Even before the emergence of the growing plethora of cryptocurrencies, several attempts had been made in the past to create digital currencies based on gold, but none of them gained widespread support. Will blockchain and Bitcoin succeed where other attempts failed?
One of the common criticisms and challenges of bitcoin and other cryptocurrencies is their price volatility which renders their consideration as a store of value nearly impossible. Some believe that gold backed cryptocurrencies may hold the key to solve these key challenges.
There are already several cryptocurrencies, otherwise known as altcoins, backed by gold that have been launched. Several of the leading online bullion exchanges have implemented or are also implementing blockchain to create more efficient mechanisms for managing transactions. Each month it seems like there are more and more players joining the fray.
My friends at The Hutch Report have provided me with an analysis of this nascent gold backed cryptocurrency niche along with a review of some the various players in the space. There are already some obvious differences across platforms which will most likely serve to weed out the serious players from those looking to make a quick buck.
This analysis provides an objective review of the strengths, weaknesses, opportunities, and threats as well as a look at 23 gold-backed crypto and digital currencies. A review of some of the exchanges is also thrown in for good measure.
Those Interested in more detail you can download the full report on Gold Backed Cryptocurrency. If you are looking for either a "To the moon, Alice" kind of report, or "This bubble will crash" kind of report, you are likely to be disappointed. Rather, this report analyses the increasing number of cryptocurrencies being backed by gold bullion. Included are research and analysis on 23 different companies and 4 gold exchanges using the blockchain. Here is their conclusion.
The recent economic and financial crisis of 2007-2008, not to mention the savings and loan crisis years before, woke people up to the fact that their banking and savings accounts may not be as secure as they once thought. In addition, people have begun to realize that the purchasing power of their fiat currency savings have been eroding over time as working families are fmding it harder and harder to get through the month.
Massive central bank intervention into our free markets has not only caused more worry about potential runaway inflation, which would cause fiat currencies to be devalued and further losses of purchasing power, but their actions have caused an ever increasing wealth gap between the rich and the poor. It is clear that fiat money has serious economic and ethical drawbacks. This has prompted a search for a better alternative.
The marriage of cryptocurrencies and gold enables alternative choices to holding more than fiat currency. Although we can't imagine fiat currencies to be replaced overnight, the promises of gold backed cryptos do look compelling moving into the future and they are certainly important to follow.
In spite of the strengths of a gold backed cryptocurrency there are still many unknowns. In their short history we already have some that have come and gone. Our research into many of the up and coming gold backed cryptocurrencies has shown that the information available is not completely clear or transparent and sometimes sketchy at best. Previous examples of blatant fraud is also a reason to be defensive but not dismissive of the newcomers. We also have a variety from different parts of the globe. There is not enough of a track record with which to have the confidence to make a significant investment although it is worthwhile to look at them from a short term trading aspect in order to see how well they function and if they are able to deliver on their promises.
The principle strengths of the gold exchanges based on the blockchain is that they are being developed by reputable organizations. We don't lose site of the fact that these blockchains being used are centralized which means they don't incorporate many of the advantages of the decentralized model for which cryptocurrencies such as Bitcoin have become known. They are not yet fully operational therefore it is difficult to judge their efficiencies.
Although these new gold backed cryptocurrency and blockchain gold exchanges provide a compelling alternative to the purchase of gold we would not be jumping in just yet, however the future looks very exciting and by understanding the current developments in the sector through this report you are provided with a greater advantage as they mature.
The ventures with the strongest management teams look to be the most compelling. For this reason the exchanges; Bankchain Precious Metals, Goldmoney, The Royal Mint and Tradewind, look solid. Among the gold backed cryptocurrencies, we will be following the launch of BullionCoin.
If you want to hold gold, hold gold. But if you are still itching to get into cryptocurrencies despite (or because of) the massive crypto-rally, then gold backed crypto may be the way to go.