Auroracoin sure does have a nice logo. Image: Auroracoin
The cryptocurrency craze spun into a new realm of ridiculous with Kanyecoin, Dogecoin, Ron Paul Coin and the bounty of other clone-coins that sprung up to ride the Bitcoin wave. But the latest altcoin to enter the market, Auroracoin, wants to take the futurist trend back to its cryptoanarchist roots. The altcoin was designed specifically for Iceland, and the creator plans to give every citizen of the Nordic country a digital handful of Auroracoins to kickstart their use.
Auroracoin is the brainchild of cryptocurrency enthusiast Baldur Friggjar Odinsson, and he'll be the one distributing pre-mined coins to the entire population of Iceland at midnight on March 25 in a countrywide "airdrop." Each Icelandic citizen—all 330,000 of them—will receive 31.8 AUC through a digital transaction. Citizens all have a national ID number available through a public database, which will be used to verify their identity.
"So I intend to leverage this system so everyone has a chance to verify their ID and get their share of Auroracoins. For most, it will be as easy as logging onto Facebook," Odinsson told me. "People will have (at least) a year to claim their coins."
Why would someone want to give away over 10 million digital coins? To stick it to the man, naturally. Auroracoin creators believe the digital currency can buck the "unholy alliance" between governments and too-big-to-fail banks, by taking the power away from politicians and giving it back to the people.
Iceland's economy is still reeling from the country's major financial meltdown in 2008, when greedy banksters nearly bankrupted the traditionally well-off nation. The banking system collapsed, followed by a run on deposits from foreign investors in the Netherlands and UK. Iceland's fiat currency, the Krona, plummeted; inflation exploded; the stock market did a nosedive; and the national debt skyrocketed. (Actually, the currency’s problems go back even further than the 2008 crisis; the Krona has lost 99.5 percent of its value since 1960 relative to the US dollar.)
Iceland's new 10,000 ISK bill is worth about $85, according to the Central Bank.
Iceland avoided bankruptcy, but spiraled into an economic recession it's only recently beginning to recover from. Major banks were nationalized and the government imposed capital controls to stabilize the economy that were supposed to be temporary but are still in place today. As a result, any foreign currency earned has to be turned over to the Central Bank of Iceland, people can't freely trade internationally or invest in business abroad, and foreigners are hesitant to invest in Icelandic companies, which further stifles economic growth.
"I started wondering how to break the cycle, and came to the conclusion that we had to democratize money in Iceland," Odinsson said. "It has to be divorced from the corrupt banks and government. I thought Iceland might be too small and isolated (because of the capital controls) for a cryptocurrency like bitcoin and litecoin to naturally take root. So I thought: What if everyone just got some cryptocoins and could use them or discard them or do anything they wanted with them? And as I thought more about this I realized that this could actually be done."
Odinsson turned to digital currency to get around these government restrictions. Remember when Bitcoin boomed after the government in Cyprus tried to pull itself out of financial ruin by reaching into citizens’ pockets? That’s what Odinsson’s hoping will happen with Auroracoin in Iceland.
So can it work? Well, Iceland is well-positioned to be a guinea pig for national cryptocurrencies. It's small—the population's about the size of San Mateo—and nearly everyone is online and brandishing gadgets. Icelanders tend to be tech-savvy and well-educated, and Odinsson's betting it won't be too hard to get people up to speed on virtual currencies. Plus Iceland has a thing for virtual stuff anyway.
Odinsson's taking the unconventional approach of pre-mining half of the Auroracoin stock, which is based off the Litecoin source code, so that the early adopters won't just be techsperts with expensive mining hardware but the whole public. Now he's encouraging developers to make tools like payment software and virtual wallets for currency, and calling on all global currency exchanges to accept the new Nordic altcoin come March.
"People will try out the system, they will send coins and use them for fun, and then they may gradually gain some economic value. People will speculate on the coins and they will have some monetary value of at some point," said Odinsson. "If the Airdrop works in Iceland, I can see similar schemes being employed in other countries with a history of economic mismanagement. I know there is an Irish version of Auroracoin currently in development, and I could see an Argentinian one working as well."