A new cryptocurrency was created in February, the Auroracoin. It is comparable to Bitcoin (actually it’s based on Litecoin, but that would be too technical for this blog post) and on March 25 every citizen of Iceland will get 31.8 Auroracoins. For free. Just by using their ID number.
That in itself is an interesting experiment, because what will happen when everybody gets a small amount of a crypto currency? Will people start using it and create a second economy or will it not take off? When I first heard about it last month I did not really believe it would work but I still followed the coin a bit.
When Auroracoin was launched the value was very small, so 31 coins did not have a lot of value. But then something unexpected happened: people outside Iceland started to buy the currency before it was even distributed to the citizens of Iceland and the price shot up. Last Friday it was worth about $7 I think, so the total value of the 31 coins would be about $220. At that amount of money it would be likely that most people would claim their coins and maybe start using them.
But what happened over the weekend is unbelievable. The coin’s price exploded, and from $7 on Friday it is now worth over $66 per coin! (Update: while writing this post the price went up to $80 per coin!!!) That means that each person in Iceland will suddenly get over $2000 at the current market value. What might happen now, is that most people will sell the coins the moment they receive them and so the price will plummet. And of course traditional media will pick up the story saying that a Bitcoin experiment showed that people do not want to use Bitcoin.
Or something else might happen: maybe, just maybe, the hackers who created Auroracoin are just some very smart guys who created a hype to get rich quickly. The total value of the coins that they created last month is now worth over $700 million. Today over $17 million was traded, so they have a huge incentive to just forget about the whole experiment and slowly start selling their coins. They could earn a few million dollars per day over the next 22 days (until the coin should be launched on March 25). Not bad for a few weeks of work.
I am not saying that this will happen, but after the Mt. Gox disaster last week nothing surprises me anymore. It turns out that the name of the person that created the coin does not exist in reality. That does not mean that this is a scam, because Satoshi Nakamoto, Bitcoin’s creator is also a pseudonym. Coincidentally Sathoshi holds about 1 million Bitcoins which as today’s market prices is alos worth about $700 million!
Let’s just say there is a big incentive for the creators not to distribute the coins and make themselves rich beyond belief. If they decided to do so, probably nobody would even be able to sue them. The perfect financial crime!
We will find out on March 25 whether the so-called Iceland airdrop will really take place. I personally think it will happen (I still believe that most people are intrinsically good), but I would not be surprised if the whole idea turns out to be a big scam.
As you know, I am more more pessimistic then ever about people when money is involved. Very sad that the Mt. Gox issue has had such a negative effect on me.
As I always say, we will see!
It says on the Aurora website “Technical details on the method of authentication will be released later”, because of course there is more involved than just entering an id, you have to combat fraud.
What you’d need is something like digid in holland – its an online key tied to your social security number. But only government institutions can use that. Perhaps wise not to trust random companies with all of a country’s citizens social security numbers? I’m really interested how they are doing this.
I would have liked this idea more if people from every country could register. At the moment it is incredibly difficult to transfer funds to those who need it most (i.e. people without bank accounts in developing countries), and a coin like this could help. Current alternatives include delivery services that sometimes cost more in transaction fees than the base value of the transaction.
In general though, I don’t think this coin is very interesting, mostly because it does not improve upon some of the limitations of Bitcoin. A truly useful innovation in the world of cryptocurrencies would be a currency that renders intermediaries and market exchanges useless (such as Mt. Gox), and therefore becomes truly decentralized.
People are intrinsically greedy. Period. Bitcoins might be perfect when it comes to algorithms and code (as 99.9999% of ppl, I got no clue abt that…), but at the end, it is imperfect humans using and abusing them, as they have been doing so through all history with all kinds of curencies and valuable things. If it has a value, somebody will be tempted to take it. And if bitcoins can vanish w/o trace then they will be even more tempted.
I must admit I know very little about the whole cryptocurrency world, but to be honest, the impression the whole scene gives to me, is unfortunately one of very, very, murky waters.
It’s pity that we cannot login in unitedstyles. I have a lot of suggestions and interestings to the Unitedstyles’s developing.
Thank you for writing this great post