Let’s talk crypto currency air drops and the national coin movement. Quite a few alt coins have popped up in the last six months that purport to represent a geographic region and are using some kind of air dropped distribution. Auroracoin, Spaincoin, and Mazacoin (centered around the Lakota native-american tribe) just to name a few. Simply put, this means that the coin is mined and distributed to a specific population. That group does not need to be involved in the currency in any way, and is given a preferential allotment which is supposed to bootstrap adoption. This is an interesting conceptual mix of ideas, it preserves digital scarcity while gifting a specific population with a digital means of exchange. There is also something nice about having a pre-baked community, a rallying point around nationality or self-identity, which seems like a more natural boundary than an adorable dog or other internet meme. In some areas where traditional payments are difficult, and injecting money into a crypto is difficult this makes a lot of sense to me. I can imagine fostering digital exchange of value in places without much traditional infrastructure.

The nagging doubt in my mind is whether or not something with excellent utility but zero cost of production can have real value. Without mining cost, labor, or capital injection what exactly are we distributing? AuroraCoin made waves claiming to be the first national currency air dropped to the entire Icelandic population. Unlike many countries Iceland apparently has an excellent mechanism of tracking its citizenry, and a mechanism for people to both establish legal identity and claim their share of the AuroraCoin. When talking about crypto value I like to substitute some ordinary object as a placeholder, I think that helps navigate the question of value. Instead of distributing a digital currency, let’s distribute special rocks to all Icelanders. Now every Icelander has five special rocks which they can trade or give to other people. Do those rocks have value? They have the same utility value of any other special rock, are scarce, but potentially cost very little to create. As someone who isn’t Icelandic, why would I trade for this free rock the Icelander’s have that I do not? Certainly I could just create my own rocks and gift them to every American and we would be in the same situation?

Value is a very tricky question. It is a soft subject. Ultimately if someone is willing to pay for something it has value. The market capitalization of AuroraCoin is over 1 million USD right now, having undergone some significant fluctuations. The total available share is not clear, I imagine most Icelanders have not claimed their allotment yet. Shouldn’t the price deflate as distribution occurs? It seems that the value right now is based on a lot of artificial scarcity more than anything else. I think that summarizes the problem I have with national currencies in general, I’m not convinced that the distribution model conveys value. There is a marked difference between a community working together to create something, as was the case with Dogecoin, pooling resources and compute power, and ultimately electricity cost and a de-facto elite membership being gifted monies.

There is a lack of transparency in the operation of the coin that is a common problem in alt currencies. It seems that most of the alternative coins don’t have public figureheads. I’ve said it before, but identity is a key component of trust. All of my products have my name on them. If they perform poorly that reflects badly on me, so there is a real tangible loss to me if something I launch turns out to be a scam. For most alt coins their failure has absolutely no repercussions on the people involved. All upside, no downside. Any investor looking at an alternative currency should have a very good idea of who is behind it, and be able to independently assess their credentials and motivations. Alternative coins are already a fertile ground for pump and dump scams, and creating specific coins geared at a target population but without any general buy-in or identity seems like an idea ripe for abuse. What is stopping the creators of AuroraCoin from distributing the pre-mine amongst themselves if there is adoption outside of Iceland? There are no capital controls, rules, or regulations that prevent the spread or misuse of crypto currency.

For any pre-mined crypto currency is seems that for it to have value something of value must be traded for it, preferably another scarce resource. If a tree had to be planted for every coin minted then there is tangible human labor involved. Labor and the usage of limited resources is a foundational component of real value. For once I would like to see a national crypto currency that trades some of the countries real natural resources in exchange for the creation of the currency distributed to its citizenry.