Topic: Hypothetical Bitcoin clone except backed by gold (Read 4498 times)

You know mate, there is nothing like having a physical gold bar or coin. Financial institutions have been trying to play around selling all kinds of gold certificates, futures, etc. It is all paper and in the end it can be invalidated with a single strike of a pen.

Unfortunately, the same holds with goldcoin. I would never prefer it over a piece of physical metal. Sorry mate.

It would be rather a cheap and reliable service to convert directly BTC to gold and silver on Goldmoney.

I don't think that's the OP's idea.

Why would any exchange back goldcoins with physical gold when anyone can mine for goldcoins? Exchanges like mtgox have traders on both the buy side and the sell side and that's how they come to the USD/BTC exchange rate. You don't just start an exchange and permanently set the exchange price yourself. If you do that, you will find that people will trade the worthless goldcoins to you for real gold and no one will trade away real gold for these goldcoins.

Only governments can really pull this off. That's because governments have a lot of gold, they have an incentive to make fiat currency successful, and they can force their citizens to pay tax in fiat currency. Tax forces people to have to trade in their gold for fiat currency. None of this is true for goldcoins.

I think anyone can mine the goldcoins, and then redeem them at the exchanges for gold.

There are just so many potential problems with this idea:

• You want to have a central authority distribute goldcoins and have them store gold as backing?
• Is the central authority going to pay to store the actual gold needed for backing.
• Where does that money come from?
• Who is this central authority and why would they do this for free?
• Why would they not steal your gold?
• Where do the goldcoins come from if not mined?
• Does the central authority just mine the goldcoins themselves and then sell it for gold?
• If mining does not create goldcoins, then there would be no miners. If there are no miners, who keeps the blockchain secure?
• Where does the initial trust for goldcoins come from? Why would I use real money/gold to buy goldcoins?

How about a hypothetical Ferrari clone except it's pulled by a horse?

If currencies backed by gold would have worked, there wouldn't be any fiat currency today. Currencies backed by anything are a joke, and fiat currencies are a scam. But most important of all is that you should not trust a central authority.

The place of gold is in electronics, jewelery, decorations, and food (for some).

Maybe it's easy to store gold for .2%/yr until the gov charges you 2% inventory fees or extra blah blah tax, now you have to fight the government head on when they know where your gold is or break your promise.

We've done promises, screw that.

100% agree.  It bugs me when people think that having a market for exchanging gold for bitcoins is as good as backing, or can even be compared to backing.  If that's the case just use your goddamn FRNs, I guess those are backed by gold because you can buy gold with them.

I changed my mind about bitcoins not being backed by anything.  Bitcoins are backed by general ignorance about the underlying nature of money.  And by the way so are USDs.  It turns out this type of backing works just great... until it doesn't.

Someone selling gold for bitcoins at a set price is not a promise but only a temporary promise to exchange gold for bitcoins at that price and that temporary promise can change at any time. If bitcoins were backed by gold there would be a permanent promise to always sell gold for bitcoins at a set price. A temporary promise that can change at any time is very different from a permanent promise. Someone selling bitcoins for gold is very different than someone backing bitcoins with gold.




I agree there would need to be incentive for someone to assume the responsibility of backing goldcoins with gold. The 0.2% per year storage fee and the 3% above spot auction fee discussed in my original post are areas that have potential for profit as it is pretty easy to store gold for less than 0.2% per year and also pretty easy to acquire gold for less than 3% above spot (i.e. the maximum over spot goldmoney charges is 2.49% and the maximum yearly storage fee is 0.18%). However, the largest potential source of profit is the likelihood that many auctions will be for more what would be required to back the goldcoins. For example, if an auction of 1000 goldcoins brought in $2000 and it only cost $1500 to purchase the necessary ounce of gold to back the goldcoins then that would be a $500 profit. There is plenty of incentive for someone to create and back something like Goldcoin.




It is not a pegging scheme because although you would have a guarantee that 1000 goldcoins gets you an ounce of gold,  an ounce of gold is not guaranteed to get you 1000 goldcoins.




