Topic: Is there a market for a 100% premined coin 100% backed by physical silver? POLL (Read 1238 times)

True, someone or something has to maintain a backing if we are dealing with something physical.
However there's no requirement that someone or something has to be a single centralized point of failure... There are degrees of centralization.

Last I checked there was only around 13 actual miners in bitcoin.(going by the actual definition of those who actually mine tx into a block) Really right now only 3 of them need to be compromised for (at the very least) bitcoins decentralized trust narrative to be classified as  compromised , and in reality a malicous actor controlling one or 2 of these entities could yield serious problems. Yet that is a much better position than last year. That's not as decentralized as some people imagine

Take the simplified example of backing a crypto asset with gold. We have an agency who'll accept your 1 gram gold and issue you 1 DIGIGOLD token. When you want your gold back you send the token and receive your gold. Simple enough, but there's the fair centralization issue you talk of. That one agency could go ahead and print as much DIGIGOLD as they want, playing fractional reserve with current supply etc.

So we can add another party in the form of a depository who'll independently verify inventory, and perhaps another party in the form of an external auditor. Then perhaps we'll segregate the trust by dividing the holdings amongst many vaults, and divide the actual issuance process to multiple agencies who have to sign off to try to prevent collusion.

Now that is nowhere near optimal (and it never will be) but it's not simple binary centralization, it's distributed trust. You write that you don't need a blockchain-based cryptocurrency, but whilst on-chain it has many of the same properties as bitcoin. (Users that hold DIGIGOLD can trustlessly send that gold token to anyone, anywhere, anytime)

 

you have to add. "Maybe, depends on the rest of the technology."
If its just a clone (or reprogrammed but the same protocol like another coin), i don't think there is market for it at the moment.

There are only 2 possibilities for a coin getting into top 10.
1. include a cutting edge new idea (what a backing by silver certainly not is)
2. Back it by a lot of marketing money. And I mean A LOT!

The coin, once sent back would be sent to a "dead" account with a password that is so long and secure that bruteforcing it would be unfeasible, once the crypto value of that "dead" account was so great that it might have some people trying it anyhow, the future coins would be sent to a different address with the same type of extremely long password.

Coin failsafe:
In the case of a successful bruteforce attack or other hack that allowed the coins from the dead account to be spent, the coins would be re-issued... I guess this could be done as a hard fork, or I would more than likely just have a separate coin set up in place to act as a backup, dark and unknown but to the developer who set it up in the first place, in case of failure, I could have it set to detect any spend or reduction in coins from the dead account(s) and upon noting it, it would automatically mine a new coin the same amount that is in the blockchain and send the same amount of new coins to the same number of accounts as currently exists in the blockchain, then all users would have to download a new client and claim their password.

Trust:
Can you trust someone to do what is easiest and make the most money? most of the time. Yes, trust in me and the company that insures me would be important, but the real issue of trust has been dealt with. I will be making a very good amount of money if this idea takes off, and since I am limiting the amount of coins produced, it is in my best interest to ensure that the crypto side of the equation is trusted at least as much as BTC is.

Node Supernode issues:
Bitcoin or any other crypto that gets too popular is susceptible to long confirm times in my understanding (which I admit is not very technical) because of the sheer amount of data contained in the record of transactions, therefore at a predefined transaction log size, the coin failsafe would be active. All users must have current account information such as e-mail so that the download location for the new client can be directly sent to them and password retrieval can be done in as painless a way as possible.

All crypto in my opinion have a limit as far as wide acceptance is concerned, and this coin is not supposed to serve the whole world, just a small portion of it, then other devs and business owners can make similar coins to serve their own demographics/regions.

Regarding the "massive amount of trust that has to be put into their partners to ship the metals and not turn into some type of fractional reserve system"

Precious metals are stored  bonded, insured and extensively guarded  at segregated accounts (meaning you could withdraw even if the company dissolved) at International Depository Services of Delaware. Holdings are audited daily and you yourself may request an audit. Individual proof of custody is issued for each and every unit added to inventory. The whole setup is fairly transparent compared to many "digital gold" offerings on the market today. Delivery is via the custodian if it's requested later or directly via the dealer-partner if delivery is requested immediately. I found it fairly simple to find delivery costs.

As for why Palladium is being sold for 0.0% over spot, that's because it's not being directly sold by serica, it's a user on the platform who has listed that for sale. They could well sell it for 50% under spot if they wanted (on site or via the decentralized exchange.. they could swap it for any other asset there too). It's kind of like amazon, where multiple sellers can offer the same product at whatever price they choose and a user can choose who to purchase from. . If you play like to play with both bitcoin and precious metals and perhaps want to merge between the two often this may well appeal to you. If you just want the physical metals straight away there is no need for this, same if you want futures, derivatives anything where you don't really truly care if you what you are trading is redeemable for physical..

