When we watch the news we always hear about the “new gold” that is making an appearance in the economic arena that can radically change the world we live in. But why are we searching for a “new” gold when we already have one? Instead of looking elsewhere, why don’t we just implement what we have in a better, more convenient way? One new solution that has come to light resulted in the creation of a precious-metal based cryptocurrency which has experienced a pique of interest as of late. Why do we need this “digital gold” and how does actual gold come into play. Let’s find out together!
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Why can’t we get away from gold?
Olivier Garret is the Founding Partner and CEO of Mauldin Economics, a leading publisher of financial research geared towards individual investors and institutions.
A long time ago, silver and gold coins were considered the best way to issue money as they were valuable as a rare metal by themselves. Later on, we moved to the gold-backed paper money and now we have fiat money with gold being used as a sort of “Plan B” reserve. Now, when we look at cryptocurrencies some of us see them as a revolution among financial institutions, but it is, in fact, an evolution of plain fiat money that inherits some of their weaknesses.
“It’s clear that cryptocurrencies partially fit the definition of fiat money. They may not be legal tender yet, but they’re also not backed by any sort of physical commodity. And while total supply is artificially constrained, that constraint is just… well, artificial…You can’t compare that to the physical constraint on gold’s supply.”
One of those weaknesses is considered to be their “artificial” nature that they share with paper money. However, paper money is backed by governments and cryptocurrencies lack widespread support, which may result in high volatility and inaccessibility, thus creating major disadvantages from using them.
“Security is a major drawback facing the cryptocurrency community. It seems that every other month, there is some news of a major hack involving a Bitcoin exchange.”
It’s true that in order for a currency to be useful it should be secure and although there are various exceptions fiat money, as an analog counterpart to digital currencies, is definitely not inferior. Actually, it seems as though the current situation favored conventional currency more after the numerous breaches and hacker assaults on various cryptocurrencies. You simply can’t hack gold and paper.
“Most stocks that had risen in the first wave of the Internet craze were wiped out after the burst of the dot-com bubble in 2000…The same will probably happen with cryptocurrencies… Only a few will become the standard, and nobody knows which ones at this point…
What little data we have on cryptocurrencies does not show the same. Consider this year alone: while the U.S. stock market continues to run record highs, the same goes for Bitcoin.”
One of the main drawbacks of digital currencies is that we still know precious little about them. The crypto industry is still underdeveloped and we have yet to receive any “certain” results out of it.
The dawn of digital currencies and its impact today
Cynthia Dion-Schwarz is a senior scientist at the RAND Corporation, focusing predominantly on cyber security technology and policy. Prior to joining RAND, Dion-Schwarz served as a senior executive at the National Science Foundation and the Department of Defense.
Angela O’Mahony is a senior political scientist at the RAND Corporation and a professor at the Pardee RAND Graduate School. Her research has focused on how international political, economic, and military ties affect policymaking.
Although it’s common to see Bitcoin as the forefather of digital currencies, that’s not exactly correct. Long before Bitcoin there was another form, called virtual currencies (VC), present and their existence may have served as the foundation for modern cryptocurrencies.
“VCs have been in use well before the invention of Bitcoin, though they were not decentralized. Digital gold currency and similar systems comprised the first wave of VCs that were created and used. Began in 1996, e-gold was a precursor to the type of system proposed by Chaum.”
Being the first to realize such ideas, the predecessors of modern crypto projects faced numerous problem starting with plain operational issues and ending with core conceptual principles by which this currency should be made. The most obvious and practical way of creating a virtual currency was by getting to the root of the conventional currencies and connecting this virtual entity to real and valuable goods, like precious metal.
“A first option is to adopt a commodity-based currency in which the currency in circulation is the commodity itself (e.g., gold coins). This is ISIL’s stated strategy. The key benefit of this option is that the credibility of the currency is backed up by the intrinsic value of and international market for the commodity. There is no need to trust the monetary authority that gold or silver will retain its value. A key limitation of this option is that it is difficult for most insurgent groups to amass sufficient supplies of gold and silver to implement this type of currency.”
Although the development of digital currencies resulted in the creation of various approaches to this issue, such as Proof of Work and so on, it’s undoubtedly true that the gold-based approach remains viable to this very day.
The dollar dilemma
Ron Paul is a former longtime congressman from Texas, known for his mix of conservative and libertarian views.
