What Is Auroracoin

Auroracoin is a peer-to-peer cryptocurrency developed in Iceland. It was launched in 2014 by its pseudonymous creator Baldur Friggjar Óðinsson.

Auroracoin was intended to serve as a mechanism for cross-border transfers in the local economy. The cryptocurrency’s value crashed immediately after launch in March 2014, and it was deemed a “failed experiment.” But Auroracoin was revived in 2016 by a group of developers who enlarged the scope of its functions to include daily transactions. It is run by the Auroracoin Foundation, which was established in 2015. 

Key Takeaways

  • Auroracoin is a cryptocurrency founded in Iceland in response to the 2008 financial crisis.
  • It was launched in 2014 and deemed a failure shortly after.
  • The currency was revived in 2015 by the Auroracoin Foundation.

Understanding Auroracoin

By 2009, Iceland’s economy had become bankrupt in the aftermath of the 2008 financial crisis. To stem the outflow of capital, the government instituted controls which prevented its citizens from taking foreign currency out of the country. Much like bitcoin, whose creation is widely considered to be a reaction to bank bailouts by the federal government, Auroracoin also positioned itself as an alternative to government-controlled currencies. 

“People in Iceland have, for the past five years, been forced to turn over all foreign currency earned to the Central Bank of Iceland,” the coin’s creators wrote. “This means that the people are not entirely free to engage in international trade. They are not free to invest in businesses abroad. The arbitrary use of power this entails and the unsustainable debt of the Icelandic government has created uncertainty and risk in all aspects of commerce.” According to the coin’s creators, the overall effect of government restrictions on the local economy was “crippling”. 

Auroracoin is based on the Scrypt algorithm, which is also used by Litecoin. Half of its cryptocurrency was pre-mined and distributed to the citizens of Iceland in three phases. During the first phase in March 2014, each citizen of Iceland received AUR$31.8. The distributed amount went up to 318 coins in the second phase and was doubled to 636 coins in the third phase. The remaining 50% of the coins were destroyed. Iceland’s national ID system was used to conduct the airdrop. 

Auroracoin’s value spiked to $1 billion during the run-up to its launch on were rumors that it was backed by Iceland’s government. But the airdrop resulted in a massive selloff, and Auroracoin’s value crashed to $20 million. In addition to being called a “failed experiment,” Auroracoin was referred to as a scam. The project remained on the backburner until a new team from the Aurora Foundation took control of it in 2016. This team plans to develop supporting infrastructures, such as cryptocurrency wallets and trading exchanges, for the coin.