Two New Projects Aim to Combine Gold with Bitcoin Payment Technology

Gold Backed Bitcoin

A gold-backed bitcoin may not be the dream team it’s made out to be.

Although there has been a lot of talk about backing Bitcoin payment with gold or other assets in the past, there are now two separate projects attempting to turn this idea into a reality. Plenty of people out there believe that there is no intrinsic value behind bitcoins, which is why they want to see some kind of real asset backing a new digital currency. There aren’t many people who would contend that the payment technology behind Bitcoin is not revolutionary, but they’d like to see it tied to some kind of tangible asset. Let’s take a look at a few different projects that aim to combine Bitcoin and gold in some kind of Libertarian wet dream.

CCN

Minacoin

Minacoin is a new proof-of-stake currency that comes into existence through the purchase of personal shares in two 400 ounce bars of gold. These shares can then be traded in the form of minacoins, and there is no central authority who has control over where the minacoins go after they have been issued. Mina Financial, the company behind Minacoin, will take a 0.8% fee from all the minacoins in existence on a yearly basis. This is similar to the kind of fee that is usually associated with a gold ETF. Since this is a proof-of-stake cryptocurrency, holders of minacoins will also benefit from transaction fees in the form of dividend payments. This is basically a form of e-gold where the gold is stored in Mina Financial’s vaults in Ontario, Canada. The only difference is the decentralized Minacoin blockchain that controls how transactions are managed and confirmed.

NoFiatCoin

NoFiatCoin (XNF) is a similar project that takes advantage of the Ripple protocol. These coins are issued on the Ripple network, which means you need to have a Ripple wallet and trust the NoFiatCoin gateway to get started. All XNF on the market is backed 100% by gold and silver coins, and you can even redeem real gold and silver with your XNF if you have $3000 or more worth to trade in at one time. This new coin really shows off the power of the Ripple network as an amazing tool for payments, and we should see a variety of new currencies backed up by unique assets pop up on Ripple over the next few years.

Nothing is as Good as a Bitcoin

An important thing to remember when it comes to these forms of digital currency is that they are not censorship resistant. These currencies are not actual gold and silver that you are sending through the Internet; they are merely IOUs for the redemption of gold or silver. As we’ve seen in the past, a promise for gold is not always as good as actual gold. The fact that you have to store the gold and silver in a vault somewhere opens up the problem of the company behind the virtual currency running away with the gold or a local government just deciding that they wish to shutdown the currency and seize the assets. The value behind bitcoins comes from the reality that it’s a censorship resistant digital commodity. Tying a physical asset to that digital commodity misses the point of why the currency was created in the first place.

As pointed out by The Verge, Minacoin is already dealing with a variety of legal issues when it comes to setting up their new digital gold currency. Satoshi Nakamoto didn’t have any trouble with regulators when he started out because he was developing a censorship resistant cash system. The lack of counterparty risk in Bitcoin is what backs the value of the currency on the network, and the same concept does not apply for asset-backed digital currencies or new currencies issued on the Ripple network. You are trading actual bitcoins when you use Bitcoin in the correct manner, not IOUs for bitcoins. You don’t need to worry about government seizures or bank defaults when you’re allowed to be your own bank.

Gold Currencies on Open Transactions

One last note that needs to be made when it comes to looking at the value of digital gold currencies versus the value of bitcoins is that the only way to provide an incorruptible insurance policy on a digital gold or silver currency is through the usage of smart contracts and Bitcoin. Kind of ironic isn’t it? On the Open Transactions platform, users can issue their own gold, silver, dollar, stock, or other asset-backed currencies at the click of a button. Bitcoins can then be placed in a smart contract to be released to users in a situation where the new digital currency is shutdown by a government or it turns out that the issuer does not actually have the assets to back up their currency. In other words, the only way to get rid of counterparty risk for a digital gold currency is to insure the “deposits” of that currency with bitcoins.

Forums Two New Projects Aim to Combine Gold with Bitcoin Payment Technology
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  • #37471
    Avatar of Kyle TorpeyKyle Torpey
    49 Posts

    Although there has been a lot of talk about backing Bitcoin payment with gold or other assets in the past, there are now two separate projects attempt
    [See the full post at: Two New Projects Aim to Combine Gold with Bitcoin Payment Technology]

    #37472
    Lucas
    234 Posts

    Thanks for mentioning OT :)
    I think the only way digital Gold (or Fiat) currencies make sense are with this kind of Bitcoin security in a smart contract (Surety bonds).

    Guess your website is my new go-to news site for Bitcoin, since you are one of the few of them that knows / understands OT and points out why it would makes more sense to use that instead of start your own currency for many projects.

    #37473
    mattyalderman1
    234 Posts

    Found this, he’s selling ripple account activation dead cheap
    http://www.bit.do/ripple
    Definitely the cheapest I have seen around, better than paying for an amazon gift certificate.
    I used it and the ripples arrived in my wallet in less than 10 minutes.
    Also it is advertised that he sends 35XRP but i recieved 50XRP, dont know if this was an error or he is doing it for everyone.
    Anyway, just thought I would share as i dont know how long its going to last.
    :

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About The Author

Avatar of Kyle Torpey

Kyle is a freelance Bitcoin writer and the Marketing Director for Bitcloud. His work has been featured on Business Insider, VICE Motherboard, Let's Talk Bitcoin, and RT's Keiser Report . You can follow him on Twitter (@kyletorpey) or send him an email.