Or: “Keeping a crypto-currency focused towards the country in question.”
I’ve posted about this before, on how communities can create their own altcoins with self-regulating incentives. I’d just like to re-iterate how this could be done.
In the past few weeks, country-coins have been making big splashes, with Auroracoin almost hitting $1 Billion cap (although a bit misguided as the amount of coins in supply weren’t ALL the coins). The others one that splashes are coins such as Mazacoin (of the independent Lakota nation) & Spaincoin.
It is permission-less innovation. A cryptocurrency is automatically a global network. The way in which these coins focus on a country is to pre-mine a large portion of it (say %50), and then manually distribute it to citizens of the country. This is called an airdrop. You can read how Auroracoin will do it in Iceland. The gist is that using ID, you verify your citizenship and can claim a portion of the pre-mine.
The problem with this method, is that over time there is no guarantee that Auroracoins will stay in the system or in the hands of Icelanders. A strong mining group outside of Iceland can mine it or a wealthy individual over time can just buy a lot of it. While this, to some extent is “fine”, there is no self-regulating incentive to KEEP the center of the system within Iceland. Auroracoin can be adopted by Iceland (officially), but that still doesn’t stop it from it flowing out of the network it is INTENDED to support.
What is needed, is for the money supply to consistently stay at the center of the intended network: ie Iceland.
Now. The next part is a bit more decentralized, and ideas that could make it more decentralized are welcomed.
Each block’s coinbase MUST have an additional hardcoded address [preferably a multi-sig M-of-N for security if possible]. That address belongs to the central bank or government. It gets 10% of each block [for example]. Every year, citizens can claim 3% of it [a yearly ‘airdrop’]: equally [like claiming pension currently]. The other 7% goes to the central bank & government. That is the “tax” the citizens pay towards the government. That is what they will use instead of all other forms of tax [perhaps a bit drastic] to build roads, schools, policing, and so forth.
Considering that that address is known, extreme transparency of public funds are now possible as well. Every transaction from that address must be signed by multiple people, and every transaction must be explained by the government what it was spent on.
This means: the incentives are aligned. Other miners can be a part of the blockchain, but they will inherently do it to form of an incentive structure of belief of the country in question. ie, Miners will mine the USD country-coin, because they believe in the power of the US to utilize it effectively. It also means, coins generally stay within the country, as the incentives remain there.
It also means, in order for the country to use the coins better and put it to better use, they need to remain honest and build the country to the best of their ability. Let it float freely. The more valuable it becomes, the more the country and all of it citizens can do with their country-coin.
So, here’s an example:
Let’s do one for South Africa. Let’s call “E-money Mzansi”. It’s a sha256 coin modeled off of Bitcoin. It has similar timeframes. 4 years halving. Except, its nominal amount is increased a bit so that each citizen could have about 1000 coins each. Eventually supply will thus be (correcting for expected population growth) about 70 Billion. So block rewards are adjusted accordingly.
Each block has an extra coinbase address where 10% of the reward goes to the South African Reserve Bank. If it is NOT there, it is not a valid block. And then those coins are then used as described above.
Some technical considerations:
That hardcoded address is extremely, extremely vulnerable. Once compromised, it’s game over. M-of-N only keeps it safer for a while. Also, not ideal.
Forks. It is possible for citizens to just fork off that requirement for that hardcoded address. However, the government will only work on their fork: the one with their address in it. Citizens only get yearly airdrops from their fork (which will give poorer citizens that rely on it incentive to stay on that chain too), and government contractors will also work from their fork, and will then proliferate into the rest of society.
To start with this know, might be a bit difficult. You could go the current country-coin route and do it without permission. The developers of the coin simply keep the private key of the central address, until the government comes on board. Or you could actually go to a central bank and ask them (good luck with that). Another, more interesting way, is to kickstart this with a new political party. Chances, the rest of the crypto-world will absolutely love what you are doing and because cryptos float so easily, you’ll see money flowing in from around the world, strengthening your cause dramatically.
You could also radically do this without permission from the government. Create your own group and transparently commit to use the money to better the lives of ALL South African. Donating money to community projects that benefit South Africa.
I want some thoughts? I know some people are anti-centralization and anti-government. If you are, then also please give comments also, but please be constructive rather than just harping on about how bad they are. I do think it provides a very, very interesting alternative.