In the cryptocurrency world, Bitcoin tends to hog the media spotlight. This makes sense, as it’s the oldest, most-valued (recently determined to have a market capitalization of around US$6 billion), and best-marketed (i.e. most recognizable) brand of cryptocurrency. However, I was suprised to discover that in discussions of crytocurrency issues such as black-market trading, stability of value, and technical viability it stands in for a vast and surprisingly diverse swath of currencies. More than sixty peer-to-peer currencies existed as of November 2013, and that number has almost surely risen since.
Four primary motivations seem to inspire alternative “brands” of digital coin. I will discuss one below, and follow up on the other three in future posts.
Unlike state-based currency (like the dollar, the pound, the euro, etc.), cryptocurrencies have no inherent ties to a government or geographic area. They can move freely around the globe and lack a centralized authority that stands behind them. However, some developers aim to reinstate those connections in digital coin, but at a different level than traditional currency. The city of Hull recently introduced a virtual currency called HullCoin
that allows citizens to make tax payments and shop at local vendors. The Oglala Lakota Nation, a Native American tribe in South Dakota, recently introduced MazaCoin
. In an interview with NPR
, Payu Harris, the developer of MazaCoin, says the primary aim of the project is to enhance the tribe’s sovereignty. The coin will certainly serve as a symbol of the tribe’s independence, but also might provide practical support to its autonomy. Pete Earle, chief economist of a firm that specializes in digital currency, suggests that the Lakota could leverage Mazacoin to incentivize tribal membership, hold tribal financial assets, to “formalize agreements,” and reward “outside groups that support the tribe’s best interests.” Harris says he also hopes that MazaCoin will raise funds for social programs stimulate business in the reservation.
These cryptocurrency projects have some potential for meaningful local use, but they face a significant obstacle: buy-in. In order to develop value, these value of these fledgling currencies depends on user demand, which might be especially difficult to develop among the small populations these projects target. No value means no demand and no demand means no value. HullCoin addresses this issue by allowing it to be exchanged for tax and rent, so it inherently begins with some value. However, MazaCoin likely faces a steeper challenge: Harris described MazaCoin’s userbase as “a trickle.”