Will Estonia Be The First Country To Issue Its Own Digital Currency?

Tyler Durden's picture

Nearly three years after Estonia introduced its “e-residency” program, becoming the first country on Earth to allow foreigners to become “digital citizens,” the tiny Baltic republic is considering another proposal that would further cement its reputation as a digital pioneer: Becoming the first country to launch its own Initial Coin Offering.

In a Medium post published Tuesday, Kaspar Korjus, managing director of Estonia’s e-residency program, explained how such a virtual token – which he has tentatively named Estcoin – would function as a new type of investment allowing investors a “pure play” investment in its development. In this case, the money raised from the IPO would be administered by a public-private trust, and used to improve the country’s already formidable digital infrastructure.

Depending on how quickly the country follows through with this proposal (assuming they do pursue it) Estonia would become the first country to publicly launch a digital currency. The Chinese are developing a prototype called “ChinaCoin,” or “DigitalRMB,” but central-bank authorities say it could be another 10 years before it’s finished and launched.

As Korjus explains, Estonia would have “a clear advantage” in launching a digital token because of its “advanced digital infrastructure” and its e-residency program.

“No other country has come close to developing both the technology and the legal frameworks that would enable them to introduce and securely manage tradable crypto assets globally.”

Korjus said the idea was workshopped with input from Ethereum creator Vitalik Buterin. Buterin, Korjus says, envisions the estcoin as a new way to directly invest in a country’s future, rather than buying stocks, bonds or businesses.

“Ethereum founder Vitalik Buterin has a keen interest in Estonia's development as a digital nation and has provided valuable feedback for the estcoin proposal.

 

He believes estcoins could be used to incentivise investors to support the success of a country in a way that is not currently possible through existing means of raising international finance.

 

An ICO within the e-Residency ecosystem would create a strong incentive alignment between e-residents and this fund, and beyond the economic aspect makes the e-residents feel like more of a community since there are more things they can do together,’ says Buterin.”

The coins would give investors “a bigger stake in the future of our country,” Korjust said, something that he hopes would help Estonia crowdsource ideas to improve its digital infrastructure.

“We already know that many people become e-residents simply because they are fans of our country, our technology and our ideas, and being an e-resident enables them to show their support.

 

A government-supported ICO would give more people a bigger stake in the future of our country and provide not just investment, but also more expertise and ideas to help us grow exponentially.”

Aside from being purely an investment, the coins, if issued on top of a blockchain, could be used in smart contracts, or otherwise as a transfer of value. Meanwhile, the money raised in the offering would be managed by a public-private partnership tasked with helping to build a “new digital nation.”

“The funds raised through Estcoins could be managed through a Public Private Partnership (PPP) and only used as described in the agreement to actually help build the new digital nation. This would enable Estonia to invest in new technologies and innovations for the public sector, from smart contracts to Artificial Intelligence, as well as make it technically scalable to benefit more people around the world. Estonia would then serve a model for how societies of the future can be served in the digital era.

 

In addition, a large proportion of the funds could be used as a community-run VC fund on behalf of investors. The money could then be used to support Estonian companies, including those established by other e-residents.”

Right now, Estcoin is still just an idea. The next step would be fleshing out the project in greater detail with a White Paper, which means the ICO, if it happens, could still be a few months away. But it’s difficult to imagine an argument for not pursuing it. Even if the coins tank on the secondary market, Estonia will be left with a giant pile of crypto-capital to spend. ICOs have already raised $1.3 billion since the beginning of the year, and analysts at Pitchbook believe that the total for 2017 will be somewhere around $1.7 billion. Earlier this month, a company called Protocol Labs raised nearly $250 million in an exclusive “presale” followed by a public ICO for its Filecoin project – all without a viable product.

Surely, an ICO with a country behind it could make an equally attractive pitch.
 

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kamikun's picture

Unless they allow individuals to hold their own private keys and ensure the issuance of the currency is kept within promised norms, this will be a non-starter. Plenty of countries already have digitized their currency - Finland and Japan are good examples. But the attraction of public blockchains with currency tokens is that they afford a degree of privacy, ensure the tokens are in the control of those who possess them, and no one entity can issue tokens as they see fit.

Bitcoin and Ethereum still hold much more promise than this kind of scheme. IMHO.

krage_man's picture

Exactly.

Bitcoin is poor candidate for goverment controlled currency. The whole design is based on discovery tokens and anonimous private/public keys.

The only way I can imagine if tokens are issued by goverment and private/public  keys for each market participant are also issued by the goverment who would know the identity of the  market participant ( basically, they have to be signed). So this way, all transactions are transparent. At this moment decentralized nature is lost as the goverment will have to maintain the ledger....

