One of the main issues that always seems to pop up with any new cryptocurrency is the problem of premining. Even if an altcoin has a few good ideas, it's extremely difficult to come up with a distribution process that will be fair for everyone. Auroracoin is offering one of the most unique distribution methods I've ever seen in an altcoin, and it could be a model that promotes further cryptocurrency development in other parts of the world. I recently wrote about the reality that no altcoin would ever be able to replace Bitcoin, but the idea of a nationalized cryptocurrency could stir things up a bit.
The Distribution Process
Most people instantly turn down any altcoin that involves a premine, but Auroriacoin's mining process will allow every Icelander to get in on the action from the start. 50% of the coins will be distributed in the genesis block, and each citizen of Iceland gets to collect their "fair share" of that first block through the National ID system. I asked the creators of Auroracoin how this would work, and this is what they had to say:
We will be using the "kennitala" or National ID system that has been in use for a long time in Iceland.
Read up on it here:
There are various ways of authenticating against the kennitala, we will be releasing the details in advance of the "Airdrop". There will probably be several channels open to Icelanders. We are trying to do as much as possible to minimize the possibility of identity theft and fraud, as each kennitala can only be used once.
Creating a New National Currency
The Icelandic krona is the currency used in Iceland right now, but perhaps this could change with the release of Auroracoin. The innovative aspect of the coin is that it basically offers everyone a chance to hit the reset button on their bank accounts. Everyone would start out with the same amount of Auroracoin in Iceland, and the currency definitely offers advantages over the krona as a payment mechanism. Those holding large amounts of kronas in their bank accounts probably like the idea of keeping everything how it is right now, but Icelanders who don't have much to lose will like the idea of starting over with a completely new monetary system.
A Competitor to Bitcoin?
While it definitely seems like Auroracoin has advantages over the Icelandic krona, it's important to remember that it's also competing with Bitcoin. The bitcoiners in Iceland probably like the idea of sticking with Bitcoin, much like the holders of large amounts of kronas will want to stick with the fiat currency. It would be interesting to see this concept applied in other parts of the world. Could we be facing a situation where each country has their own coin in the near future? My personal opinion is that Bitcoin will still come out on top because it is a borderless currency. There's no reason to convert to a new currency after landing in the local airport if everyone is using Bitcoin. Having said that, Auroracoin is definitely one of the altcoin experiments that actually grabs my attention and makes me think about what the global cryptocurrency market will look like in five to ten years.
Update: The creators of Auroracoin sent over this hilarious clip from Jimmy Kimmel Live that shows of the usage of the National ID system in a smartphone app.
Last modified (UTC): February 8, 2014 10:22 PM