By Jim Duffy
As central banks consider the introduction of their own digital currencies, there are lessons to be learned from history. One such attempt at creating a new digital currency for a country has not ended well. But its not a country one would immediately associate with crypto.
Known for its breathtaking landscapes, warm hospitality and hot sulphuric baths, Iceland sits smack bang in the middle of the Atlantic between Canada and the UK. Blessed with scenic vistas, high literacy rates and one of the most wired [broadband] infrastructures in the world, Iceland plays a significant role in the Bitcoin ecosystem as an epicenter for Bitcoin mining. With an abundant supply of renewable and affordable energy along with its cool climate, Iceland is an ideal hub for mining operations.
But, what’s even more fascinating is that Iceland almost pulled a one-off back in 2014 with its own country-wide crypto coin – the Auroracoin. Created by founder Baldur Friggjar Ooinsson, Auroracoin was created almost as a reaction to the extremely tough time Iceland suffered during the 2008 Global Financial Crisis.
In short, Iceland’s banks burst and needed to be bailed out. Its citizens lost their savings and a significant number of mortgage defaults precipitated even more misery across the country.
This development begs the question — can a new people’s cryptocurrency could emerge and create a more stable future financial system?
Like all innovations or inventions, there are two factors that could make or break them. The first is timing. Netflix came out just at the right time when the broadband speeds could handle video streaming. 10 years earlier and it would have been doomed.
And this was the case for the Auroracoin project as it launched at a time when the plumbing for cryptocurrency in Iceland and indeed across the word was still in its early genesis. This factor alone was a key arbiter in why Auroracoin did not gather wide spread traction. In context, there were no exchanges like Coinbase or Gemini, no wallets to store crypto and the citizens of Iceland were just not ready.
The second factor is crucial and one that today’s central banks whoever they are should take note off and learn from — People are not dumb. Any invention that is foisted on them that does not feel right or smells wrong has no chance of making the cut.
Like any new product the messaging and marketing has to be clear and well laid out. This was not the case for Auroracoin. It got off to a very rocky start. This was due largely to Baldur’s access to the government identification system. This led many mistakenly to believe that Auroracoin was somehow tied to the Icelandic Government.
Ergo, it was not trusted.
Both timing and trust played a big factor in bringing this new coin to market. Hence, Auroracoin didn’t make it, despite another attempt in 2016 to resurrect the project. Even today its website is barren with little or no social media engagement in years.
The demise of Auroracoin is not a failure in my book. It was an entrepreneurial venture where someone took action. For this, it should be applauded. However, the lessons are there for any country that decides to innovate on a new digital currency. Get the timing wrong and it could fall flat on its face. Get the messaging wrong and your new digital coin could end up distrusted or shunned.
Perhaps that’s why Bitcoin is making great headway as it has stood the test of time and is owned by no-one!