DWD-MOVIE's picture

I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do… http://disq.us/url?url=http%3A%2F%2Fwww.jobproplan.com%3A68UoF1LgzM-Yo3S...

bwh1214's picture

That depends on who is behind it. Here's a video on Bitcoins prehistory.

http://www.themonetaryreset.com/2017/03/bitcoin-prehistory.html?m=1

But while some will act as if they know, like Chris Duane, they don't.

http://www.themonetaryreset.com/2017/08/duane-challenge-accepted-and-wag...

dumbhandle's picture

AXA and and a bunch of Chinese wasting electricity are behind it now.  That is why Bitcoin forked.  Another thing, it does not matter that the NSA is responsible for most of the technology behind cryptocurrencies. Anybody that knew enough crypto to make a cryptocoin was working for the NSA back in the day.  That was the only place to get a job with that skill.  So of course this is where the tech came from.  The source does not make it any less revolutionary or valuable.  Crypto is what it is.  It prohibits signing transasctions unless one has the code. It does not matter where it came from.  This "it came from the NSA so there is an evil agenda" is pure non-sequitur.

Silver Shield's picture

Wait what?!
Governments don't need to buy into a Ponzi scheme like BitCOiN?
They can create their own?!

dumbhandle's picture

Couple of things.  Bitcoin is pseudonymous, not anonymous.  Also, once an entity's identity has been linked to an open blockchain address, a blockchain analyzer program can track subsequent and prior transactions from and to that address, forever recorded on the blockchain in full public view. This does not apply to Monero, Zerocash, or even Ethereum after snarks are added soonish.  Monero is the most private and fungible of the major cryptos, but it suffers from low programming HR horsepower.  It is difficult to conceptualize and use, so people just ignore it.  Bitcoin has pretty serious issues that have become worse due to it's developer community.  Basically, they are insane and coopted and most of the expertise fled long ago to Ethereum. Ethereum benefited immensely from this brain drain and transactions per second on the Ethereum network is skyrocketing far above Bitcoin's TPS.

Tokens can be issued by a third party on an existing mined or staked blockchain to have an enforced inflation schedule, so governments can do that.  But they get no seignoriage, so there is really no point to that.  They can issue seignoriage currencies all they want, but nobody will want to hold them when the alternative is a mined or staked crypto.  Seignoriage currencies are going to devalue and there is no way around it.  The leakage into the cryptosphere is accelerating.  When it hits 5%, the tidal wave is just out of view.  No one will see it and everyone will be swamped.

krage_man's picture

Well, new pair of keys can be made any time so new market player can appear from air. So, it is easy to hide real identity. So, any goverment  would prefer control over issuing new identity.

Ultimately, criptocurrency is commodidy rather than currency. Any goverment would need to ensure that its cryptocurrency can be exchnaged for something real... gold, goods, etc. this is how it can attrac market players to use it

dumbhandle's picture

Nobody is going to use govcrapinflationcoin except maybe to pay taxes. They don't exactly have a good record you know.

anarchitect's picture

Yes, but they'll do OK if you're mandated to pay taxes with them.  After all, fiat would be asswipe if it weren't for that and legal tender laws.

2banana's picture

Except, of course, to actually MOVE to and LIVE in Estonia.

Why does this have all the hallmarks of a scam?

+++++

He believes estcoins could be used to incentivise investors to support the success of a country in a way that is not currently possible through existing means of raising international finance.

‘An ICO within the e-Residency ecosystem would create a strong incentive alignment between e-residents and this fund, and beyond the economic aspect makes the e-residents feel like more of a community since there are more things they can do together,’ says Buterin.”

The coins would give investors “a bigger stake in the future of our country,” Korjust said, something that he hopes would help Estonia crowdsource ideas to improve its digital infrastructure.

DownWithYogaPants's picture

Let's not ruin Estonia with the religion of peace.  

Demographics of Estonia

dumbhandle's picture

Nobody is going to use a gov Ethereum token.  Government products are always crap.  I don't care what they release.  The next day there will be something 100 times better issued by a private party.

Latitude25's picture

More bitcoin pictures showing them made of gold.  Why not just buy and own the real thing rather than a psyop illusion of money?

dumbhandle's picture

Because you can't pay someone on the other side of the world semi-instantly.  Gold is not transactional.

anarchitect's picture

There will soon be (or already are) cryptos backed by gold.  The model is similar to the way mints used to operate, in that issuance occurs when metal is submitted.

Golden Phoenix's picture

The beauty of blockchain is it's trustless because the ledger is distributed. The idea of cryptos 'backed in gold' reintroduces the idea of people believing some guy when he says the gold is still in the warehouse or ever was. 

DarthVader101's picture

Ecuador and Senegal already have a national blockchain-based digital currency. Sweden, China, Russia and many other countries are testing one right now.

dumbhandle's picture

Waste of time unless they limit it to a tax paying coin.  Nobody wants a crapcoin.

Long memory man's picture

Estonia? big deal it is a tiny tiny country so maybe they can, If China does it, wow. But remember if the internet goes down, that would be described as 3rd party risk, something to try to avoid in my humble opinion.

theright555J's picture

It's a tiny country, but has a very strong tech presence.  It's known as the "silicon valley of Europe".  Not at all suprised to see Estonia try something like this.

dumbhandle's picture

Won't work, it's a dumb idea.  More communist thinking.  They are late to the party and do not understand the technology so they are misapplying it.

swizzlefoot's picture

ESTONIA AIRDROP?

