The promise of bitcoin is a universal currency free from the control of any nation or government. But a new generation of cryptocurrencies are focusing on the opposite goal: building money to solve problems specific to one country.
On midnight Monday, Auroracoin, a bitcoin clone which is the fourth most valuable cryptocurrency being traded today, entered the second phase of its life, with a "helicopter drop" of 30 auroracoins to every citizen of Iceland.
The currency began life in February, and for the first month, traded like many other bitcoin clones. As you can buy auroracoin with bitcoin, and bitcoin with US dollars, it's possible to establish an exchange rate: one auroracoin is now worth $11.37, putting the value of the entire currency at $121m.
But unlike bitcoin, which is only created by users "mining" for more, auroracoin was brought into life with a significant "pre-mine": 10m coins were created before the currency went public, and now they will begin distribution throughout Iceland.
The rationale behind the currency is to fight Iceland's capital controls, which ban Icelanders from taking kronas outside the country. The controls were put in place to strengthen the island nation's economy after the disastrous crash in 2008 which all but destroyed its banking sector.
Auroracoin launched with a manifesto, detailing its creator's plans. "The people of Iceland are being sacrificed at the altar of a flawed financial system, controlled by an elite that made astronomical bets supported by the government on behalf of the people and ultimately at the expense of the people," it says.
"The power must be taken away from the politicians and given back to the people. Cryptocurrencies are a very important milestone in this fight for liberty. They bring the hope of a new era of free currencies, immune to the meddling of politicians and their cronies." The document is signed "Baldur Friggjar Odinsson"; just like with bitcoin, the currency's creator is pseudonymous.
But Baldur may find there is a stumbling block ahead. Iceland's central bank has not been ignorant to the possibility of cryptocurrencies enabling the evasion of capital controls. BitLegal, a site which monitors the legal status of Bitcoin around the world, says that "domestic entities are not allowed to buy bitcoins from foreign entities, as such transactions are considered a capital movement out of the country."
"Furthermore, the Central Bank considers exports of goods and services in exchange for bitcoin in breach of these capital controls," it adds. "Icelandic merchants and service providers are thus not able to legally accept bitcoin as payment."
Regardless of legal problems ahead, Auroracoin has started strong. Too strong, maybe: the currency's site has collapsed under the load of Icelanders trying to claim their 31.8 coins.
"I am hopeful that the Scottish people will, over time, understand the vision of this project"
Already, other currencies are following in Auroracoin's footsteps. The Scotcoin project is one such proposal.
Set up by Derek Nisbet, an Edinburgh-based venture capitalist, the cryptocurrency is offering 1,000 Scotcoins to every resident adult of Scotland – as well as bigger allocations for businesses, charities and start-ups, to boost the economy.
Nisbet's motivations are necessarily different from Baldur's, since Scotland doesn't have capital controls. Instead, he tells the Guardian that the motivation is Scotland's uncertain future.
"There is so much uncertainty with the current financial situation, that introducing a voluntary cryptocurrency, which may in the future act as a medium of exchange for the Scottish people, can only benefit them should there be major disruption."
"I am hopeful that the Scottish people will, over time, understand the vision of this project, the good it can do for the Scottish people, and will therefore choose to participate, to make this successful for all."
Despite appearances, Nisbet says he isn't a Scottish nationalist. "The motivation for us has nothing to do with the vote later this year, or politics for that matter.
"Our motivation is to empower the Scottish people with an alternative digital currency opportunity, which may be used as a medium of exchange, should the need or wish arise."
And just recently a third such coin launched: Gaelcoin is offering 50 free coins to every Irish citizen. The trend shows no sign of stopping yet.
guardian.co.uk © Guardian News and Media Limited 2010