Auroracoin (AUR) was launched on January 24th 2014 as an Icelandic peer-to-peer cryptocurrency, Iceland’s alternative to Bitcoin and the Icelandic krona. Quick side note, Auroracoin shouldn’t be confused with the cryptocurrency token Aurora (AUA).
Auroracoin and Bitcoin share the same mysterious origins
Much like Bitcoin where the creator or creators are to this day unknown, the original creator or creators of Auroracoin are also a mystery and go only by the pseudonym Baldur Friggjar Óðinsson.
Additionally, exactly as with Bitcoin, the total supply of Auroracoin was limited to 21 million coins at inception.
It is understood that Auroracoin was created as an alternative to the government-controlled currency, the Icelandic Krona following the 2008 financial crisis and federal government-backed bank bailouts.
Additionally, to restrict the outflow of capital the Icelandic government implemented controls that prevented its citizens from moving foreign currency out of the country.
The second reason was to present an alternative digital currency where the unlimited printing of money was not possible due to the 21 million coin limit and thus reduce or perhaps even eliminate inflationary effects prevalent in most government-issued fiat currencies.
Auroracoin was seen as an answer to financial frustration in Iceland after the 2008 financial crash
The creators of Auroracoin said: “People in Iceland have, for the past five years, been forced to turn over all foreign currency earned to the Central Bank of Iceland. 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 and the overall effect of government restrictions on the local economy was crippling”.
It has been suggested that Iceland could be seen as the ideal breeding ground for a virtual digital currency due to the limited use of cash, high adoption of electronic finance and an unusually high level of interest in Bitcoin within Icelandic society.
If you add to this the long-term instability of the Icelandic krona and the foreign exchange controls enforced on citizens it’s easy to see how Iceland could be an ideal environment for a decentralised digital currency such as Auroracoin.
The big Auroracoin “airdrop” in 2014
Initially, half of the total 21 million Auroracoins were pre-mined and allocated for the entire population of Iceland, with some 330,000 Icelandic citizens living in Iceland.
In what was a first of its kind, a national ID-enforced airdrop began with phase 1 on 25th March 2014 whereby 31.8 Auroracoins were allocated per individual claimant.
This was followed by two further phases that concluded in 2015 with 318 and 636 Auroracoins available per claimant.
From these 10.5 million pre-mined Auroracoins, around 40% were claimed, 10% of the coins were gifted to the Auroracoin foundation (M1 fund) and 50% of the pre-mined Auroracoins were verifiably and permanently destroyed or in crypto terms, burned by being sent to the special burning address AURburnAURburnAURburnAURburn7eS4Rf.
In 2016 there was a hard fork to a multi-algorithm proof of work (PoW) code change resulting in a block time change from 10 minutes to 61 seconds thus massively improving transaction speeds.
There was also an increase in the maximum number of coins to 23.3 million which was adjusted to 17.97 million after 5.345 million Auroracoins were burned.
Auroracoin was based on Litecoin’s proof of work algorithm
Auroracoin was originally based on Litecoin with a script proof of work (PoW) algorithm which relies on a system of miners solving highly complex mathematical puzzles known as hashes. This is the same consensus system used by Bitcoin and currently also Ethereum although this is due to change. On 8th March 2016, a new codebase was released using a multi-algo architecture based on DigiByte, pioneered by Myriadcoin.
Auroracoins value reached a high of $1 billion during the build-up to its launch on the back of rumours that Auroracoin was backed by the government of Iceland.
However, the airdrop resulted in a massive selloff causing the plummeting of Auroracoin down to just $20 million.
Auroracoin was viewed by many as a failure or even a scam
For many observers, Auroracoin has been seen as a failed experiment and has also been referred to as a scam.
This “failure” amongst other things led to the project sitting on the back burner for a period of time until a new team from the Aurora Foundation took over in 2016.
This team took on the challenge of developing the infrastructure including cryptocurrency wallets and trading exchanges for the coin.