Shitcoins In The Name Of The State - Or A New Era In The History Of National Currencies?

With the Souvereign (SOV) plan the Marshall Islands as the first country in the world to introduce a cryptocurrency as the official currency. The Marshall Islands are thus following Venezuela, which is issuing an oil-covered currency with the Pedro. Turkey and Iran are also in the starting blocks, according to reports. Will the ICO be the new tool that states use to fill their coffers? And does that mean that the crypto-revolution has now arrived at the level of nation-states?

The biggest problems of an ICO are usually not in the technology, but in the marketing: How do you manage to build up so much trust that people give a FIAT currencies for tokens, which are virtually made from the air, and virtually in all cases come with a best windy and vague promises of return?

The problem is likely to be familiar to anyone who has ever dealt with state money production. Again, money is created from the air, and the market is required to trust the state enough to trade real goods for the worthless bills. Unlike the makers of the ICOs, however, the state has the advantage of having a history that is decades or even centuries old, armed forces, and economic resources. A state brings with it enough to get a trust, which is usually sufficient to give a value to the money he created.

Now it seems as if some states are discovering that they can make good use of this trust in order to fill the treasury with ICOs. After Venezuela has presented with the alleged oil-covered Pedro, the Marshall Islands now want to start with the "Souvereign (SOV)" the first own currency as a cryptocurrency. The project is quite ambitious.

The Souvereign (SOV)

With 72,000 inhabitants and a surface area of 181 square kilometers, which are scattered over more than 1220 islands, the Marshal Islands, located in the middle of nowhere between Australia and America, belong to one of the smallest states in the world. The republic is still suffering from the effects of the massive nuclear and hydrogen bomb tests carried out by the US in the 40s and 50s on the country's formerly inhabited atoll, and does not have bright prospects for the future: economic growth is weak and strongly supported by the US, which will decline significantly over the next decade, while the climate change-induced increase in sea levels can make other parts of the country uninhabitable.

The Marshall Islands do not have their own currency; So far, the US dollar is being used. Now, the island's parliament, the so-called Nitijela, has decided to set up its own currency, or rather its own cryptocurrency, for the first time with the SOV. This is to be awarded by an ICO and then circulate as official means of payment next to the US dollar.

More specifically, the Parliament has adopted the following plan: a total of 24 million SOVs, each divisible into 100 sub-units. Prior to the ICO, the Republic receives 12 million SOV, of which it sells 6 million. The proceeds and the remaining SOV 6 million are to be distributed to various funds, including funds for dealing with climate change and nuclear pollution. Subsequently, the money supply will grow by 4 percent annually. The newly issued coins either go to the miners or are distributed by the ministry of finance. All citizens and traders of the country should be provided with the necessary technical means to use the SOV.

The ICO is organized by the Israeli startup Neema. With it, the country wants "blockchain enthusiasts who have nothing to hide, venture capitalists, banks, and other financial institutions to be involved in building the first crypto-based economy." Unlike any other known cryptocurrency, sovereignty integrates identification the user in the log. The "Yakwe Framework" will bind each wallet to an identities verified by passports and fingerprints. The identity of the user is stored on the blockchain, but encrypted so that only this can reveal it. With the SOV, the country wants to "meet the market's huge need for a non-anonymous blockchain system that works in regulated environments," hopes Minister David Paul. Because the currency has the benefits of Bitcoin, without the disadvantage of anonymity.

Further technical specifications will not be revealed. Will the currency be a token on a blockchain like Ethereum? Or does it become a blockchain of its own - and if so, is this produced by Proof of Work or Proof of Stake? You can only be curious. Here we look at other state blockchain projects.

Turkey and Iran

There is little evidence that both Turkey and Iran are planning to issue their own cryptocurrency in the coming months.

After all, there are some information for Turkey through an article by Al-Monitor. So the small partner of Erdogan's AKP, the National Movement Party (MHP), probably comes up with the idea of developing a Turkcoin. "The world is entering an age of a new digital system. Turkey should form its own digital system and its own digital currency before it is too late, "said the party's deputy chairman, Ahmet Kenan Tanrikulu, the magazine.

Tanrikulu has previously presented a 22-page, amazingly innovative report on digital currencies. In it he explains that the use of digital currencies and the generation of profits by mining and trading in cryptocurrencies are not punishable. The spread of cryptocurrencies in commerce is growing rapidly, according to the report. In order to prevent tax avoidance, capital flight and money laundering, it is proposed to set up a state-controlled Bitcoin exchange.

Regarding their own currency, Tanrikulu says that Turkey should build up the infrastructure for its own blockchain database. Turkey's own currency should be based on the "Wealth Fund". In doing so, the politician complies with Mehmet Simsek of the AKP, Turkey's Deputy Prime Minister, who oversees the economy and chairs the central bank. He announced in an interview on February 7 that the government would prepare to launch a national cryptocurrency based on the Wealth Fund. This includes large state assets such as Turkish Airlines, the Istanbul Stock Exchange, the gas company Botas, Turkish Telecom, Ziraat Bank and the National Lottery. These serve as a kind of value anchor for the digital currency of Turkey.

We only have a Coindesk article about Iran, which refers to a Persian message from the central bank. It says the central bank is developing a cryptocurrency that will be managed by the government. More precise details are very rare or volatilize in trivia.