While it’s true that there are some crypto-enthusiasts who are driven by the idea of cryptocurrencies, most people expect it to be a useful financial tool that could handle some of the issues that come along fiat money. But are cryptocurrencies that much different when it comes to solving these issues?
“It’s conceivable that cryptocurrencies, using blockchain technology, and a gold standard could exist together, rather than posing an either-or choice. Different currencies may be used for certain transactions for efficiency reasons. The desire for storage and speed can make a difference in choosing a currency. It appears that decentralized ledger technology will also be useful outside the sphere of digital currencies. A combination of gold and crypto will prove to be a lot more achievable than getting people to adapt to a totally new concept of money.”
If we form our demands correctly then we can expect the market to produce several types of “money” products, each having their own specific set of attributes.
“Privacy will always be a concern to those who seek to avoid constant surveillance by the state, even when it’s for many reasons other than taxes. Retail trade, under primitive conditions associated with a currency crisis, will lend itself to using tangible precious metals in preference to a digital cryptocurrency requiring active networks. Large transactions, at greater distances, may best be served by a proven and trusted cryptocurrency, however.”
While it’s a fact that in the future we would probably turn our money into a fully digital currency, the use of a gold-based currency (digital or otherwise) could continue for a long time.
It’s your environment that makes you better
Business Insider is a business site, launched in 2007, with deep financial, media, tech, and other industry verticals. The site is now one of the largest business news site on the web.
While it may sound that we are talking about the pure theoretics of digital currencies, it’s quite the opposite. In reality, there are several gold-based digital currencies and some of them have already emerged onto the blockchain space. While many factors contribute to their success, both credibility and networking could be considered to be the major ones for any project of this sort. This applies to the yield-bearing digital currency project Kinesis as well.
“Our due diligence and governance structure ensures we uncover the most credible token offerings for our investors. This has become increasingly important as there is a huge amount of interest, excitement and opportunity in the ITO space, and investors should have the confidence to take part without worrying about credibility.”
As a form of a stablecoin, gold-related digital currencies hold their stability and trustworthiness as their main point of pride, so partnerships of this kind would most likely lead to the establishment of a healthy economic environment. In this regard, the consulting service of MLG Blockchain may lead to the creation of a trustful stablecoin.
“Thomas Coughlin, CEO of Kinesis Money, comments, “Investment in ITOs has doubled in the last year alone. Investors are on the lookout for the credibility and quality assurance that Kinesis has to offer and our $50 million in KVT sales and agreement with RenGen Labs bears testament to this.”
Understanding your own worth
The Hacked team consists of economists, entrepreneurs, cryptocurrency enthusiasts, and technologists working to improve financial understanding and the upcoming macroeconomic changes.
It’s true that partner support matters a lot, but the quality of the project itself is a primal defining factor. First of all, there should be a main idea behind the project that is worth following. Its true that there are many others trying to implement precious metal-based digital currencies out there, but this proves only that the idea is sound even if it’s not that unique.
“Kinesis aims to provide an alternative to both fiat currency markets and thee cryptocurrency market by creating an efficient, secure and fair monetary system. Although it will have many components such as Kinesis Currency Exchange, Kinesis Financial Network and Kinesis Commercial Centre, four cryptocurrencies which shall be launched on the platform will be pegged to gold and silver and this will bring considerable price stability.”
Of course, it’s nice to dream big. But a rational assessment of your own capability is what distinguishes amateurs from the pros. In this regard, the Kinetic team is being smart by having just one token to support and develop it further with others coming later on.
“Aiming to create a complete monetary ecosystem, the first cryptocurrency the team introduces is Kinetic Velocity Token. The buy-back program and the distribution of transaction fees create huge incentives to hold KVT tokens even in the presence of great price volatility.”
It’s also important to know the basis of that industry that you’re dealing with. It’s not only about connections but the accumulated experience and intuition that allows you to feel the slightest fluctuations of the market. You think that size matters in this case, but it’s a competitive environment so it’s that little bit of insight that separates the winners from losers.
“The Allocated Bullion Exchange: ABX is a gold exchange which allows investors to buy and sell precious metals since 2013. Many Kinesis team members have worked or have been working for ABX.”
It’s true that we are now in a time when blockchain industries are maturing while leaving many others in the dust. From this point of view, even if the crypto market is flooded with a supply of services of some sort (even when talking about gold-based digital currencies), it doesn’t mean that this will last forever. And while some may be forced out of the market, the remaining projects will be the ones who get the lion’s share.