What if a Country were to start its own Cryptocurrency

[EuSouBitcoin]

What if a country were to start its own cryptocurrency based on Bitcoin? What would they change? They could have a different method of initial distribution. For example, the govt could premine all the coins and then divide them equally among all their citizens. Or the govt could start owning all the money but then how would the citizens get the coins? Maybe the govt would want the ability to reverse transactions. They could print print paper currency and exchange it to people at coinbanks when people deposit their cryptocoins. The govt could have 1 central bank where all accounts must be held. Cryptocurrencies could be ushering in the era of Big Brother instead of guarding against him. What do you think?

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[JoelKatz]

I don't think it would be rational for a country to start a cryptocurrency based on Bitcoin technology. The basic ideas of accounts, transactions, and confirmations make sense. But where the lack of a central authority is not an advantage, there's no reason to make all the compromises bitcoin makes to get that.

[cbeast]

If a country started an alternate block chain that is compatible with my system I would join their pool if there was financial incentive for me to do so. If the entire world would support any country willing to use a cyptocurrency, it would create strong alliances among the common people instead of just nations. OTOH, if a country tries to operate a closed system LAN type cryptocurrency, then it will just be a bank based fiat currency.

[jjiimm_64]

The country idea is not new......... but the govt dont have to start or support them, they can stand on their own.

bitcoin -- gold crypto
litecoin -- silver crypto

rucoin
iraqcoin
ukcoin
chinacoin
usacoin
francoin
etc

[cbeast]

The country idea is not new......... but the govt dont have to start or support them, they can stand on their own.

bitcoin -- gold crypto
litecoin -- silver crypto

rucoin
iraqcoin
ukcoin
chinacoin
usacoin
francoin
etc

I think the OP was talking about an actual real country officially adopting a cryptocurrency. That hasn't happened yet. Otherwise they just Bitcoin wannabees.

[DeathAndTaxes]

The country idea is not new......... but the govt dont have to start or support them, they can stand on their own.

bitcoin -- gold crypto
litecoin -- silver crypto

Doubtful.  Silver coins didn't exist because people decided they needed  2nd best thing.  They existed because of a limitation on gold.  Gold coins can't easily be converted.  If a gold coin buys 400 gallons of gas how do you buy 1 gallon of gas?  Sure you could make smaller coins but 1/400th of an ounce coin?  Highly impactical.  You could shave off some grams but weighing and measuring that would be tough and now your "gold coin" is worth less than other gold coins so you just destroyed the fungibility of your money.

Silver existed because subdividing gold beyond maybe a 1/10th ounce becomes highly impactical.  That limit doesn't exist for Bitcoin.  Bitcoin needs no silver.

rucoin
iraqcoin
ukcoin
chinacoin
usacoin
francoin
etc

These serve no purpose.  Why pick a coin limited to US (whatever than means) when you could simply use the nearly universal (by crypto-currency standards) Bitcoin?  Fiats exist because they have the power of the law backing it.  A national crypto-currency without legal tender status is the only thing more foolish than a national crypto-currency.

[ripper234]

I don't think it would be rational for a country to start a cryptocurrency based on Bitcoin technology. The basic ideas of accounts, transactions, and confirmations make sense. But where the lack of a central authority is not an advantage, there's no reason to make all the compromises bitcoin makes to get that.

I'm surprised you didn't link to this thread on SE.

[ovidiusoft]

Government-backed pseudo-anonymous cryptocurrencies? With no possibility of blocking accounts or taking money from users whenever they want, or monitoring you whenever they want? Hahahaha. Not gonna happen. Never-ever-ever-EVER.

On the other hand, a private corporation(s) backed cryptocurrency is, I think, possible. I actually discusses about this a litte on IRC with a fellow romanian bitcoiner (hi!). It could work like this:

* mining could be optional, fees might be distributed across active nodes or there could simply be no fees. This will allow faster block generation (1 every minute is, IMHO, about right. We live in the Internet age, people, I don't want to wait +10 minutes for my transaction to "clear"!).

* new money will be injected into the network by selected, trusted nodes. Clients will have a list of certificates that are allowed to create and sign generation transactions. I'm thinking something in the way SSL certificates and CA's work.

* money can be "destroyed" by a trusted node + the user who cashed out.

The system might work like this, let's call it usdcoin:

* There are a random number of companies who already have fiat cash. They can prove this to all the other companies in the web of trust and to any 3rd party. They will be required to do this regularly.

* A company will generate a transaction for injecting new money in the system. All the other companies will check the validity of the transaction and sign it off. Time is not relevant here, so they can all take their time to independently check that the money exists and is available if needed.

* After all the trusted nodes signed on the new money, they can be "sold" to users, for a fee, by the issuer. The users will send fiat cash using any accepted method and will receive usdcoins to their address.

* From there on, transactions will function like bitcoin's, maybe with a method of rewarding nodes for propagating them. As I already says, mining is not necessary, the trusted nodes could take turns generating blocks. For some extra protection, there should be ways to evenly distribute different coins generated by different companies. This will help if a certain company goes down - users will lose only part of their assets.

* If at some point a user decides he wants fiat cash out, he can contact any of the trusted nodes and send his usdcoins. The trusted node will then generate a "destroy" transaction, send fiat to the user, who will also sign on the destroy transaction. If he doesn't sign in a reasonable amount of time, the network will simply continue using those usdcoins (node can resell them) (fraud issues here I ignored, I know).

Any thoughts on this?

The main "suspects" to do something like this would be, IMHO, e-currency companies that already have a large user base and their implicit trust (and they also solved the legal issues, which is very helpful): LibertyReserve, Pecunix, WebMoney, MoneyBookers and so on...

