Auroracoin – an online currency for Iceland

auroracoinIn three weeks’ time another experiment in online currency will begin. Every resident of Iceland will be gifted 31.8 Auroracoins on the 25th of March, from which point the currency will operate online, much like Bitcoin before it.

Bitcoin itself has hit crisis points, recovered and soared in value, and remains a fascinating if confusing experiment in 21st century money. It’s also opened the door to a number of similar cryptocurrencies, such as Litecoin or Dogecoin, with varying degrees of success. What makes Auroracoin an interesting development is that it will be the first national cryptocurrency, and it has been created in response to Icelandic government policy.

Since the collapse in Iceland’s economy, there have been capital controls in place that make it hard for its people to move money out of the country. As the creator of Auroracoin sees it, this is unfair on the people of Iceland, complicating international trade and deterring investors. People are forced to use the devalued Krona despite a long history of government mismanagement, and Baldur Friggjar Odinsson thinks that it’s time to wrestle money away from political control. “Cryptocurrencies are a very important milestone in this fight for liberty” he says. “They bring the hope of a new era of free currencies, immune to the meddling of politicians and their cronies.”

Hence the delivery, or ‘airdrop’ as Odinsson is calling it. After March 25th, Icelanders will be able to claim their free coins and will have an online alternative. Whether it will actually be worth anything depends on how many online currency exchanges move to accept Auroracoin payments. If enough people show an interest in acquiring the currency, it will find users and a value will be established. If not, it will remain an eccentric experiment in anarchist money.

So far, it’s impossible to predict which way it will go. Being computer-generated, the currency has no inherent value, but early interest from cryptocurrency enthusiasts has pushed its exchange rate up to around $15 per Auroracoin. That’s no guarantee of anything – there are plenty of cryptocurrency nerds willing to speculate on the next big thing. Persuading ordinary Icelanders to use the mystery invisible currency is something else altogether.

The main reason to watch what happens is to see what the government does. This is the first example of online currency creators issuing a direct challenge to a government. I expect the government will move to quash Auroracoin in any way it can, but its powers are limited and it may only make the currency more valuable. We’ll see. What is certain is that online peer-to-peer currencies are increasingly common, harder to ignore, and they’re getting bolder.

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4 Comments on “Auroracoin – an online currency for Iceland”

  1. imarunner2012 March 4, 2014 at 1:34 pm #

    The US Dollar and other national currencies are backed by the full faith and credit of the issuing government. Bitcoin etc, is vapor currency. Backed by nothing but speculation. Sounds like the stock market. There is no product backing it like a stock and no national goverment backing it like the dollar or pound.
    I’m sure I don’t understand the creation on money. but these new “currencies” have nothing at all behind them. Might just as well be monopoly money.

    • Jeremy March 4, 2014 at 3:21 pm #

      All true, but money is simply an agreed mechanism of exchange. If people want to use Auroracoin, Bitcoin, or Monopoly money for that matter, that’s fine as long as everyone agrees. Unlike government currency, you are not compelled to use it if you don’t want to.

      These online currencies tend to appeal to a libertarian mindset, money beyond the control of government, so at the moment they’re not really for everyone. It’s also rather new and volatile, with a lot of naive expectations and predatory behaviour. But that will change as the idea of cryptocurrencies matures. It would be premature to write them off just yet.

      • imarunner2012 March 4, 2014 at 4:09 pm #

        I agree with the appeal to certain people. The nice thing about government control is that someone is in control. A business is in control of these new “currencies”. Businesses are in the business of maximizing profit.
        With all of the credit card issues, I’m going back to using cash for my small daily purchases. Why get hacked over a $2 coffee?
        I may be too conservative for the libertarian mind set. 😉

        • Jeremy March 4, 2014 at 7:50 pm #

          The government being in control is exactly what worries the maker of the Auroracoin, so it just depends on who you trust more. But I take your point. I don’t have any use for these currencies either yet, but the time may come.

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