After the incredible rise in Bitcoin’s popularity since it first broke $100 in the Spring of 2013, the world has awakened to the reality of cryptocurrency. The decentralized Bitcoin consensus protocol solves a decades-old computer science problem known as the “Byzantine General’s Problem”. Bitcoin will likely be seen as the most important invention of the 21st century, as people utilize it to eliminate middle-men and counterparties in financial transactions to the greatest degree possible. With this discovery and its subsequent boom in popularity, many people have been inspired by the opportunities this technology makes available. Interesting applications such as decentralized exchanges to smart property can be built using the Bitcoin protocol, and new innovations are appearing every day. For some, however, Bitcoin was just a proof-of-concept. People are now working on new cryptocurrency projects, some based on Bitcoin’s code and some built from the ground up. One trend that’s been making headlines recently: sovereign national cryptocurrencies.
After months of anticipation, in February 2014 history was made as the first sovereign national cryptocurrency, Mazacoin, was released by BTC Oyate, a digital currency consulting group working on behalf of the Oglala Lakota Nation. Mazacoin is a fork of the Zetacoin protocol, which is itself a fork of Bitcoin, and utilizes the SHA-256 hashing algorithm for mining. The Mazacoin cryptocurrency will inflate forever; approximately 2.4192 billion mazacoin (MZC) are expected to be mined in the first five years. After that 1 million MZC will be mined per year ad infinitum. 50 million MZC were pre-mined for the Oglala Lakota Nation and will be used to fund community events, economic development, charitable volunteer work, business grants, and development of the Mazacoin protocol.
Another project of potentially equal historical significance also launched in February 2014: Auroracoin. This cryptocurrency project was developed by Baldur Friggjar Odinsson, a citizen of Iceland who wanted to “break the nationalistic currency shackles of Iceland’s monetary policy.” Auroracoin (AUR) is a fork of Litecoin with a cap of 21 million coins, 50% of which were pre-mined and will be proportionally “air-dropped” to every citizen of Iceland on March 25, 2014. Starting that day, every citizen of Iceland will be entitled to claim 31.8 AUR, worth approximately 2.22 BTC or $1472 USD at the time of this writing, using their national ID number. The Iceland government has been quick to distance themselves from the project, calling it a “fringe activity” and warning that participating could be a violation of Iceland’s capital controls. Whether or not Auroracoin gains popular usage in Iceland, this is a significant event which could be a sign of things to come in the future as more people begin discovering the fundraising possibilities of cryptocurrency
The term “pre-mine” has come to be synonymous with “scam” for some old-timers in the cryptocurrency community due to a long history of unscrupulous developers pre-mining an altcoin, hyping or “pumping” it enough to have it listed on an exchange, then “dumping” the pre-mined coins and abandoning the project. However, other projects have recognized the value of having a guaranteed pool of funds to draw from and are attempting to launch more successful and responsibly-managed “pre-mine” coins. The Mazacoin development team intends to use their pre-mine to strengthen the economic foundation of their tribe, and the Auroracoin developers are giving everyone in Iceland an equal shot at cryptocurrency ownership. This is only the beginning of such experimentation, but we’re likely to see many similar projects attempted as successful issuance models are discovered and replicated worldwide. The future of money and financing is here; it’s now up to the people of the world to choose to embrace it or not.