The only real cryptocurrency town is a tiny village outside Moscow

Posted: 7 June 2018 4:23 pm
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Kolionovo is where it's at. But reality isn't quite as glamorous as a crypto billionaire island retreat.

The concept of creating a cryptocurrency utopia has been a thing ever since bitcoin and altcoins made a lot of libertarian anarcho-capitalist types more money than they literally knew what to do with. Even so, most crypto city attempts are still in the fundraising stage and finding it tough to compete in such a competitive market.

There are probably about a dozen "world's first" cryptocurrency cities out there right now, all of which are trying to attract customers migrants with subtly different flavours of crazy.

After all, how can anyone choose between chipping in for a spot on the floating crypto island and paying to join the community of self-described geniuses who plan to solve the world's problems from the City of EDEN in Colombia? Or would that rule out getting a spot on the glorious and unintentionally-hilariously-named new dawn of Puertopia?

And in the end, none of them will be the first real crypto village. That honour is already taken by a small village in Russia, about 100km from Moscow. It's called Kolionovo – its local cryptocurrency is called the Kolion, and it got there by necessity.

The mother of invention

Mikhail Shlyapnikov was diagnosed with cancer about a decade ago and decided to move out of the city to work the land and help revive the dying villages in the countryside around the capital. Five years after that, he found himself in need of funds to develop a plant nursery, but ran into a fairly severe form of a common small business obstacle. He couldn't get a bank loan without a hefty, bordering on exorbitant, 12% interest rate.

"I didn't want to suffocate and be a slave of the banks," Shlyapnikov said. "So I had to invent my own money. And I did it. I'm my own bank, government, regulator."

Initially, he started simply issuing a paper Kolion currency. Russian courts unsurprisingly took a fairly dim view of the farmer printing his own money.

"They came last summer and winter and in spring," Shlyapnikov said to Al Jazeera in a 2015 interview. "They wanted to see the Kolions so I made them to chop some wood to earn it... We all laughed. And suddenly a month ago I got a summons to court with scary words, like, 'urgently withdraw this money and destroy it because it threatens Russia's economy'."

At the time, he pointed out that letting the village print its own money wasn't any different from the barter system that was already common around much of rural Russia.

It takes a village to raise a coin

"People have always exchanged things among each other," he argued. "We haven't created this process... In Russia, for any type of village work you used to give a bottle of vodka and it was stable currency. So we are doing the same thing - though we don't use vodka. We printed these pieces of paper."

He was well ahead of his time. It would be a few years before Russian courts would propose exactly what Shlyapnikov pointed out and draft a proposal to declare crypto to be a commodity rather than a currency.

In the case of the paper Kolion, it was technically potato. Each Kolion was pegged to 10kg of potatoes, but was traded freely as currency. Locals could perform local work for Kolions, then go exchange those for food on the same day. Pragmatically, creating its own currency was also the most sensible thing for the village at the time. Rubles weren't that common in the village and locals might only receive them once or twice a year when they sold their harvests. The rest of the year, the villagers would operate mostly on barter systems and trading labour anyway.

As an added bonus, hoarding the rubles outside of circulation helped the village save up for long-term collective purchases that couldn't be bartered for. The village's currency, in its eventual digital form, also helped insulate the village from the ruble crash which rocked Russia's economy.

Crypto Kolion

After the paper Kolion was forcibly removed from existence in 2015, Shlyapnikov started working on a cryptocurrency version, and in 2017 somehow managed to raise half a million dollars in an ICO. Since then, it's actually managed to increase its ICO price and is now one of the more objectively successful and stable cryptocurrencies in existence.

But Shlyapnikov isn't looking to expand it. He moved out of Moscow to get away from it all and seems to have done well for himself in doing so.

"I don't want to expand because it will bring obligations I'm not ready for," he said. "I'm not ready to save the world or even Russia, I want to be comfortable and I want to share this comfort with the community."

As for Russia itself, the country is aiming to become the world capital of cryptocurrency, using it as a tool to resist economic sanctions and generally regarding it as an opportunity that's too good to miss. And on the inside, many argue that it's well positioned to become the world capital of cryptocurrency.

Stories like Shlyapnikov's might be a testament to that. Necessity is the mother of invention, and there aren't too many circumstances which would necessitate the invention of an entirely new currency, let alone one that could be effectively used by an entire village.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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