Venezuelans are faced with a terrible choice:

  1. Continue making purchases using the country’s almost-worthless local currency, the bolivar.
  2. Go to the black market and buy U.S. dollars.
  3. Flee the country.

It got this way because the country’s leader, Nicolás Maduro, made some pretty terrible economic decisions. For one thing, he put all of Venezuela’s (economic) eggs in one notoriously bumpy basket: oil. The country’s always had a lot of it, but for a long time, it was just one of many resources the country exported, along with heavy industry products (steel, aluminum, cement) and agricultural products like rice and corn. By 2017, though, oil had taken over, accounting for 98 percent of the country’s export revenue. And when the price of oil took a nosedive in 2014 (from $115 to just $35 a barrel), the Venezuelan economy plummeted, too.

Basically all domestic businesses took a big hit — imported goods cost more, so local businesses were forced to charge higher prices, even for basic necessities. People could afford less, so they spent less money, which meant the government made less money in tax revenue. And instead of increasing interest rates or cutting back its own spending, the government took exactly the wrong tack: printing more money.

And so the process of inflation began. Hyperinflation — an extreme form of inflation where a currency’s value jumps erratically — has gripped the country since the beginning of 2018. And it’s only predicted to get worse — by the end of the year, inflation is predicted to hit a staggering 1,000,000 percent.

In 2017, a bag of rice cost 8,000 bolivars. Just last week, it’s price would’ve been well over 9 million bolivars.

In 2017, a bag of rice cost 8,000 bolivars. Just last week, it’s price would’ve been well over 9 million bolivars.

About 15 percent of the population is desperately fleeing from an economic crisis. Crime rules the streets, while critics of president Maduro’s authoritarian regime are threatened with political persecution.

It is, unfortunately, a situation characteristic of a rapidly collapsing economy. The bolivar is rapidly becoming worthless. It’s only logical, then, that people turn to more stable alternatives like US dollars traded on the black market, or even bartering for goods and services.

In a desperate attempt to stop the spiral of hyperinflation, Maduro recently introduced a new currency called the “sovereign bolivar.” To be clear, the “sovereign bolivar” is simply a rebranding of Venezuela’s previous currency. The only real difference is that its value simply had five zeros lobbed off the end — in other words, something previously worth 1,000,000 bolivars is now worth just 10 sovereign bolivars. But its value will also be tied to the petro, a state-funded cryptocurrency that launched back in February (the previous bolivar was loosely tied to the U.S. dollar).

This change won’t do much to help Venezuelans, Steve Hanke, a professor of applied economics at Johns Hopkins University and a leading expert on hyperinflation and exchange rate regimes, tells Futurism. “The removal of zeros and the introduction of a new currency with a new name does absolutely nothing. It’s a cosmetic kind of change.” Just days after the devaluation, thousands of businesses closed temporarily to figure out how to adapt to the “sovereign bolivar,” according to the BBC.

The petro (the cryptocurrency the sovereign bolivar is tied to) is doing something groundbreaking, however — it’s one of the first attempts to introduce a state-backed cryptocurrency. If the situation were different, Venezuela could provide a promising model for other nations looking to shift to a blockchain-based currency. But that’s not what’s going to happen in Venezuela. Instead, the petro might become a cautionary tale that could discourage other nations from introducing similar state-backed cryptocurrencies.