[DeathAndTaxes]

Here is the TL/DR version:

Govt = control
crypto-currency = lack of control

Govt & crypto-currency don't mix.

[dancupid]

It doesn't matter who starts a cryptocurrency - if a government wanted to do it they could, but it would quickly cease to be something they control. A cryptocurrency is controlled by it's users not the person/institution who initiated it.
Anyone can start a cryptocurrency - people will use it based on its merits.

[Kolbas]

For some countries it may be a good idea. For example, new Russian Empire (Cook Islands) http://russianempire.org/

[cbeast]

In the short term, a country could mine the most or all of the coins and distribute a deflationary cryptocurrency to their citizens in exchange for fiat. They would release the code so that anyone supporting their network would be paid transactions fees in their currency. I would hate to be the first country to do this for fear of a 51% attack on a fledgling cryptocurrency. However, this could become a political boon for alliances with strong countries willing to support them in case of attack. The rules of global finance can be rewritten to take away power from international banksters and put the power in the hands of the people wishing to support their national interests.

[sd]

What if a country were to start its own cryptocurrency based on Bitcoin?

That is about as likely as a country handing out its gold reserves fairly to all of it's citizens. Governments are not in the business of giving away their power. The only possible government type that would consider such a thing is some kind of anarchy/communism system and countries like that get destabilized by outside interests.

[freequant]

Actually, a micronation like SeaLand could very well do that.
King Roy, I know you are reading this forum with interest.
When do you start your own alt cryptocurrency based on Bitcoin?
Imagine the extra edge that could give to your nation : it would be the first country to recognize a crypto currency as legal tender.

[ovidiusoft]

@freequant Sealand is not a country. I'm not saying that it can't play with a cryptocurrency, just that it won't mean anything and will most likely be laughed at, just like the "country" itself. Sorry if I'm being harsh.

But Greece OTOH...

[freequant]

@freequant Sealand is not a country. I'm not saying that it can't play with a cryptocurrency, just that it won't mean anything and will most likely be laughed at, just like the "country" itself. Sorry if I'm being harsh.

But Greece OTOH...

Indeed, a nation isn't a country until it is recognized otherwise by enough other countries in the world.
Yet SeeLand is the closest thing to a country among micro-nations, and they already started minting their own currency and printing their own passports.
What it needs now is to find a profitable edge that will propel it to the attention span of major corporations and governements.
Endorsing cryptocurrencies could be such a edge.
If cryptocurrencies deliver on their promise and indeed become a sizeable part of the monetary and financial system, we can expect that many countries will be lagging and trying to ban them for a while.
During this transition phase, companies that want to operate officially in crypto currencies will need branches in crypto-havens where they can legally receive and make payments in crypto-currencies.
IMO, It is a unique opportunity for a small nation like SeaLand.

[sd]

IMO, It is a unique opportunity for a small nation like SeaLand.

A unique opportunity to get blown to little tiny bits maybe. SeaLand is only allowed to exist because it is inconsequential.

[jtimon]

Government-backed pseudo-anonymous cryptocurrencies? With no possibility of blocking accounts or taking money from users whenever they want, or monitoring you whenever they want? Hahahaha. Not gonna happen. Never-ever-ever-EVER.

This is like saying in the middle ages: "Democracy? An elected king whose actions can be punished by the population? Not going to happen"
If the population of a country demands it unanimously (I'm not saying this is likely to happen, at least not soon), the government has no other choice.

But let's analyze the potential advantages for the government when issuing a national coin.
Let's say the currency is like bitcoin but with centralized issuance (like beertokens or usdCoins) directly by the state (without a central bank that also charges interest to the state that legitimize it).
Yes, they lose control over it. But regular cash also doesn't enforce the payment of VAT and enables its use for illegal activities.
The decentralized management of a currency is desirable for its users. If say, Greece decides to issue drachmaCoin, that would be the first national currency tradeable for bitcoins in a decentralized manner and would share other advantages for the users with bitcoin (smart property, contracts, etc). More people other than greeks (who would be forced) would use those drachmaCoins and that is good for the country.
In the end, when you hold national currency you're holding IOUs from the state. But those IOUs are not redeemable for anything apart from paying taxes and the state doesn't have to pay interests on this "debt issuance".
If foreign investors hold a billion of DRC, that's great for Greece. The state is printing but the price inflation is being exported (or absorbed by foreign investors).
Certainly they would be better than with the Euro.
Also, the state outsources the costs of management of the currency to miners. Miners can live on fees or be perpetually rewarded a la expocoin/freicoin. And still the state can enjoy its monopoly on discretionary printing.

[ovidiusoft]

This is like saying in the middle ages: "Democracy? An elected king whose actions can be punished by the population? Not going to happen"

You seem to think that there is such a thing as democracy or fair elections, direct representation and so on. It does not, and never was. "Punished"? When did that ever happen? And no, I don't mean small things like stealing a few millions or doing miss Lewinski... I mean people who did real damage to their country or to the world. Those who were punished (and that's already a small percentage), got punished through revolutions, which are pretty undemocratic.

....
Certainly they would be better than with the Euro.

I completely agree with everything you said. I just don't think it's going to happen via "people wants > government provides". I find it much more probable that a private corporation will launch something like "backed bitcoins" and it will grow up to the point that it will simply replace the traditional banking system.

[freequant]

IMO, It is a unique opportunity for a small nation like SeaLand.

A unique opportunity to get blown to little tiny bits maybe. SeaLand is only allowed to exist because it is inconsequential.

A unique opportunity to be remembered as a glorious king.