Before they crashed an entire economy six years ago and became poster children for banker excesses in the pre-Lehman era, a brash young clique of Icelandic financiers thrust their tiny country into the big leagues of global finance.
Now, an Icelandic techie who is trying to undo the legacy of that financial disaster has achieved something similar in the digital-currency world — except in this case it’s founded on ideas antithetical to the old, too-big-to-fail banking model behind that 2008 crisis.
His invention, a so-called “alt.coin” known as auroracoin, has rocketed into second place among the most valuable independent digital currencies after bitcoin – albeit amid a rollercoaster ride in its price.
According to coinmarketcap.com, auroracoin – whose 10.6 million “pre-mined” coins are currently valued at $39.71 each – has a market capitalization of $381 million. Although that’s down a whopping 51% from its level on Tuesday, it’s still up by 1,100% from Thursday. Until Wednesday afternoon, it was even ahead of litecoin, whose capitalization was last quoted $423 million and has held the title among alt.coins as the “silver to bitcoin’s gold.” Bitcoin, the grand-daddy virtual currency, weighs in at $8.3 billion.
(This ranking excludes the digital currency Ripple, whose market cap of $1.6 billion does not make for a fair comparison. Most ripple coins are retained by the issuing entity under a centrally managed model that’s very different from the decentralized networks employed by other alt.coins.)
How did little Iceland achieve this? One factor: auroracoin has an instant mass market. Its creator, who goes under the pseudonym of Baldur Friggjar Odinsson, plans to make a virtual “airdrop” on March 25, granting 31.8 auroracoins to each and every one of the 330,000 people listed in a national ID database. Already, Icelanders represent one of the most wired and technologically literate populations in the world.
So, the bet among investors is that this fledgling currency is ripe for mass adoption. It also sets the country up as kind of laboratory for the use of cryptocurrencies generally.
The project is a direct response to Iceland’s strict capital controls, which the government initially vowed would be a temporary measure during the turmoil of 2008 but which are still in place more than five years later. They severely restrict Icelanders’ ability to get money in and out of their country. Meanwhile, the government has struggled to protect the value of its currency, the krona, a failure that auroracoin’s web site illustrates with an image of the new 10,000-kronur note morphing into a one-hundred-trillion-dollar Zimbabwean note. Auroracoin is presented as a way for Icelanders to escape this currency trap.
“The whole point of auroracoin is to provide Icelanders with an alternative to the króna, a currency they are forced by pain of imprisonment to use,” said the pseudonymous Mr. Odinsson in an email exchange. “Icelanders will be free to sell auroracoins anywhere they like and buy anything they like, be it dollars or other foreign currency on offshore currency exchanges. They won’t need permission from the Central Bank or politicians.”
As for the pseudonym – a tactic reminiscent of that of Bitcoin’s mysterious, unidentified creator, Satoshi Nakamoto, auroracoin’s founder says, “The agents of the state will attack anyone challenging their power, so I chose a name from Norse mythology to shield myself from such attacks.” He notes that Icelandic central bank officials have spoken out against cryptocurrencies and the government has adopted a hostile posture toward bitcoin.
In Norse mythology, Baldur was the son of Odin, chief of the Gods, and Frigg, a benevolent sorceress. He described on norse-mythology.org as “one of the most beloved of all the gods… a generous, joyful and courageous character” who was killed by the “wily and disloyal” god of Loki.
Whether any of that contains relevance for auroracoin, Mr. Odinsson isn’t entirely happy with how speculators have driven his currency up 2400% and then halved it, all in the space of six days. On the one hand, the price gain could encourage some people to adopt and use the currency. On the other, sharp declines and price swings could scare others off.
“Personally, I would have wanted to see a more gradual rise in the value of auroracoin,” the creator said in the email.
UPDATE: This article was updated in the headline and text to reflect the fact that the fall in auroracoin’s price Wednesday had pushed it back into third place among digital currency market capitalizations behind bitcoin and litecoin.
source:http://blogs.wsj.com/moneybeat/2014/03/05/auroracoin-already-second-biggest-virtual-currency-and-its-not-even-out-yet/
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