Cryptocurrencies for social change

A couple of recent events/news stories have inspired this post. The idea I am exploring is if a cryptocurrency (like bitcoin and I mean like in the sense "similar to", not "such as" -- bitcoin might not be a way to address poverty in Nicaragua. First, the two events that got me thinking.

Iceland has strict foreign exchange restrictions -- pretty much a result of the banking meltdown some years ago. Coindesk reports that a new cryptocurrency, called Auroracoin, is being created and each resident of Iceland will receive equal shares.

Auroracoin is a litecoin-based digital currency, 50% of which is pre-mined. This is where it gets interesting: the pre-mined coins will be distributed to the entire populace of Iceland starting on 25th March. Each one of the country’s 330,000 citizens will receive 31.8 auroracoins.

Unlike most countries who see the banking sector as a good thing, Iceland's banking sector has a bad track record and the people have noticed. This new kind of local money is there to offer an alternative.

Mazacoin is the other recent story. Again, as reported by Coindesk, we are talking about another cryptocurrency with a specific target, this time native Americans in the US.

In both cases, the new currencies are designed to empower a community by giving them their own, non-controlled currency. You need to fully understand the hows and whys of cryptocurrencies to see the big picture but on a very basic level, you are eliminating government controls and banking overhead from a currency. Let's look at the types of changes that can happen.

  • Credit/Debit card discount rates (that is, the cost to a merchant for using plastic money) tend to be around 3% in the US but more typically 7% to 9% in this area. That's a huge cost that most merchants cannot afford. Doing transactions with a non-bank currency can eliminate those fees.
  • Exchange controls exist. They are very strong in Argentina now, for example, but are becoming more popular. Using a cryptocurrency instead of a fiat currency which must be exchanged eliminates the effect of exchange controls.
  • A local currency can fluctuate in value based on real supply and demand. Any country who uses the currency of another nation as their local currency is subject to the economic changes of the nation whose currency you are using. The obvious example is the EU where it is difficult for one country to change currency values to control their own economy. Any currency pegged to a foreign currency (Cordoba to US dollar, for example) is a victim of this problem as well.
  • Having a local-only currency encourages buying locally. A LETS offered an early solution here but has management issues and overhead. Cryptocurrencies are clearly the new/better way to address this issue.

I don't have a plan but it seems that considering the possible use of a cryptocurrency in Nicaragua to address solutions to social problems is worthwhile. I welcome discussion on the topic.

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The lure of something like Mazacoin (public launch less than 24 hours away) is, potentially, far beyond the implementation of a “national currency” for the Lakota Nation (here in South Dakota). By establishing a crypto-currency, and a government-friendly atmosphere for others of the same, the Tribe and likely and others in the U.S., will be in a position to try to attract Bitcoin-like outfits to Tribal Lands. On such lands the currency outfits would face far fewer regulation and lesser taxation – with none of the latter going to the U.S. Federal Government. It could/would be a governmental/territorial showdown in terms of what it means to be a “Sovereign Nation”, much more so than some other disputes of recent years involving casinos and business enterprises, including South Dakota hemp.

and where is bitcoin today

It's an interesting subject, but once it leaves the it's an interesting idea and goes to implantation is will be co-opted. Bitcoin was and today it has a bank holiday on it's customers. Just another move by the big guys to steal other people's money. As good as any new banking idea may be it will not be the little guy that owns it for long or is taken out by those in a much better position to do so.

A digital currency is the dream of these criminal bankers anyhow and they being at the top of the banking tier will be the ones in control of such banking services and that is really the big problem here. The day it all goes digital is the day they can just turn off your funds if you are playing their game their way, and that is really where this is all headed in the end anyhow. How fast is another story.

There was an article in El Nuevo Dario that was (projecting) if you will the future for Nicaraguans and the rest of us, where it was showing the future of digital banking through their cells phones. It seemed like quite a future projection however given the addictive nature of humans and Nicas a like to their cell phones it might not be all that far off. But Nicas would have to have confidence in this kind of banking and they don't have that much in regular banks anymore than I do, so it will take allot of breaking down of how banking works now and to instill another false sense of security in it's place for depositors.

I think some other advents must take place first before the stage can be set for this, but a digital currency is where we are headed for sure.

Nicas and banks - a myth, and a much related folklore story.

Don't confuse "No Need" with "No Confidence"

Those with good jobs, INNS deductions, pay a little taxes etc. have no option but to deal with a get paid.

They are being worked by the banks and now have proper accounts (not just a payroll ATM card account), a savings account and on line banking.

Those people are moving up and they ain't rich, just part of the change.

AreThere ANY

bank protections in Nicaragua like deposit insurance, credit and ATM card protection, privacy regulations?

Or, is this still the Wild West?