The Goldcoin system proposed would be just as vulnerable to attack as Bitcoin will be after all the bitcoins have been issued because Goldcoin would use the same transaction fee system as Bitcoin. I think the Bitcoin transaction fee system is a good model for Goldcoin to follow.

wow, what was it a week ago this was brought up? ,  and the mob pitchforks and torches came out at that time.

fickle crowd

+1

Thank you.

Couple of notes on that.  Part of the deal was that the Saudis MUST buy US Treasuries with a % of the income they reaped from Oil sales.  As well, on the Sadam Hussein side of things, when Sadam stopped using Dollars in Oil transactions this painted the big target on himself and his country.  Before he invaded Kuwait he was told by the U.S. that nothing would be done if he did(no one would interfere).  As we all know he did attack, and we all know what happened from there on.  He was backstabbed by the U.S. on this issue.  We can only imagine that Iraq stopping using the U.S. Dollar for Oil had something to do with this.

" Basically, they agreed to develop Arabian oil fields if all oil trades were done in dollars. The dollar therefore went from being backed by gold up until 1971 (for international trade, anyway) to pretty much being backed by oil... as long as everyone went along with the conversaion (Sadam Hussein decided against this oil for dollars trade, btw)."

OK, I realize we've all entered bitcoin for various reasons, but backing a new bitcoin-like currency with a fiat curreny that's already losing its status as such is somewhat bizarre. The US$ is a reserve currency because, in 1971, Nixon and Kissinger succeeding in getting everyone trading in oil to convert their local currency into dollars to trade (buying and/or selling). Basically, they agreed to develop Arabian oil fields if all oil trades were done in dollars. The dollar therefore went from being backed by gold up until 1971 (for international trade, anyway) to pretty much being backed by oil... as long as everyone went along with the currency conversion (Sadam Hussein decided against this oil for dollars trade, btw). This is why other countries have reserves of dollars.

However, with China and Russia having agreed earlier this year to side-step this $ for oil conversation and trade directly with each other withouth involving the US$, and with the Fed having to buy more FRNs as other countries aren't biting like they used to, the petrodollar is pretty much doomed. It's therefore hardly a wise decision to back a  new digital currency with a failing fiat one, is it?

As to  your last question. I wouldn't sell silver for a UKB, or at least would hope I wouldn't have to. If silver, or any precious metal, is backing a currency, then you'd have to be in dire straits to decide to liquidate your valuable underlying asset for said currency. So, theoretically, I'd happily use a UKB to buy gold and silver all day everday, but not the other way around, unless I really had to.

Hey how about we make a Bitcoin clone backed by hookers?  You can turn in 1 Bitcoin for $5 minutes of Goodness.

As already stated, you can simply "back" bitcoins with gold yourself by offering to sell gold for bitcoins.

You don't need a whole separate blockchain for that.

Which is good because if miners are spending their money on gold instead of electricity and hashinh-hardware the blockchain might be quite vulnerable to attack by anyone who chooses to invest in computing gear instead of gold.

As to it not making sense to back a currency with a currency, well, maybe it doesn't need to make sense. What is a 'reserve currency' but backing in one currency for another?

There are a whole bunch of blockchain-based currencies looking at all these concepts precisely because they do want to "back" their currencies. Part of how they plan to do that is to each buy a whole bunch of each of the others, so that all of them have a decent amount of "float" to use to buy back their own using any of the others.

If you would like to "back" one or more of them by selling gold for them, instead of or as well as "backing" bitcoin by selling gold for bitcoin, I doubt they will object. Heck they might even "back" your gold by buying it with various currencies not only with goldcoin...

Come to think of it, United Kingdom Britcoin (UKB) might for traditional reasons like to be "backed" by silver, How much silver would you sell for one UKB?

-MarkM-

+1

What incentive would whoever is backing the currency have to back the currency? Would they just do it out of the goodness of their heart? If you want to start backing bitcoins with gold, nobody is stopping you. But I can't think of any reason anyone would do that.

As others have said, give it a shot. You'll have a lot of work to overcome, though. (As in, the cumulative effort put forth for bitcoin since 2009.)

I find these ideas amusing, because it is human nature to force new ideas to 'adapt' to previous ones. It's like taking a look at a car, and deciding to weld some metal loops and supports on the frame so a horse can pull it. Just doesn't make sense, really.

I would be happy with a cheap and reliable service to convert directly BTC to gold and silver on Goldmoney.