It's easy to pick holes, harder to suggest a stronger approach. We are dealing with tangible goods- there is only trust minimization, no complete trustless approach, it's just about narrowing it down to parameters you can be reasonably comfortable with. I have to say I would be more confident storing PM"s with this service via the approach you suggested, which amounts to "occasionally taking pictures of the physical assets with a webcam" and "Dropping the silver rounds on a counter so people can hear the silver for themselves"

The risk and trust problems would be too big if all coin owners had to rely on you. What if you have an accident? Then the people would never get their silver.

Second: what happens to the cryptocoin in the system (blockchain?) when you have got back the cryptocoin and have sent your silver round? The coin still exists but you have one silver unit less in your safe. What do you do? Do you restore your silver by buying more or can you delete the cryptocoin? If you do not delete it, the coin price will deviate from the silver price. Or doesn't this matter any more after you issued your coins?

People have tried something like this before with a coin backed by real gold or silver. The problem with your idea is people have to put a hell of a lot of trust in you seeing as you'll be doing all the mining and keeping of both the coins and silver. Personally I don't think it's a good idea but you're free to try it though I don't think it will work out very well.

^ Above two posts...

Here's the thing: If you're "backing" a crypto-currency with something physical, someone has to maintain the backing. If you have someone doing that, you have a centralized system and you don't need a blockchain-based cryptocurrency.

I definitely see the appeal of protocol defined supply (hard limit) of btc that has no requirement for physical backing.. with clear incentive mechanisms .. at least now and clear rules on how those coins are minted

However I argue creating arbitary assets backed by something physical on top of Bitcoin is not a fundamental misunderstanding, if anything those that imagine the scope of the applications of blockchain technology is limited to moving bitcoins back and forth have a short-sighted viewpoint of the potential we have here.

Perhaps the biggest problem this technology solves is verifiably replicating a uniform ledger across many untrusted or competing participants.
That ledger can act as a database for user defined asset registration of anything.. control of a private key grants control of property rights- You then have a cryptographically secure, transparent custody enforced by bitcoins well understood blockchain consensus mechanism . We're far from using this tech as  magic pill yet but i think there will be constant evolution and dramatic progress in that field.

Tangible goods are not going to disappear. Neither are those that want to hold or speculate on them. Bitcoin isn't a dominating currency or commodity right now..Even  if it was there will always be diversity. These tokenisation/'blockchainification' systems are bridging traditional commodities onto the bitcoin network where they do not lie on any central server, can be trustlessly traded p2p or used as digital representations of bailment receipts etc. Obviously risk outside of the blockchain walled garden requirement for trust is not eliminated entirely so a semi-trusted approach is taken. In the case of precious metals example above they issue a certificate of order from dealer & proof of custody with a depository (which themselves have external auditors) where it is held under segregated accounts. I'd say it's a better peace of mind than you'd get from traditional paper gold. It's a kind of physical/digital hybrid- the past has certainly shown demand for things like that.

In future Novel Banking API's, Smart contracts , Trusted computing/secure enclaves, Homomorphic computing, Zero knowledge proofs, sidechains etc open the gateway to way more advanced applications of the blockchain than the primitive apps currently built on it today.  

The classic example given here https://en.bitcoin.it/wiki/Smart_Property is of a car who's ownership is linked to a private key.  Based on that model you could, in theory create a token "Backed" by BMW's, and since both the BMW-token and the bitcoin could be swapped at once whilst the requirement for trust has not been eliminated entirely it has been reduced. A middleman has been cut out.

Smart property could be purchased, transferred or rented on the blockchain. Blockchain becomes a form of DRM. Airbnb for cars, bikes is possible.. I think it will be interesting to see some of the huge innovation here in the sharing economy and rise of decline of ownership in the coming years, I think it's wise not to discount it too quickly

Another example is banking API's  that can show you a cryptographic proof certain amount of fiat was sent/received and currently owned. In conjuction with moving control of the accounts to open smart contracts it's possible to represent fiat on the blockchain. This strategy can potentially ameliorate doubts with fractional reserves of fiat on centralized exchanges.None of these are anywhere close to being total panaceas. There are always external (often human introduced) weak-links but they do help in bridging intangible with the tangible.

You must be a miner.

I would say that not backing crypto is a huge mistake that will cause all cryptos to be unstable unless wide acceptance is achieved (for goods and services), and that wide acceptance seems not to matter much to miners because it is much simper to hype a coin and sell it off on an exchange, since you have no interest whatsoever it is becoming currency.

After all, currency was supposed to be the point of cryptocurrency and the vast majority of crypto cannot be readily exchanged for goods or services because of the fact that long-term the volatility of the coin is so great that it is only of value to 3 types of people, all of whom are an extreme minority of the population: #1 Developers #2 Miners #3 Investors who have yet to loose a large amount of money dabbling in crypto.

If a system of physical goods backed cryptocurrency were to take off and be refined so as to be available to many different countries/localities then crypto could eventually lose it's horrible reputation as something that is only used by druggies, scam artists, and uber-geeks and it isn't used as currency by ANY of them either.

Cryptocurrency has yet to solve many of the problems it was set out to solve because of lack of wide acceptance, this is because of a fundamental misunderstanding about the way trust factors into economics and trade.

