Do you think a cryptocurrency backed in actual Gold has a future? As a novice it seems to me that such a cryptocurrency offers the advantages of blockchain technology backed by actual gold reserves.
Trying to wrap my mind around a gold-backed cryptocurrency and pros/cons vs. the current relationship between physical gold and USD. Seems that after the 70's when Nixon [was essentially forced to] take us 100% off the partial-gold standard, the USD has been "floating" with no real grounding, and with the USD as world reserve currency, all other fiat currencies float relative to the USD. And since USD like any other floating fiat currency has the potential to be infinitely hyperinflated to worthless value, the ability to do "micro-transactions" -- or any transactions in the worst case scenario of collapse -- of gold based on USD seems unpredictable.
I guess there's nothing preventing digital gold transactions (e.g. online and mobile payments with gold backed in vaults) to be measured in troy ounces e.g. 0.001 troy oz. But what's the fun in that? Or, more accurately, what's stopping fraudulent transactions and people lying e.g. "Surrrreeee.... this digital transaction measured in ounces or US Dollars is TOTES backed up by physical gold in our vault in the Rockies.
"
Thing is, most cryptocurrencies (and I'm a newbie) are designed to have a finite mathematical limit, which grounds them somewhat. But
most modern cryptocurrencies (including BitCoin and most altcoins) are virtual so prone to bubbles and Ponzi schemes. But when we have a finite amount of gold in circulation and a finite amount of gold-backed cryptocurrency to transact business, it seems like a stable pairing for the long run. In other words, the quantity of physical gold and the quantity of gold-cryptocurrency are both finite so volatility should be low or close to non-existent and risk of hyperinflation or monetary crisis non-existent. With the added benefit of blockchain (cryptographically verifiable transactions, distributed ledger, decentralized currency if it's open-source and not controlled by a nation-state).
Lemme know if this was cadre scum sophistry. It made sense in my head as stream of consciousness.
Edited to Add: I can see to ways to possibly transact with gold as money:
- Physical: Exchanging tangible gold minted coins/bullion for goods and services. Has pros/cons... weight, divisibility, security risks. Measure everything in troy ounces. Status quo for thousands of years. Doesn't require electricity or Internet.
- Digital:
- I believe there may be conceptual mobile apps and systems already around that allow for gold-backed payments (similar to PayPal). Con: Maybe more risk for fraud without cryptographical ledger; in other words, faith is more concentrated in the payment processor's infrastructure and business.
- New way: Gold-backed cryptocurrency to transact with gold digitally. Has the benefit of mathematical verifiability and public accountability.
