I found Allahcoin the other day. It’s essentially a Litecoin clone, but with one interesting distinction: 10% of each block goes to the Muslim Brotherhood.
I’ve always wondered if it was possible to in some way design community-based altcoins (either, governmental, regional (like a city), or whatever delineation you want). The problem however: it’s purely digital. Creating a Bosch-coin (for Stellenbosch), for example, means anyone in the world can mine it, and still use it, kind of defeating the purpose of delineating it to a region.
Seeing how Allahcoin donates 10% of each block to a central authority is the clue here. I’m not going to bother with Allahcoin, because I don’t want to mine something where 10% of it gets donated to a religious organization I don’t support. But I’ll be more likely to mine and contribute to a coin which donates part of the money to an organization or entity that supports a goal I align with.
And this means you can easily see regional (or community) coins start popping up. “Boschcoin” could have 10% of the proceeds of each block donated to the municipality (of Stellenbosch). This is a public address, and then you can see where they spend the money.
Other (of the top of my mind) options:
- “Gamecoin”: where 10% of each block goes to Child’s Play.
- “Govcoin”: 10% of each block is the ‘tax’ imposed on the nation.
- “Bankcoin”: There’s no fees. The bank makes it money by getting 10% of each block. And anyone wanting to deposit money with them, has to use “bankcoin”.
In a cryptocurrency world, tax is a thorny issue. If you think ‘tax’ is a good thing, this is a much better way to impose it. It’s built into the money protocol. The city doesn’t have to forcefully extract tax from its citizens. It’s saying: “Here’s how you transact in our area. Go crazy, it’s already been ‘taxed’.” vs saying: “Do what you want with money, but please pay us tax, otherwise we will come get it.” It’s push vs pull.
The value of the coin is also directly correlated to adoption. If “Boschcoin” wants to succeed, the city will have to visibly show how well it is doing. Its proceeds (ie tax) is correlated to its success. It’s like holding stock in the city.
Transparency: if a city decides that it wants its citizens to use the currency, it will have to use the coins donated to it, in a similar fashion. The good thing about this: it’s a public address, and it can be mandated that each transaction that the municipality spends has to be labeled and visible in the blockchain.
Centralization. However, this is not ‘such’ a big deal. If the central authority dicks around, then faith in the coin will be lost, and its value will decrease. But it’s still an added vulnerability.
Not as secure as Bitcoin. Bitcoin’s security comes from it’s big infrastructure. A regional coin will always be less secure, and is more prone to attacks. The only way I see this can be improved is through Mastercoin or Colored Coins, where the regional coin is minted on the Bitcoin blockchain, but then I’m not sure how to impose the 10% fee to the central institution. Another way protect against this is to used centralized checkpointing (already being employed in newer altcoins to keep it secure until the infrastructure improves).
Is this something that is needed (or wanted)? Not sure yet. The only benefit I see is that it can increase transparency to a region (such as a city), decrease some of the inefficiencies related dealing with the current financial system and add the idea of a ‘stock’ to a region (ie owning “Boschcoin” is an investment in the city of Stellenbosch). Otherwise, just using another coin will do a similar job.
Thoughts? Advantages? Disadvantages?