When Bitcoin started back in 2009, decentralization was one of its core ideals. In other words, Bitcoin did not need a centralized authority to issue it. Its legitimacy and value depended on the digital ledgers interconnected system verifying the transactions.
Eleven years on, and more than six thousand crypto-assets, we live in a very different environment. Governments actually get interested in the cryptocurrency environment. They have kept an eye on the market for cryptocurrency since day one. Let’s not forget the UK inquiry about cryptos back in 2014 as a very vocal example.
Since cryptos have become more popular, blockchain technology has spread into other fields. For example, software outsourcing companies such as BairesDev use it to provide their customers with creative solutions. Governments are following the trend, both implementing solutions to blockchain and trying to legislate on crypto-trading.
Opinions on cryptos right now are as diverse as our cultural differences. Thus, some countries like Israel tax them as securities. Others, like Bolivia, explicitly ban trade with them. And others like Belize do not have any specific cryptocurrencies-related legislation. Yet, no matter what initiatives are in favor of or against, everybody pays attention to them.
Moreover, some countries have gone one step further and are actively developing or implementing their own assets based on cryptography. However, the question remains: is this a good idea? Will traders need to invest in such cryptocurrencies? Would they still have cryptocurrencies?
Ill-fated experiment from Ecuador: The first phase
In 2015, Ecuador was the first country to formally introduce Sistema de Dinero Electrónico, a digital currency. Although it was not, in every sense, a cryptocurrency, it did make the news the first state-sponsored e-wallet.
Many saw this as a progressive government’s optimistic take on digital currencies. Critics were quick to point out that Ecuador had banned Bitcoin and crypto-trading a few months before. So it looked more like a move of power to monopolize digital currencies than the free adoption of it.
Ironically, while Ecuador’s government has criticized cryptocurrencies and painted them pretty much as a sham, Bitcoin trading has continued to grow. Although Bitcoin continued to get stronger in 2018, the government’s experiment came to a sad end when they announced full network deactivation would occur in mid-April.
This was a tough blow not only to Ecuador but to worldwide critics who claim cryptos lack value because no institution or country would back them. Ultimately, it was the decentralized system that survived the test of time.
Second attempt by Latin America: The Petro
As Ecuador’s digital currency crashed, another Latin American country caught Crypto traders’ attention: Venezuela. This time, it was possible to use the state-sponsored coin, the Petro, based on blockchain technology, as a trading currency inside and outside the country. The oil market in Venezuela supported its value.
To be real, it sounded too amazing-and it was. The Petro’s launch burst with a myriad of troubles, from the Venezuelan government’s vague statements to outright lies. For starters, officials said they had already sold over 700 million dollars before releasing the Petro.
When crypto-traders checked the blockchain, they soon discovered that a single wallet belonged to every Petro, and there was not even one transaction. The Petro was a con, then? Not exactly. There is the Blockchain, and people might buy and sell Petros.
The currency is, however, wrapped in mystery and drama. For example, Joey Zhou, the creator of Etherium, pointed out that the whitepaper from the Petro was a blatant clone of Dash. And the latest controversy seems to be that the Petro was hard forked a couple of weeks ago, with the block explorer showing the genesis block was mined in 2018 and on May 5, 2020.
Although Venezuela’s response to US sanctions may not have been the Petro, the fact that a state would even turn to a cryptocurrency as a tool to confront the US is a strong indicator of how big role cryptos will soon play.
The world goes cryptography
Cryptocurrencies issued by the government might have started with the wrong foot, but 2020 was full of surprises (aside from a pandemic, that is). Seoul, South Korea’s capital, wants to launch its own S-coin within the coming year, a digital currency given to citizens as a reward for their civic duty (like paying taxes).
The S-coin may be smaller in scale than Petros, but, at the same time, it is a fascinating social engineering experiment, a way of improving civic activity that can be traded for rewards and other social benefits.
China is the country that should keep an eye out. With the recent release of the Blockchain Service Network and some leaked online images, it appears that China is now preparing to release a digital yuan.
If that were the case, that would make China’s cryptocurrency the first digital currency backed by a genuinely large economy. With the right rewards, on foreign markets, it could even rival the dollar.
Government issued cryptocurrencies
For many, the centralized nature of government-issued digital currency defeats cryptocurrencies’ purpose. It has a secure and open system that does not rely on an entity’s whims but rather derives its value from its users. Would people bet on a digital currency that has the same limitations that we’ve been trying to get off? It’s just time to learn.