these markets.
🇻🇪Venezuela ‘Launches’ PetroCoin
What’s the Story?
Venezuela apparently conducted a pre-sale of its state-backed cryptocurrency ‘PetroCoin’. President Maduro tweeted a claim that they had raised USD735 million, although there is no record of this on any blockchain yet.
PetroCoin is a cryptocurrency that is supposedly backed by barrels of oil in Venezuela. Since the initial announcement of the PetroCoin in December by president Maduro, there have been scarce details about the project.
Supposedly the PetroCoin is legal tender that can be used to pay taxes, amongst other government fees.
Why Do This?
Venezuela’s government have been hit by a triple whammy of US-led sanctions, a collapse in oil prices, and economic mismanagement of epic proportions. As a result, the government has been printing the national currency, the bolívar like there’s no tomorrow, literally. This has caused hyperinflation that has led to widespread social unrest.
The PetroCoin is a way for the government to sidestep the US sanctions and ‘sell’ their oil directly to other government institutions, corporations, and individuals. It also seems to act as a forward contract against the oil reserves, allowing them to ‘sell’ the oil without actually extracting it.
Does This Work?
The pre-sale apparently had a steep discount to the ‘pegged’ value. While this is normal for cryptocurrencies doing ICOs, in financial markets this steep a discount indicates a lack of confidence in the counterparty — especially given that the asset is supposedly backed by a hard asset, unlike the average government bonds.
Part of this is because there has been significant confusion surrounding the pre-sale. Initially, it seemed the token would be an ERC20 token based on Ethereum. The English language whitepaper still makes mention of this fact. Confusingly, and only 2 weeks before the pre-sale this was changed to NEM, which the NEM team have confirmed.
Additionally, there have been references to ‘mining’ operations being set up across Venezuela, although being a centralized cryptocurrency it seems a database would be cheaper to operate. Either way, if it really is based on NEM, which uses a Proof-of-Importance algorithm instead of Proof-of-Work, then there is nothing to mine anyway.
Finally, the pricing mechanism for the PetroCoin has undergone a few changes, although all iterations effectively give the government supreme control over its redemption price.
So, in conclusion, we have a ‘crypto’ currency that doesn’t need to be decentralised, has no proof of actually being backed by a barrel of oil, and is completely centralised by a government that has systematically mismanaged its finances. There are no technical details available, proof that the $735MM was sent anywhere on any blockchain, or that anybody has received a PetroCoin yet.
If that’s not enough to scare people off, the US Department of State has explicitly said that they would sanction any individual or corporate involved in purchasing the PetroCoin.
For the morbidly curious, here’s a link to the official website.
Every week there are new scams that hit the market. Here a few that have surfaced this week.
Phishing is when targets get sent a link that directs to a clone of a well-known site, like an exchange or wallet. When the user inputs their credentials, the hackers simultaneously log into the actual account and drain the accounts of funds. This works even with 2-factor authentication enabled, with sophisticated scammers automating the entire process. This method has been used to great success in whatsapp and telegram groups — now they’re directly sending text messages too.
The best way to avoid this is to never log into anything using a link sent to you in a message — type in the domain directly.
Domain names can be registered using special characters such as áäâåã. This leaves room for scammers to register similar domain names using these special characters and create a phishing site where again, user credentials get stolen. This example above is particularly nasty because, in applications like email clients where links are underlined, the dots are obscured.
Always check the SLL certificate (little green lock icon to the left of ‘https://' in the address bar) to ensure you’re on the right site.
😷Fake Celebrity Twitter Accounts
Scammers create a fake twitter profile that looks like the original celebrity’s with a similar handle. Accounts controlled by the scammers then claim that they received the ‘free’ reward, making it seem like there’s social-proof of the scheme working as advertised.
Always make sure the handle is correct. Don’t expect free money.
🤖A few tips
1. Use a password manager. If the manager doesn’t register the username/password fields then you’ll know you’re not on the right site.
2. Use browser extensions that detect special unicode characters. Here’s a Chrome one.
3. Don’t follow links. Type in the domain manually.
4. Be wary of anybody offering ‘free’ money, especially if it involves sending them something
If you get value out of this newsletter help spread the word! Forward it on to some friends or share this link 👉https://medium.com/cryptosfortherestofus