On February 20, President Nicolas Maduro activated the process for the pre-sale of the Venezuelan cryptocurrency, the 'Petro', which is considered a 'sovereign crypto-asset’ backed by 5.34 billion barrels of oil from the Number 1 field of the Ayacucho Block in the Orinoco Oil Belt.
The Petro looks to fulfill a function of enabling an alternative source of financing for the national government that would not be directly tied to the major global financial centers, given that it adopts blockchain technology which is open to the direct participation of citizens. Also, the upcoming release of the 'Petro-gold cryptocurrency’ has been announced, backed this time by this important mineral.
The announcement of the Petro has generated a debate in which promoters and naysayers highlight mainly the potential economic advantages or disadvantages associated with it.
Very little is written about who will assume the socio-ecological costs of this new proposal of financialization of nature which uses massive amounts of electricity to feed its virtual economy.
Although cryptocurrencies seem to be a matter primarily of 'intangible economy', it is essential to remember that they are always based on the devastation of nature. One must take into account that between 60 and 70% of Bitcoin mining in the world, which is located in China, is fed by coal from Australia, Indonesia and from China itself.
So, once again we are forced to emphasize our need to escape from being bottled in by financial economics, which is thinking about monetary flows and work, and try to also show how preserving prevailing ecosystems and reproductive means of the organic life of a country enter the debate.
We propose to take these issues into account, whilst highlighting at least two factors:
Electricity-Devouring Mining Farms and the Energy Crisis in Venezuela
It has already been said that the Petro as a cryptocurrency is based on the technology of blockchains, which record transactions by means of a collaborative work that guarantees reliability and validity of system data. This format encapsulates the mining of the cryptocurrency in which miners compete with each other for the resolution of mathematical problems which broaden the public 'accountancy books' of the cryptocurrency, in exchange for a reward paid in that same currency.
But it is still not clear how the processes of mining the Petro is to be developed after the pre-sales and initial offer. Different spokespersons of the government –including President Maduro– have announced the creation of mining farms in all of the regions and municipalities of the country (in high schools, universities, prisons, etc), establishing the first mining laboratories and farm field practices, where they will mine not only Petros, but all of the existing cryptocurrencies. In the Petro’s 'White Paper', the objective of growth and the technological development of the system are stated, with special emphasis on blockchains.
It is important to highlight that cryptocurrency mining processes use many computers with powerful processors that systematize data and create new chains of blocks 24 hours a day, and therefore require a huge amount of electric energy.
Several studies have been published in recent years showing this problem and generating a debate over the sustainability of the cryptocurrencies, at least those with a main algorithm (proof of work).
So that one may have an idea of how much energy we're talking about, we can examine some examples, taking into account the rapid growth of the Bitcoin.
According to the Bitcoin Energy Consumption Index (2018), it is estimated that the power consumption of all of this cryptocurrency networks is 42.3 TWh/year, equivalent to the energy consumption of Peru.
Several analysis has shown how the amount of electrical energy that Bitcoin consumes now exceeds that of many countries in the world, and the growth rate of the Bitcoin network operations per second (hash rate) is increasing very rapidly, especially in recent years. Some projections suggest that by 2020 Bitcoin is going to be consuming as much energy as the United States, and other more alarmist projections say that it will surpass the global consumption of 2017.
It is clear that the Petro has other political and geopolitical dimensions and conditions. But one should ask to what scale and intensity does the Petro look to grow to in terms of the creation of mining farms with their large computers connected to network and which tend to operate by the logic of competition and rewards? And above all, who will have to make sacrifices so that this can happen, especially given the serious deficiencies and the energy problems in the country?
The severe power crisis that exists, both in generation and distribution capacity, has shown itself with severity in recent years (remember the last crisis of Guri in the first half of 2016), to the point of leaving us at the prospect of triple rationing and with permanent blackouts in all Venezuela. The most essential economic activities (such as the oil and the retail sector) have also been affected.
In the short/medium term the Petro could add another trigger element to aggravate the situation and affect all electrical generation and distribution in the country, with important social and economic consequences.
Finally, I invite you, yet again, to think about the proposed developmental model and its worrying trends to socio-environmental sustainability and systemic collapse.
Commercialization and financialization of nature
The momentum of the Petro represents, in our view, an escalation in the mechanisms of massive commercialization and financialization of nature that are being driven by the national government as a way to recover the affected cash flow and face the extraordinary economic crisis that exists.
It is necessary to remember that this is occurring within the framework of a series of economic policies which have been carried out as of 2014 which look to make the economy more flexible, including the certification of all mineral reserves of the country which has been promoted (Magna Reserve Mining Project), and the offer to pay debt with commodities (not only oil but also coal, as proposed to the interested corporations for the Carbozulia project) for example.
The Petro inscribes nature and territory, framed as they have been as guarantees, in financial capital encoding (e-commodity), and promises petroleum, gold and diamonds that have not even been extracted to these international dispossessing financial dynamics.
Although it offers greater autonomy, it’s operations do not cease to be in relation and function to the global processes of capital accumulation and flow into and from the country. At the same time, and in the same way as that which happened with PDVSA bonds, the crypto asset buyers may also be speculative world vultures, compromising our sovereignty over our territories and ecosystems.
The Petro and its expansion is linked to, and operates in relation to, the configuration of an expanded and more flexible extractivism, as well as mortgaging off of nature and its cycles. These factors tie us closer to colonial schemes of environmental dependency and devastation rather than characterize our developmental model.
All of this logic is fundamentally neoliberal. From the 1980s onwards, there has developed a process of commercialization and financialization of all aspects of life on a global scale (as one of the main devices of globalization). The most recent precedent in Venezuela was precisely in the decade of the 1990s, when a more orthodox liberalism prevailed and proposals emerged in the country to pay our debt with nature (hence the overt interest of Rafael Caldera in opening the gold mines in the Sierra Imataca, which unfortunately would be carried out and consolidated by the government of Hugo Chavez).
The current severe crisis can hardly tackle mortgaging the socio-ecological future of the existing population and that to come.
Similarly, there are open questions about the fate of public monies obtained in previous years (a citizens audit of all public accounts is imperative), as well as over the lack of spaces for socioeconomic alternatives that ensure, first and foremost, food sovereignty, popular participation and environmental sustainability.
Equally, it is still vital to recover old discussions on the theory of disconnection, which were revived when there was talk of ALBA-TCP, Bank of the South and the Sucre.
Translation by Paul Dobson for Venezuelanalysis.com.