A team of Icelandic cryptocurrency enthusiasts is gearing up to launch an altcoin designed specifically for the population of Iceland.
Auroracoin is a litecoin-based digital currency, 50% of which is pre-mined. This is where it gets interesting: the pre-mined coins will be distributed to the entire populace of Iceland starting on 25th March. Each one of the country’s 330,000 citizens will receive 31.8 auroracoins.
Iceland’s banking sector does not have a very good track record, and this appears to be the driving factor behind auroracoin. The team cites the government's use of strict capital controls following the collapse of the local banking sector in 2008.
These controls are still in effect, and the auroracoin team disputes the notion that they are good for the economy, or the people of Iceland for that matter, stating:
“These controls were supposed to be 'temporary', but as with so many government actions, they remain in place to this day. This means that the people of Iceland have, for the past five years, been forced to turn over all foreign currency earned to the Central Bank of Iceland.”
“This means that the people are not entirely free to engage in international trade. They are not free to invest in businesses abroad. The arbitrary use of power this entails and the unsustainable debt of the Icelandic government has created uncertainty and risk in all aspects of commerce.”
The developers' statement continues: “This has had a crippling effect on foreign investment, as foreigners in general avoid investing in Icelandic enterprises, because of the risk of not being able to convert their investment back into dollars or euros.”
Digital currencies are one way of getting around the restrictions. In theory, they could allow consumers and investors to do whatever they like with their money, but only if the government does not step in.
Auroracoin's developers also point out that the Icelandic krona has lost 99.5% of its value since 1960 relative to the US dollar.
Print money, get out of debt
The trouble with the Icelandic financial system is not that it is in some way different than financial systems in other western countries, but that it was relatively small to begin with.
Once the bubble burst, Iceland’s relatively small economy could not help and the country still finds itself in a world of trouble. That explains the devaluation of the krona, as the government can only service its debt if it keeps increasing the money supply, resulting in high inflation.
Auroracoin is supposed to be distributed to the entire population by an “Airdrop” which should reach every citizen. That’s what sets it apart from other altcoins – it will have a large user base at launch, provided people take interest. This is, in part, made possible by Iceland’s extensive ID database.
It is an interesting concept, but it might have a few problems getting off the ground.
First and foremost, it will not be easy to reach the entire population and get them on board. Even if this happens, the government may choose to get involved, but it's an interesting experiment nonetheless.
Iceland Image via Shutterstock