It is difficult to entertain the idea of combining gold with blockchain without a thorough understanding of each. Government needs to assume responsibility for protecting and insuring our money considering how critical it is to the health of the country. A gold-backed blockchain system will give great faith in the health and security of our economic engine.
- What is Blockchain?
Blockchain is a distributed public ledger containing a transaction history. This ledger is stored on multiple systems across a network in which anyone can participate. In order to participate you need a public address and a private key. A public address is a wallet that anybody can see inside of to verify transactions. The corresponding secret key is needed to control what’s inside. A transaction request is sent by one address to another with a variable amount of ‘something’ attached. When a transaction is made, individual systems, called nodes, race to verify the legitimacy of the transaction by checking and confirming the address balances against the historical ledger. The nodes compete to finish the calculations for a variable reward, or miners fee. Much of the network will also have to confirm the transfer before being permanently recorded on the ledger as a valid transaction. The transaction can not be reversed once completed. The whole process could be described as a consensus. The unit of exchange can represent anything, IE: bitcoin, equities or gold. The unit transacted can be reduced into many fractions too.
- Why Blockchain?
Blockchain is transparent because it’s a public ledger, anyone can view it. Frauds, welshers, and deadbeats will not be able to hide money. Transactions are efficient and cheap. Blockchain is peer-to-peer, so there are no 3rd parties adding fees or causing delay. The only cost is a negligible fee paid to miners for verifying the requests. The miners are extremely competitive and plentiful, anyone can mine, so we never pay much over actual cost. Blockchain is flexible and scaleable too. Almost anything you can imagine might be built in. A common escrow service could be made simple with multi-signature authorization.
- Reflect on History and Predict the Future
- – Coins were adopted soon after humanity learned how to cast and strike metal.
- – Paper money was produced soon after the invention of printing presses.
- – We create, store and transact money digitally since the world wide web was established.
Money evolves. Every new advancement had initial problems that were constantly improved upon. Coins became more refined, consistent and detailed. Paper money became more durable and tougher to forge. Our current digital economy has weakness too: it is not universal, non-transparent, hackable, unnecessarily complicated and has relatively long hold times for verification. Blockchain has none of these weaknesses! It is fast, simple, transparent, secure and universal in comparison. It is prudent for banks and exchanges to adopt the blockchain technology, and they already are. Banks are patenting blockchain and mints are setting them up on world exchanges (see RMG, Royal Mint Gold).
- Why not Bitcoin?
Bitcoin is not blockchain. There are problems with bitcoin as currency. The greatest strengths are also its weaknesses. It’s totally decentralized and no single entity has any incentive to police it. While the blockchain is safe from hacking, your personal computer might not be. If anyone ever had access to your private keys they could steal all of your bitcoins! Any mistake on your part, and you could lose everything. Nobody is going to help you in any case because bitcoin is designed to be completely anonymous – it would be impossible to find a thief. Imagine losing your life savings because of a keylogger or any other type of digital scam. We love insurance; to be protected by a group. There is no way to prove someone even stole your bitcoin. It can not be viably insured.
- A Gold-backed Blockchain Currency
Gold is the best medium to transact over the blockchain. Gold has been the predominate money throughout all history and across all nations. It has never failed, but abandoned due to greed or impending bankruptcy. Gold is finite and furthermore rare, but not too rare. It is divisible, indestructible, inert, recognizable, and without chance of forgery. Nothing else shares these important qualities in which make it a perfect money. We need a permanent and honest system. Not something that can be manipulated to suit the needs of the few. Not one where a single entity can profit from the unrestricted printing of paper dollars. Would you rather live with a constant rise of prices with the exponential printing of paper money, or would you rather know that your money is predictable and tamper-proof?
- Why? How?
I believe the transition is inevitable. Blockchain is too secure and too convenient not to adopt. Logical demand will force it into every possible application. People will become aware and discuss the benefits, eventually using it in some capacity no matter what. To put it bluntly: there is no way to stop it. I believe governments and banks realize it and do not mind, as it can suit their agenda just fine with the right application. Efficiency, and in turn, velocity of money is critical to economic health. First adopters could have a great advantage on skeptics. Government may track every transaction and guarantee they are receiving all tax revenue and fines with a digital gold currency. They can also easily investigate crime, putting an end all fraud and other issues.
It should be no secret that government wants to be in a position of ultimate power. Power is mostly perceived. Power can stem from both respect, or fear. While ‘We The People’ could transact gold digitally, we might not have the opportunity to see a real gold bar. The bulk would be stored in vaults while the blockchain simply represents that gold. The psychological effect of such circumstance could be powerful. Some will long to feel a gold bar while knowing the opportunity is rather impossible. A feeling of not being worthy or responsible enough to own real gold will convey a perception of power for the custodians of the physical gold.
The fear of a potential removal of the gold backing, effectively destroying our economy and sending us into poverty is another perception of power – not that it would be logical, but just as a possibility. Money is the lifeblood of our economy. We spend our lives wishing, worrying, working, saving and spending it. People are willing to cheat, lie, steal, fight kill and die for it. Many believe money is power. They are wrong, but remember, power is perceived.
- It Isn’t so Bad
A gold blockchain will help the honest citizen more than anyone. Banks and government are already in control of our currency. We are not giving up any more rights or freedoms if they manage a gold-backed blockchain currency over a private network. Government or banks could act as the exchange by issuing our addresses while protecting and controlling our private keys. We could spend with a debit card having our blockchain addresses attached. The simple digital trail could be followed back and reimbursed in the case of theft, unlike bitcoin. Auxiliary monitoring softwares could watch for out-of-the ordinary transactions and alert us to possible fraud, even requiring us to confirm large transactions with additional authentication. If all this were implemented in a centralized and streamlined way our economy would be exponentially faster, efficient and safer than it is today.