The War On Shitcoins Episode 3: Auroracoin (AUR). The war on shitcoins is a Crypto.IQ series that targets and shoots down cryptocurrencies that are not worth investing in either due to their being scams, having serious design flaws, being centralized, or in general just being worthless copies of other cryptocurrencies. There are thousands of shitcoins that are ruining the markets, and Crypto.IQ intends to expose all of them. The crypto space needs an exorcism, and we are happy to provide it.
Back in the early days of crypto when there were less than 140 cryptocurrencies listed on CoinMarketCap versus nearly 2,100 cryptocurrencies today, Auroracoin (AUR) briefly became the second most valuable cryptocurrency on March 4, 2014, when its price peaked at $98.
This corresponded to a market cap in excess of $1 billion at a time when Bitcoin’s (BTC) market cap was only $7 billion. But this ended up being one of the most vicious pump and dumps in the early days of altcoins since a mere two days later AUR’s price was already more than 80 percent lower.
The reason AUR gained such a high market cap, if only briefly, is that it brought forth the original concept of national airdrops. It could also be considered the first attempt at a national cryptocurrency. The idea was that AUR would be distributed for free to all citizens of Iceland who signed up and that this would drastically increase cryptocurrency adoption in Iceland.
AUR was mineable via Scrypt Proof of Work (PoW), and the mining community believed in AUR’s potential for becoming the national cryptocurrency of Iceland. Also, AUR was very scarce before the airdrop. Only 2.5 AUR were being distributed per minute via mining, and this scarcity automatically increased its value.
There was a time when AUR was increasing beyond anyone’s expectations just before the airdrop, and numerous speculators jumped into the market only to experience catastrophic losses. But the extremely rapid price peak and subsequent crash is an excellent example of a pump and dump.
Ultimately the citizens of Iceland who signed up likely dumped their AUR immediately for cash profits versus using or adopting AUR. Thus, the original purpose for which Auroracoin was built ended up being its biggest weakness, making Auroracoin a prime example of why national airdrops — and perhaps airdrops in general — do not work. At the point the airdrop occurs, the market becomes saturated, creating strong selling pressure.
The Auroracoin airdrop occurred in 3 phases. On March 24, 2014, 31.8 AUR were given to each Icelandic citizen who signed up. Right before the airdrop started, the Auroracoin market cap was $163 million, and less than a week later it had crashed to $20 million. The earliest Icelanders who received their share of 31.8 AUR got an impressive $400, which explains why they immediately cashed out. By the time phase 1 of the airdrop ended in late July, 1.127 million AUR had been distributed across Iceland, and AUR’s market cap had been completely plundered to less than $70,000.
Phase 2 of the airdrop immediately began when phase 1 ended, and the share per citizen drastically increased to 318 AUR to account for the fall in price. This amounted to about $30, however. By the time phase 2 ended, 1.6 million AUR were distributed, and AUR’s market cap was solidly less than $100,000. Phase 3 of the airdrop then began, and the reward was doubled to 636 AUR per citizen. 1.7 million AUR were distributed by the time the airdrop ended in late March 2015, and the AUR market cap had declined to less than $40,000.
Essentially, speculators and miners worldwide invested heavily into AUR during early 2014 in the hopes that a national airdrop would make AUR a strong cryptocurrency long term. In the end, the airdrop sucked all of the money out of the AUR market. This represented a redistribution of wealth from people in the crypto space who cared about Auroracoin to about 45,000 citizens in Iceland who didn’t.
With the airdrop completed and no more purpose left for Auroracoin, the developers pulled one final trick in April 2015 and burned 5.3 million unclaimed AUR. This led to a speculative rally that increased the Auroracoin market cap back to $450,000.
Shockingly, in March 2018, AUR’s market cap increased to $20 million on strong buying pressure. This showed the tremendous disconnect between the crypto rally and reality. AUR had already been proven to be a failure more than three years earlier.
Currently, Auroracoin has a market cap of $1.6 million despite the fact that AUR has practically no community and no purpose. The trading volume is less than 0.2 Bitcoins (BTC) per day, and confined to the small exchanges Cryptopia and YoBit. This shows how shitcoins with no real trading activity or value can have a market cap in excess of $1 million, proving how meaningless market cap can be at measuring a cryptocurrency’s investment worthiness.