Words by

Catharine Fulton

Auroracoin drops on Iceland

On March 25 the internets made it rain all over Iceland. Auroracoin, a cryptocurrency for Iceland to call its own, officially airdropped, and each and every Icelander was invited to claim a gift of 31.8 AUR. 

The forces behind Auroracoin’s development—an anonymous faction operating under the pseudonym Baldur Friggjar Óðinsson—have launched the cryptocurrency in response to what they see as an ongoing crisis in the Icelandic economy: that pesky króna.

While team Auroracoin points to the capital controls put in place following the economic collapse of 2008 and the resulting stifling of foreign investment as “slowly bleeding” the Icelandic economy, they also make the case that the króna has been a sinking ship for pretty much always. 

“The devaluation of the Icelandic króna… is not just a temporary phenomenon,” reads a statement on Auroracoin’s website. “The entire history of the currency is one of inflation and devaluation. Since 1960, in just over half a century, the Icelandic króna has lost over 99.5% of its value in U.S. dollars – at a time when the dollar lost 98% of its value relative to gold! At one time during this period two zeros were taken off the currency and new bills printed to replace the stock of bills. Now, the highest denomination is back up to 10,000 ISK, which would have been a million króna bill had the two zeros not been removed.”

Cyptocurrencies, like Auroracoin or the popular Bitcoin and Litecoin, are means of escaping government controls over currencies, creating a new currency with a finite circulation and a value dictated strictly by supply and demand.

What Does It All Mean?

For the uninitiated, spending too much time thinking about how, exactly, a virtual currency can just suddenly exist, be doled out en mass, and have some kind of market value is a dizzying exercise. But then the same headache could result from dedicating any amount of time thinking about how traditional currencies get their value. Really, currencies are a lot like Tinkerbell—they survive so long as we clap our hands and say we believe. 

Auroracoin’s initial value at the time of its airdrop was based purely on speculation, just as one would value a company at the time of an IPO. It was expected to be hot. And so those first few Icelanders to claim their 31.8 AUR were taking hold of the equivalent of 400 USD. However, in the hours immediately following the airdrop the value quickly plummeted, and frustrated AUR-holding Icelanders pled with their countrymen on Facebook to stop selling their Auroracoin. Still, at the time of writing, that 31.8 AUR is worth approximately USD $95, with just 8% of the airdropped coins collected. Those in the know on dedicated cryptocurrency market forums are speculating that the coin will stabilise as Icelanders become more familiar and comfortable with the idea of a cryptocurrency and as more goods and services can be received in exchange for the coin. Thus far at least one Icelander was able to buy bacon with his Auroracoin, and bragged about it on Twitter. So, that’s something.

What Happens Next?

Well, this initial phase in which Icelanders are able to collect their gifted coins will continue over the coming year. These airdropped coins represent 50% of the total number of Auroracoins that will ever exist and they were pre-mined, meaning they were pretty much pulled out of thin air.

There are currently 10,653,364 AUR in circulation, with nearly as many coins remaining to be ‘mined.’

“Essentially, electric coins are ‘mined’ through mathematical equations,” explains Einar Valur Aðalsteinsson, a computer scientist and programmer. “That is, ‘miners’ complete some equation to validate the authenticity of a new block of coins being created. The trick is that every time you create a block it gets harder to create the next one. This is to make sure that coins aren’t forged and that the supply of coins into circulation is slow and controlled.”

So, if all goes to plan for team Auroracoin, the currency will continue to be mined, Icelanders will continue to collect their gifted coins and explore the possibilities of their own cryptocurrency, and more merchants will recognise AUR as legitimate tender. 

Will the Aururacoin ever replace the króna? It’s unlikely, but with Icelanders being so connected and prone to adopting new technologies, it will be interesting to see where this all leads.