Topic: Hypothetical Bitcoin clone except backed by gold - page 3. (Read 4498 times)

Yes the dollar could also be a possible way to back a Bitcoin-like currency. It would actually be easier to back with a dollar because instead of having to pay to store the gold backing the "goldcoins" you could earn interest storing the dollars that back your "bitdollars". I didn't want to use the dollar in my example of backing a Bitcoin clone-like currency because people would probably attack the dollar aspect instead of thinking about the concept of a Bitcoin clone being backed by something.

so, bitcoin is like a failed goldcoin ... smart thinking   

I agree without this as a "feature" there could essentially be a bit-currency backed by the dollar, ie. the Bitdollar, for use in exactly the same secure, convenient, fast, cheap, online, and semi anonymous way as the Bitcoin, but exchangable for a dollar at your local bank and vice versa... and of course with value controlled by the value of the dollar

The failure scenario you bring up would render Goldcoin to be like Bitcoin with nothing backing the coins. However, at least with Goldcoin there is a chance for there to be a backing.

Hypothetically, what happens when these websites don't feel like giving people gold back or they shut down?

The reserve price is set as a fixed ratio between gold and goldcoins. In my example I just picked 1000 goldcoins to 1 ounce of gold to be the fixed ratio for every auction. The auctions could take place on a website. The bids could be done with bitcoins (using the conversion rates between bitcoins, dollars, and gold) and you could also redeem goldcoins for bitcoins (using the conversion rate between bitcoins, dollars, and gold). Of course you could also use a service like goldmoney.com to to directly give people gold when they redeemed their goldcoins. I'm not sure if the details I picked are the best, but I wanted to pick some numbers to illustrate the Goldcoin concept.

Bitcoin not having any backing assets, is not a bug, is a feature.
It means no assets to protect from any evil or corrupted entity.

How is the auction reserve price set? Where is the auctioning happening? Where can you redeem gold?

I was pondering what would happen if somebody launched a completely separate Bitcoin clone except they tweaked the code slightly so the Bitcoin clone could be backed by gold. Below I discuss Goldcoin, a hypothetical Bitcoin clone except backed by gold, where goldcoins would have all the properties of bitcoins except each goldcoin would be redeemable for a predetermined amount of gold.

Overview of Goldcoin

I assume it wouldn't be too difficult to build a completely independent Bitcoin clone because Bitcoin is open source. Once this identical, yet separate, clone of the Bitcoin system were setup, the only algorithmic tweak necessary to enable the goldcoins to be backed by gold would be make it so instead of miners competing with computational power for the new coins, people would compete for the new goldcoins in auctions. The proceeds of the auctions would be used to purchase gold thus enabling each goldcoin in circulation to be backed by gold. Other than the differences mentioned above, the Bitcoin and Goldcoin systems would be identical.

Example Implementation of Goldcoin

To illustrate how this Goldcoin concept could work, In the paragraph below I make up some numbers and details about how a Goldcoin system could be implemented.

At launch, the number of goldcoins available for purchase would be identical to the current number of bitcoins (i.e. If launched today there would be an initial inventory of 6,770,350 goldcoins available for purchase). Additional new goldcoins would become available for purchase at the same rate new bitcoins became available to miners (i.e. the total bitcoins_in_circulation over time curve is identical to the total goldcoins_in_circulation+available_for_purchase over time curve). Frequent auctions of 1000 goldcoins would be scheduled whenever there were at least 1000 goldcoins available for purchase.  The minimum auction reserve price for 1000 goldcoins would be set at the price necessary to purchase an ounce of gold (i.e. gold's spot price plus around 3%). If the inventory of goldcoins available for purchase goes below 1000 goldcoins, then auctions are placed on hold until the total “goldcoins over time curve” makes it possible for more goldcoins to be available for purchase. Lastly, anyone can redeem 1000 goldcoins at any time and receive the current value of an ounce of gold less a storage fee which would be around 0.2% per year starting from the launch of Goldcoin until the date the goldcoins are redeemed (i.e. if you redeemed your goldcoins in five years from the launch of Goldcoin you would have a little less than 1% deducted from what you got for redeeming your goldcoins).

Similarities Between Goldcoin and Bitcoin

Please keep in mind how similar the Goldcoin and Bitcoin systems would be. There could be the same level of anonymity because the systems are virtual clones and you could even buy goldcoins with bitcoins. Transactions have the same degree of decentralization because the two systems are virtual clones with the gold backing being completely independent from the decentralized transaction system. The payment address conventions of Goldcoin and Bitcoin could be identical (perhaps put goldcoin_ in front of the goldcoin addresses to distinguish between the two) which would make it easy to modify existing systems that already accept bitcoins to also accept goldcoins. Also, similar to bitcoins, goldcoins could be bought and sold on independent exchanges as the goldcoin prices would actively fluctuate between auction prices and the redeemable price.

Tradeoffs Between Bitcoin and Goldcoin

The one advantage Bitcoin users would have over Goldcoin users is Goldcoin users would have to directly pay the cost of their transactions because new goldcoins aren't awarded to miners in exchange for performing computations. However, the goldcoin transaction fee system would be identical to the transaction fee system Bitcoin will use after all the bitcoins have been created.

Of course, the one main advantage Goldcoin would have over Bitcoin is that goldcoins would be backed by 0.001 ounces of gold per goldcoin. However, in the disaster scenario where the Goldcoin system of auctioning goldcoins and redeeming goldcoins completely fails (i.e. government crackdown, gold gets stolen, etc.) then the backup plan could be to have Goldcoin automatically revert to the exact same system Bitcoin uses of awarding new coins to miners. In other words, the failure scenario for Goldcoin could be to revert to the Bitcoin system.

Conclusion

If you were convinced that the hypothetical Goldcoin system described above were operated by an open source development team of the same level of skill and integrity as the Bitcoin development team, then would you exchange some of your bitcoins (i.e. currently bitcoins go for around $15 each) to get around a ten-fold number of goldcoins (i.e. currently goldcoins would be around $1.50 each)?

The reason I bring up the hypothetical Goldcoin system is because I believe it would be possible for the current Bitcoin system to be tweaked slightly so bitcoins could be backed by something like gold. For example, instead of giving new bitcoins to miners, bitcoins could be sold at auction and the proceeds could be used to buy gold and then each bitcoin could be redeemed for the amount of gold in storage divided by the number of bitcoins in circulation. This is just a crude example of how it could be done, but this simple approach of starting to back bitcoins with something now could make Bitcoin more competitive with future competing currencies like the hypothetical Goldcoin.