Either experience makes these concepts possible, or these concepts make experience possible.

Nation Building: Just Add Crypto


Mastercoin Foundation Director Ron Gross pointed me to this call to pump significant quantities of bitcoin into (west) Ukraine. 

Meanwhile, in a different corner of the socio-political chess board, Iceland is about to get an airdrop of Auroracoin later this month - every man, woman and child on the island, ~320,000 people, will get 31.6 AUR. Nobody donates, they just buy into the currency because they are betting the use of it by an entire nation will translate into a multi-billion market cap for the currency. Their m3 is 1.62 trillion Krona or about 14 and a quarter billion USD, their nominal GDP is  a bit smaller at 13.65 billion, high velocity, typical for an inflationary economy. 

AUR popped up on Coin Market Cap the other day due to the 50% pre-mine, putting about 4% of the current money supply in float - apparently this is the way to launch a cryptocurrency these days, have a math scheme that makes your market cap seem huge so people see it in the top 10 and immediately start the speculative punter buying frenzy. At the current valuation, AUR has an implied market cap of almost 150mm, making it equivalent to 1% of the money supply of Icelandic Krona. That seems really promising until you realize that the results of the airdrop are likely to be as follows:

1) significant fraction of population ignores the news, procrastinates, or is deterred by the apparent technical difficulty, eventually gaining use of their coins, but putting off the chore until other people generate more news about its applications - this could be as high as 60% of the population and thus about 57% of the money supply hangs unsold for a while. 

2) another signficant fraction of the population decides to go through the steps to immediately capitalize on the chance to book themselves some Euros. Maybe 30% of the population. Envealop math suggests ~100,000 sell all or most of their AUR in their first month, about 30% of the money supply gets dumped.

3) a minority begin trying to use it for trade with each other or on the exchange, the same spirits that lead to risky currency trading in banks follows here.

4) A stark minority immediately push initiatives to get businesses accepting it.

It seems likely that the value of the currency will drop the first month after the airdrop given the supply overhang. Looking out further, this could be very interesting, securitizing geothermal plants - for example - could be a global first that is accomplished in Iceland, and the maybe dividends won’t be paying out in BTC, but in AUR.  

What’s needed to track the efficacy of an experiment like this is blockchain statistics - doing it as a separate currency brings the benefit of a clean data-set as well as the trade-supported capitalization of the pre-mine. In a peaceful society, maybe, just maybe, giving people “free” “money” will make the first worst change to “valuable” and remove the quotations from the second. It kinda works in inflationary socialist nations, but this time, it’s a one-off. Stranger things have been tried. 

Back to Ukraine - skeptics would note that this “revolution”, an apparent sequel to the “Orange Revolution" of almost a decade ago, is laden with proxy war political connotations between NATO and Russia, who one of the partners theorizes is actually still communist, just under a different name - that the tenor of communist nations has evolved to compete with oligarchic capitalism but retains its penchant for hyper-centralization. So are we playing cold warriors for the 21st century trying to bomb them with hard money? And what about the neo-nazi element of this opposition movement? 

Rather than complain about it on Reddit, I think the organizers could take a cue and use the benefits of distributed blockchain technology to audit the ethical flow of funds and perhaps even derive metrics on their efficacy. At the very least, be able to make a convincing argument based on data that this money is not enabling skinheads to shoot at their brothers on the other side of the river. My other partner and I are currently designing the extended self-auditing functionality for our funds to show that we are legit in the published Net-Asset-Value, perhaps the same can be applied to provably ethical financing of causes. 

Now, let’s take a look at Venezuela. I happen to be in circles where people are trying real hard to figure out trading angles that would enable Venezuelan people to sell domestic goods or services for bitcoin. The other angle, perhaps this can be filed under just-crazy-enough-to-work by the US government agencies that have been trying to topple the Chavez regime for years, is to just send bitcoins to demonstraters in Caracas. My favored strategy would be to do some of that disbursion in different regions, but focus on Tachira, everyone there is politically totally on-board with anything that enables them to function independently of the government, and you’ve got a legit deal of trade that could be facilitated between the cities and economic hinterlands of San Cristobal in VZ and Cucuta across the border in CO.

So the title is somewhat facetious, it’s not so simple as just sending people bitcoin, we need better tools to justify significant fundraising. However, just bitcoin by itself can do interesting things. In Argentina, where currently the saturation of BTC is about .1% of the population that holds dollars, which is itself about 5% of the national population, so about 10,000 people, they mostly use it as a medium of moving money between foreign accounts and local currency, and as a speculative trading vehicle. The idea that everyone is just going to start trading with each other in a magical sandbox of sea monkies building skyscrapers. You need at least 1000 people using a cryptocurrency in the same town to generate any useful local economics, and in the case of Buenos Aires, the bitcoin holders have so much liquidity in terms of goods and services with local currency, you’d need 100,000 people using it in the upper crust neighborhoods before it became seen as a legit payment method to settle your bar tab - not even a currency. But what if we get these tools in the hands of people in the villas, in the favelas, or equipped a couple cities to use it for bi-lateral trade and then that spilled over into local trade? What if we had different designs of currency suited to the math of the particular socio-geo-logistical-political dynamic of different classes of populations, and audited the results? How many years before radically more efficient forms of society begin propagating right under the stew of conventional nation states? 

Perhaps crypto-anarchic ferver is getting the best of us sometimes, but the technical possibilities are still worth solving and testing.

It should be seen as no coincidence that one of the organizers of the Ukraine fundraiser is the man behind that Honduran enclave project - looking forward to the more successful sequel, a free city-state inside a host nation with no taxes and its own opt-in automated legal systems. 

Which will come first, the populist usage of crypto-tokens; or the elite libertarian usage of Distributed-Autonomous-Government to minimally regulate their building of Distributed-Autonomous-Corporations? Will the most sophisticated things come to serve elite minorities and then maybe we can help extend the blockchain-branch down the pyramid, or will the simplest applications of payment empower politically entrapped populations? 

Why not both? And here we are at the crossroads.