Scammers: An irrevocably sent digital item is naturally going to become the currency of scammers because all they have to do is convince someone to press send and they get the coin, then they try to get it into local currency as quickly as possible, after all, they are aware of the volatility as well. For them, crypto is just a way to get the fiat they want, not something they want to hold. NOT CURRENCY TO THEM.

Druggies: Again, this is just about the supposed un-traceability of crypto, which we all know to be an illusion at this point, it allows you to buy drugs that will be shipped to you if you can trust your drug dealer enough. Again, this is something that drug dealers don't want to hold, they want their fiat, and the drug user would probably be just as happy to use paypal if he thought that he wouldn't be prosecuted of locked out of the use of his money for doing so. NOT CURRENCY TO THEM.

Uber-geeks: This is more than half of the people on this board more than likely, but unless you are a developer who has has some success or can't figure out that the one year chart on virtually all of the alt-coins shows a crazy ginormous loss if you had purchased any crypto from fiat to btc to whatever that alt-coin is, then you aren't viewing crypto as currency, it's a hobby or a curiosity or a means to make fiat that you can pay your rent with in some rare cases. In either case nobody on earth can get by with only crypto to spend unless they are living with their mommy and daddy who are clueless about why their electricity bills have been so high. so... NOT CURRENCY TO THEM either.

The only people who truly view crypto as currency (not just a way to send fiat that is a little more complicated) are true believers and some developers.-- There are less and less true believers as they get scammed out of their coin, hold too long, buy at the wrong time, etc. And even developers are finding that it is taking more and more time to come up with a coin that seems different and the amount of time that the coin is worth something meaningful is shorter and shorter.
 
It is time for a crypto to do something more than make money for developers and miners.

No, that is something you can purchase with BTC, and a massive amount of trust has to be put in their partners to ship the metals and not turn it into some type of fractional reserve system. Plus I do have an issue with the fact that they say they are willing to sell palladium for 0.0% over spot, are not transparent about shipping costs and do not seem to make a healthy enough profit to do what they seem to be doing long-term.

Arg. Where is the poll-option for "Backing a crypto-currency with something physical is a really stupid idea and a fundamental misunderstanding of the problems this technology solves."?

"premined" Crypto-assets on the bitcoin blockchain backed by physical goods like silver already exist now:



https://sericatrading.com/leaderboard/

No matter what you need proof of the silver reserves.

Here is the idea.

I have a safe, I buy silver, I sell silver, I like crypto... BUT every ALT coin seems to have the same trend line over time... hype at the beginning, then it slips into worthlessness with occasional hype and pump-n-dump schemes. Why? because it's simply not backed by anything whatsoever and people eventually realize it and sell off.

So here is what I propose. I mine on demand myself with a small computer and I only mine what I physically have in real .999 1 troy OZ bars or rounds. Then I immediately auction off the coin on a crypto auction website. If it does not sell, then I never turn on the miner ever again and the whole idea fades into the background, however, if it does sell, then the person gets a coin sent to them and whenever they send it back, I mail them a silver round.

Why would you want to do this? Well, maybe the price of silver goes up, maybe you are pretty sure I am scamming and want to prove it to the world, maybe you want a coin that is immune to the drastic price fluctuations that they all have, but want the convenience of being able to cash out into something else when you get tired of the coin, maybe you realize that businesses are much more likely to want to trade in an item that is backed by something.

Would it really work?
maybe, I would have to convince people to confirm transactions for free, I would likely want that built into the wallet in a way that does not take much computing power. I would need several people to help with constructing the coin and the wallet and the blockchain tool. I think it would, and perhaps it would take off quickly and the coin itself might trade at several times the price of the underlying asset, simply because I won't flood the market with it, and I will cap the coin production, as well as cap the amount of the coin that any one wallet can acquire.

How can we trust you?
I would occasionally take pictures of the physical assets while adding an item into the picture that will be requested by the community, (within seconds, so that everyone will know that there is no digital trickery going on.) I will have a webcam on the physical silver, take out random rounds, put it in front of the camera, and drop them on the counter so that people can hear the silver for themselves, etc, etc. But most importantly, people who have gotten the physical silver delivered to them will be requested to post in the BTCT forum as soon as they send the coin and as soon as they receive the coin so that everyone else will know that it is legit.

Is there a risk of loss?
Yes, in all things in life risk exists, however, I will have the entire contents of the safe insured with a well-known insurance company, so in case of theft, I will quickly replace the silver as soon as possible.

What kind of limits are you talking about?
As far as how much I will mine, probably 1000 coins in total, for the reason of space within the actual safe. Along with a coin limit of around 100 per year.

Why would I do this?
Because I want to prove the potential of decentralized currency, and this would do it quite nicely, also, since my starting price for the coins will be more than the physical silver, I will make profit on each coin I sell, and yes, this includes the price of mailing the physical asset.

Would there be restrictions to who can buy?
Yes, residents of the United States, and I will not ship to some remote areas that have a higher shipping cost.

Questions? Ask me.