DING

East Indian's picture

Issuing money in any society is always very profitable, especially if it involves almost no expenditure. Blockchain tries to change that, by making sure that a certain amount of energy is expended before a new token is created. Thus it puts an effective check on the ability of the central banksters and their crony commercial banksters to create "money" out of nothing. That way, people will start trusting the work involved- Proof of Past Work; as opposed to a pure fiat - Promise of Future Work.

 

But there are two more issues involved:

1. how much money should be created? Bitcoin freezes the maximum number of tokens, thus if it becomes money, it will lead to world where the GDP may raise and fall, but the money circulation will be fixed. This was exactly the trouble during the Great Depression. Too much of money went into the hands of the super-rich, who took it out of circulation, leading to a shortage of money for even very essential transactions. The final way out was devaluing the currency and banning private ownership of gold. Thus, inelasticity in money supply is also bad. A government must first make up its mind about this. Creating a fixed proportion of tokens every year may work, but it will pinch and kick during expansion and contraction of economies.

2. How do we destroy money when it is not required?

And finally fractional banking should be banned; the profits of issuing credit that works as money should be transferred to the treasury. This alone will keep a fair control on the unnecessary creation of money. OR issue a PoS token, which will obviate the need for keeping your savings in a bank!

Latitude25's picture

So sorry.  Bitcoin has been forked.

dumbhandle's picture

Who is "we"?  Nobody wants "we" to be in charge, because "we" is selfish and they screw everything up.  This is why they created crypto.  To get rid of we.

Dangerclose's picture

Any crypto fans out there should definitely look into this coin. Mothership (MSP) may be the coin that is at the forefront of this program. Definitely see some upside to it.   https://www.cryptocompare.com/coins/msp/overview/ETH

Youri Carma's picture

Nop!

Korean banks plan to install blockchain system by next year
Aug 18, 2017 ARIRANG NEWS
https://www.youtube.com/watch?v=g-nnvIgNs-I

culater's picture

The ECB and the IMF are not amused.

And Airdrops to EU citizens - all EU countries should do that and provide some liquidity, especially the weaker ones, like Greece, the banksters would be shot out off the water. Rest of the world could buy it. 

dumbhandle's picture

I hate to break it to you, but all fiat currencies like the USD are digital.  They are not MINED.  Cryptocurrencies are mined or staked.  That is what kicks them off and then makes them valuable, sets the inflation schedule, and makes them non-counterfeitable.  Oh, and Bitcoin sucks as it was taken over by AXA with the help of Chinese getting cheap electricity to mine selfishly. That is why Bitcoin forked.  Everyone got sick of the stupidity of Blockstream and the Chinese mining cartel.  Ethereum is where Bitcoin's programmers went.  And it shows.  It does many more TPS than Bitcoin at the moment and the TPS count is rising rapidly.  Ethereum.

Funn3r's picture

Every Estonian citizen (and foreigners if they apply for one and pay) has a government-issued X.509-based ID. The proposed Estcoin would be somehow crypto-connected to the ID. 

"Fortunately, the secure digital identities used by e-residents (as well as citizens and residents of Estonia) are now the ideal mechanism for securely trading crypto assets in a trusted and transparent digital environment. The tokens can not be counterfeited and the government oversight means they can not be used for illegal activities."

In short, Bitcoin but without the good bits such as anonymity. Not much use I would say.

 

dumbhandle's picture

Bitcoin is not anonymous.  Ask Carl Mark Force IV of the FBI (formerly, now in jail).  Not sure why this misfact keeps getting repeated.

Youri Carma's picture

I concur I keep people hearing repeating this false meme that 'Bitcoin is anonymous' while it's not. It's tracked and traceable.

You have to take further technical measures to make it anonymous so I am told by experts. I am still not sure which measurements are required exactly. Will find out some day.

Davidduke2000's picture

Stop dreaming.maybe in 25 years where old people who do not use computer. but for the next 25 years it's not possible.

dumbhandle's picture

It will never be possible except in a hard dictatorship like North Korea.  Nobody is going to want to use a govcrapinflationcoin.  If we do end up using it, it will be due to the threat of death by a person worse than the North Korean nut cases.

TeaClipper's picture

You remind me of Eeyore from Winnie the pooh. "Every silver lining has a cloud" Keep taking the anti depressants pal.

dumbhandle's picture

You remind me of shithouse psychologist.

makinbacon's picture

Can't wait to see the Red Herring Prospectus on this 18K sq mile rock with 1.4M people , resources poor , but amazing low in debt after being ass-raped by German & Russian troops for 52 years.

I'm sure their president is amazed at his 14 year old nephew's ability to mine BCH off the government wind farm electricity ( making him their 8th richest citizen!) , and the chance to finally do away with the unpleasantness of the Euro!

The best part of the plan is...if they default...they can just " Fork! "...Brilliant!  

It's like a scene out of " Borat".

o r c k's picture

Why don't they simply adopt litecoin ? Ready to go. 

radbug's picture

You want my money? Then sell me a bond!