Created page with " =Discussion= Raúl Carrillo: "On the Pine Ridge Indian Reservation on the South Dakota-Nebraska border, a small team of developers has been attempting to achieve not only ..."
"On the Pine Ridge Indian Reservation on the South Dakota-Nebraska border, a small team of developers has been attempting to achieve not only economic growth, but economic self-determination—via the Internet. It’s a plan created out of a desperate situation. According to Oglala Sioux Lakota Housing Director Jim Berg, about 40,000 members of the tribe live on the reservation; 80 percent are unemployed and 49 percent live below the poverty line. Furthermore, the tribe has felt the wrath of austerity, facing million-dollar budget cuts from the U.S. federal government, which will worsen housing, education, and health services. It seems that if anyone could benefit from financial innovation in the painful absence of the U.S. dollar, it would be the people of Pine Ridge.
Fortunately, the Fort Laramie Treaty of 1868 with the U.S. federal government says nothing about the tribe relinquishing its right to maintain a currency. The Oglala Sioux can thus attempt to go beyond a complementary currency—like the ones in Brixton and Mombasa—and create a limited sovereign currency, to eventually substitute for the dollar.
It’s easier said than done.
When Payu Harris, himself of Cheyenne-Lakota heritage, started Mazacoin a year ago, it was marketed as a cure-all. At the peak of popularity, Harris told Forbes magazine that the cryptocurrency could become the “new buffalo,” the foundation of a new economy. Within weeks, Mazacoin was all over the financial press. Although perhaps well-intentioned, the media attention backfired. Investors on online coin exchanges flocked at first, and then left when it became apparent that the currency didn't have quite the backing from the tribal government that some thought it did. As a result, some cryptocurrency investors considered—and still consider—Mazacoin to be a scam. From the perspective of the team that’s building the currency, however, things have cooled down, and they are preparing for a slower, less precarious hike.
Harris has indicated that he is working closely and productively with tribal officials.
Some of the volatility is to be expected. Operationally, Mazacoin works very differently from the Brixton Pound or the Bangla-Pesa. It is neither backed by the U.S. dollar nor pegged to it. There is no central issuer. Instead, Mazacoin is based on the software behind Bitcoin. Even though it is ostensibly used for different purposes, the currencies bear many technical similarities. As the website states, “at its core, Mazacoin is a software program that anyone can run on their PC or Android device, and some rules for computers to communicate.”
People send Mazacoins to each other’s (often encrypted) electronic “wallets.” To do so, all you need to know is the recipient’s address, unlimited numbers of which are generated freely with the click of a button. The addresses aren’t available unless they are shared by the recipient, and users are encouraged to use a new address each time they want to receive Mazacoins. This process purportedly maintains privacy and security without the need for a bank, a feature that is important to the Mazacoin team, just like it is paramount to other cryptocurrency organizations.
As opposed to the more centralized monetary policy of the Bangla-Pesa, which essentially bases supply on real labor, Mazacoin uses the “mining” protocol of Bitcoin. Some users equip their computers to solve codes that are necessary for the upkeep of Mazacoin’s digital ledger and payment system. When the computers solve the codes, the users—or “miners”—are rewarded with Mazacoins for their service. They can then spend Mazacoins into the economy.
Unlike Bitcoin, however, Payu and his team have “premined” 20 million coins to be held in a trust by the future Mazacoin Development Foundation, on behalf of the Oglala Sioux tribe. The trust is essentially a digital sovereign wealth fund, the value of which will be determined by the future performance of Mazacoin on the reservation, with neighboring retailers, and in investment on the cryptocurrency markets. Additionally, the coins in the trust can be used for price stabilization and distribution. The legal details of the trust are a bit murky; it is unclear how the coins would be allocated and how much of a share the Mazacoin development team might get.
Although Mazacoin isn’t worth much now, the founder’s hopes spring eternal. Perhaps most importantly, if Mazacoin ever does take off, the funds in the trust might be exempt from U.S. taxation. If retailers that now accept Bitcoin, like Overstock.com and Dell, ever accept Mazacoin, buyers could pay a lower tax rate to the Oglala Sioux than they would to the U.S. government. Although U.S. regulators would likely wade in with respect to nontribal transactions, there is potentially enormous upside.
This is all quite complicated. On a fundamental level, a digital cryptocurrency isn’t as easy to comprehend as a paper voucher. For better or worse, many people on the reservation, including tribal officials, are understandably hesitant to embrace the idea. A Mashable documentary from last fall depicts some of the tension between Harris and residents on the reservation. Although the permission to create the currency doesn't seem to be an issue, trust is, and in addition to the confidence of the public, Harris and his team need legal recognition from the tribal government if Mazacoin is indeed to take on aspects of a sovereign currency. Recently, however, Harris has indicated that he is working closely and productively with tribal officials.
Regardless of whether Mazacoin succeeds in its ostensible goal to become the crux of a new economy for Pine Ridge, or merely becomes a source of speculation and individual profit-seeking, it’s difficult not to see economic self-determination as a worthy goal. The reservation is in a perpetual depression. That it should have the ability to create financial wealth for its own people, especially when the United States isn’t exactly flooding the badlands with greenbacks, seems a tenet of fundamental justice."