Venezuelan Pedro - a story of lies?

Meanwhile, criticism of Venezuela's Pedro is loud. In particular, an article here on Steemit by @alemacgo does not go far with the currency project of the socialist country, which allegedly covers a token with a barrel of crude oil.

According to the article, the ICO did not take in $ 750 million, as President Nicolas Maduro claims, but not a tired cent. There would not have been a start yet, just a sloppy website that does not know exactly which blockchain the coin is running, uses bad SSH certificates, sends e-mails with a six-hour delay, and has amateurish JavaScript bugs. There is still no wallet, as well as the opportunity to buy tokens. "Damn, I could even confirm that the government has not yet developed a smart contract and has not yet issued a token."

Maduro pulled all the stops. For example, he said he had met representatives of the NEM Foundation, which was not true at all and became a PR nightmare for the Foundation. Also, the price of $ 60 for a Pedro - which should represent a barrel of crude oil - holds @alemacgo for mischief. Venezuelan oil does not get that price when loaded onto a freighter, and certainly not when it's still in the soil of Ayacucho, a completely untapped oil field with which Maduro covers the Pedro.

All this makes the Pedro for the Venezuelan author nothing but a pure fraud. Another in the history of the fraud and lies not poor government Maduro.

Is Venezuela still open to cryptocurrencies?

Whether fraud or real - the Pedro ICO has an exciting side effect: the president recently announced that all cryptocurrencies, including the Pedro, are completely legal. Given the often harsh restrictions on foreign currencies and strict capital controls, this is a big and surprising step.

Maduro has mandated the various authorities to accept cryptocurrencies for their services. This includes all services provided by consulates and embassies around the world. The national airlines are to sell tickets for cryptocurrencies and pay kerosene with them. In addition, it should soon be possible for tourists to pay for services and hotels with digital currencies, as well as the petrol stations that Venezuela maintains in the country and at the borders with Colombia, as well as the large state oil and gas companies should accept cryptocurrencies.

It is difficult to say exactly why the government is doing to make this move. Is it due to the expectation, in the near future, of receiving large revenues in cryptocurrencies thanks to the ICO? Or has the country actually received large sums of money in Bitcoin, Ethereum and Co. through the unofficial pre-sale of the tokens? This could be a good reason for a full legalization. But it would also be conceivable that Venezuela tries to promote the ICO through the widespread acceptance of the Pedro and other cryptocurrencies - one could also say to "pump" - or that the country simply desperately seeks a functioning money after its own currency, the Bolivar, which made hyperinflation more or less useless. Venezuela may also simply try to shake off the oppressive capital controls by doing its part to replace the dollar with its key currency for international trade through cryptocurrencies.

Shitcoins

At the end of this review of state crypto ambitions, we need to come back to the category of Shitcoin mentioned in the headline. The Shitcoin is a derogatory term for a cryptocurrency. Most of the time, it is being rushed by representatives of dominant cryptocurrencies, especially Bitcoin, to unseen other crypto projects. This does not mean that it has no value as a category.

Shitcoins means cryptocurrencies that basically have no other raison d'être than making their founders and crypto whales rich. They are a bad investment because they are not innovative and have no good developers behind them. In addition, most of the time through pre- or instamining, they have given the founders an outrageously high bonus by allowing them, in one way or another, to get extra many of the coins. On the crypto markets, Shitcoins' liquidity is so low that the altcoin whales manipulate the course through pump'n dumps, enriching themselves at the expense of newbies.

If you put the category of Shitcoins on government cryptocurrency projects, it does not look very good for them. With a premining of 50 percent and the lack of a developer community, the Souvereign (SOV) is ever suspected of being a Shitcoin. However, with the 70,000 or so inhabitants of the Marshall Islands, he could have a lively user community and, as an alternative to the dollar, have real economic added value. After all, the project seems to be driven forward in a serious and transparent manner and also with a genuine, if questionable, innovation - the abolition of anonymity. Accordingly, the SOV should not be a real Shitcoin.

The situation is different for the Pedro, of course. The Coin meets much more criteria of the Shitcoins: advertising with nonexistent cooperations, the blurry and confusing technical descriptions, the bad website, questionable claims about revenue, the missing developers - there are many red flags. If the Pedro did not have the Venezuela bonus, investors could only be advised to run away from it as fast and as far as possible. But you have to say that the Coin, if it should be online and open source, can still be a step forward. Because worse than the Bolivar, the largest Shitcoin of Fiat currency, it can hardly come.

Overall, one should observe the development of state ICOs with some skepticism. Apparently, this is often behind the government's motivation to fill its coffers by outweighing the credibility of a state from the crypto markets with digital gold. The state-run ICOs also show that government-issued money has not yet been able to keep up with the high standards that the markets have for good crypto money. If it were not for government coverage, the Coins of the Marshall Islands as well as Venezuela would not be the least interesting.

The fact that governments are behind it, however, makes the planned cryptocurrencies exciting again. Perhaps they mark the demise of FIAT money by showing how little government can compete with private money - and perhaps they are a milestone in the evolution of FIAT money, now, after centuries of paper and virtual databases, with cryptography finally solid again and stable.

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