On the one hand nobody I deal with so far wants a check. There is no bank in Condega to cash one. We do have an ATM at the Palí, and we have a Western Union. On the other, I can see it changing when I start paying INSS . . .and other taxes.

Are Nicaraguan banks safe -is the bottom line question.

Yes but not much

Banks and financial instutures regulated by the Superintendent of Banks and Other Financial Institutions, SIBOIF ensures the safety of client money.

The Deposit Guarantee Fund, FOGADE, ensures the public's savings for an amount of U.S. $ 10,000.


The Canadian mint is developing a crypto currency they're calling MintChip. Like BitCoin, it is supposed to be a completely anonymous crypto currency, but backed by the Canadian government and more tightly integrated into the financial system. The main difference between it and BitCoin is that your funds are stored on a chip and transactions are basically chip to chip.

One of the problems with it, according to law enforcement, is how do you freeze terrorist funding in an anonymous payment system? But I also don't like this government ability to cut all your funding. A friend once tried to withdraw money from his bank's ATM on a Friday night and was refused. It took until Monday to learn all his accounts were frozen due to bank error. How to lose trust in your bank.

Banking by cell phone is not futuristic since it's already operating in Africa.

It's dead

From CoinDesk:

The Canadian government has announced that it will end its MintChip electronic payment system, and that it will look to sell the business to the private sector.


Bitcoin was and today it has a bank holiday on it's customers.

Bitcoin doesn't take holidays. It's a 24/7 thing. Now, there is yet another issue with an exchange called MtGox but that would be like saying that BanPro is closed is equal to the córdoba is "closed".

At the

time of my post I had read that bitcoin was freezing funds from withdrawl and that is what a bank holiday is, it's not saying something like the currency of that country is closed, but a bank holiday is simply when a bank closes to reduce pressures from a bank run or some other economic event in which the bank decides funds are going to be not available to it's depositors.

To me the real issue is do you really want another fiat currency even one that is digital? or something fully backed by something of value that is equally exchangable in value for things tangable in nature.

A bird in the hand is worth two in the bush, I'll take in my hands any day of the week when it comes to currencies and someone else deciding whether or not I can have my money or that some unknown cyber hacker got in and erased my worth with little to no recourse.

Although this is the current trend and direction the world is being pushed into, it comes with a huge price and that is if you don't play the game they way they want and they (those wtih the power to do so) can just turn off your funds at will with a click of a mouse and giving you if they chose a personal level bank holiday.

History has proved over and over again whether your bank is 24/7 or not, they still have the power to not give you your funds for a number of reasons. All banks are 24/7 to some degree with ATM's and they can shut down for the day or more if they wish so can your electronic bank. So I dont' see the saftey factor being increased or the ease of doing business with a electronic bank, but instead see it as giving even more distance between your hard earned money and you.


time of my post I had read that bitcoin was freezing funds from withdrawl

While it was easy to read this, it is not true and cannot be true. Let me cover the two pieces separately.

There was an issue with the reference Bitcoin software that you could modify a posted transaction. Not something where funds could be lost but an inconvenience where some exchanges needed to use other records to sort things out.

What did happen/what started this is that one exchange, MtGox, screwed up bigtime in this regard. They had made modifications to the reference software for their use and then had not made updates because they were incompatible. The result was (and still is) that MtGox has been offline for a couple of weeks. (There is a lot more to the story including that they tried to say this was a bitcoin issue, not their issue which is where the freezing funds rumor came from. If you have bitcoin in MtGox, it is true.

Much more important is the perception that there is some central place/authority related to bitcoin. This really comes from the fact that all our lives we have seen that's the way that banking works so we assume it must work that way. In a nutshell, banks depend on a central authority and restricted access. Bitcoin does not. In fact, it is pretty much the opposite.

The central authority is the complete transaction history of bitcoin -- currently about 11GB of data. It is called the blockchain. Anyone can read it and anyone can contribute to it. When a new transaction occurs, by anyone, it is submitted to be included in the next block. The blocks are not encrypted but require computation-intensive work to create. Generally, those sending information to the blockchain wait until at least six others have verified the integrity of the block including a transaction before they accept it.

Fraud is prevented by having this open record and allowing others to verify the data. It is just not worth it to try to fake a block. And, the important part is that there is no central authority. Thus, no way to have a bank holiday.

So, why are there exchanges such as MtGox? They perform conversion functions between bitcoin and fiat currencies. While you can leave your bitcoin in their account, it is a lot like leaving too much money in your checking account or in an account that can be accessed by a debit card. The alternative is to secure your bitcoin yourself. It can be done with any of a number of electronic wallets that run on most any computer/phone (except Apple stuff -- another story) or on paper. The big plus is that unlike cash, stock certificates and such, you can make multiple copies of the information -- in case one gets lost.

Bottom line, bitcoin is alive and well. The MtGox fiasco sounds bad but it is no more than an excuse to make people think bitcoin is bad.