I must admit, I had trouble getting my head around this initially.
I'm still there but it's fun to play with the idea.
What I can't understand is why would I purchase CBX and then purchase some silver on top. It feels like paying twice.
Wouldn't this work better if there is an option to back someone else's CBX.
Example: I will back 1,000 CBX that belong to Raizor for 1 year with 1 oz Silver. If he choose to sell his CBX before the year ends then the Silver will start to back another persons 1,000 CBX. If Raizor holds his coins for the full year he may claim the Silver.
That would be an incentive to hold them. Raizor could return the favor and back a 1,000 from me for similar value.
It would require trust or it needs to have legal backing with a contract.
Hey BTCat,
Your idea of pairing your CBX with someone else's physical precious metal holdings is something that I hadn't thought of. I think that would provide another excellent entry point for both CBX and precious metal holders. Great idea!
In my mind, it's a case of what gives currency value. The Gold Standard for instance, where currency is backed by physical gold. The value of the currency is dependent on gold reserves to which it is tied. If you were to sell off 50% of the gold, the currency would devalue as the amount of gold that backs it has been reduced. Using precious metals to provide backing for the value of Crypto Bullion would in effect provide a 'Gold Standard' for Crypto Bullion. It would remain up to you to decide whether or not you'd like to back your CBX with physical precious metal. If you chose to do, the amount of precious metal backing CBX's value would increase (by whatever amount to used to back your CBX). This results in the backed value of Crypto Bullion rising, which benefits everyone who holds CBX. That is the reason you would choose to back your coins, to increase their value against the precious metals backing Crypto Bullion. As new investors come into CBX and also back their holdings with physical precious metals, the precious metal market cap for Crypto Bullion increases accordingly. This acts as an incentive for everyone who holds CBX to physically back their CBX with physical precious metals. It even encourages people who have already backed their CBX to increase that backing, as they (and by-proxy every other CBX holder) benefits. The wonderful thing is, they still hold their CBX and their physical precious metal and simply by having both, they increase the value of their CBX holdings. If the physical backing is verifiable and encoded securely in the blockchain (eg. this unit of 1 CBX in the blockchain is pegged to 0.1 oz of physical gold stored securely at XXX, deposited by XXX on XXX date, all cryptographically signed with the holders/depositors identity). We can cryptographically encode this proof-of-holding into the blockchain, which makes CBX a digital representation of physical precious metal holdings.
It's a lot to get your head around, I admit, but once we revise and refine this it should be very easy for everyone to realise the true potential. This is a truly perfect fit for Crypto Bullion. In time, this should allow Crypto Bullion to be pegged in value against gold or silver in addition to Bitcoin or traditional fiat currencies. In my mind, the value of CBX against its physical precious metal counterpart carries much more weight that its value against fiat currency, where fractional reserve banking and the removal of the gold standard make it increasingly hard to ascertain the true worth of the majority of fiat currencies. This plays very well with the reasons many of got involved in Cryptocurrency and Crypto Bullion in particular. Crypto Bullion ceases to be a purely 'virtual' currency if this is implemented.
The sticking point remains with verifying the physical holdings. Once that problem is solved, the sky is the limit
As it stands, with BitcoinFX's verified holdings, CBX has a physically backed value of.... $15.54 (current USD value of 1 Troy Oz of Silver). As more investors back their CBX holdings with precious metals, purchase CBX with precious metals or pair their CBX with someone holding precious metals, the 'CBX precious metals market cap value' increases and increases, attracting more CBX investors and more physical backers. Physically backed Crypto Bullion is our killer app, in my humble opinion. People today talk about the value of CBX in USD or BTC primarily, I can see a future where Gold, Silver, Platinum etc are included too. This is the most exciting idea I've come across in Crypto so far. I'll think on it for a couple of days to be sure it isn't just caffeine and lack of sleep, but I'm pretty convinced that this is a real game changer, both for CBX and Crypto in general. When you consider the mindset of the average intelligent crypto investor, who looks for a store of value, safe from capitol controls during times of economic uncertainty. It's easy to see why so many cryptocurrency advocates also hold precious metals. CBX is perfectly poised to be the link between those two worlds, aligning the digital and physical and providing forward-thinking investors to get involved early and help to realise the massive potential this offers (both on a technical level and a potential financial gains level).
These are just some of the ideas flying around in my head this morning. I'm sure in the near future we'll be investigating interacting with precious metal brokerage markets directly from the Crypto Bullion wallet, using a decentralized exchange system that automatically purchases the corresponding amount of precious metal (automatically encoding this pegging on the blockchain) when someone purchases CBX. That's certainly one way to have fully-automated and decentralized cryptocurrency to precious metal pegging. Exciting times for CBX indeed!
raizor