During much of 2017 and now half way through 2018, an ongoing debate has taken place between traditional hard money advocates – proponents of holding physical gold and silver – and the new kid on the block (chain), cryptocurrencies, most strikingly personified by bitcoin.
Can/will one or more of these supplant the traditional role – going back at least 4,000 years – of precious metals, gold, silver, and during the time of the Babylonians, copper as money? Would a digitalized version, backed by the metal itself, change the metrics on how trading and storing takes place? Could, for example, silver actually be restored to its traditional monetary role, in addition to its current usage as a critical metal in literally thousands of industrial and commercial uses? Or must it be a duel to the death?
A Brief Comparative Look
- The total value of all the gold ever mined is around $8 trillion (World Gold Council estimate). The value (highly volatile at present) of the crypto asset market is about $300 billion (coinmarketcap.com).
- An Achilles heel in the argument in favor of most cryptoassets, is that they have no physical backing. Their price in fiat currency or in exchange for a digital version is largely determined by demand, or to some extent, confidence in the liquidity/viability of the coin/token itself.
- During the relatively short history of bitcoin and the follow-on arrival of a couple of thousand new cryptoassets, mainstream acceptance has not yet arrived, though that portion of the landscape is quickly changing. (See: Argentina to Get Thousands of Bitcoin ATMs, at btcmanager.com) Gold is accepted – with the current price – even in the Amazonian jungle – just about everywhere.
- Not unlike the destruction visited upon the first wave of Internet stocks in 2000, the majority of cryptoassets, most of which are based upon an unsound business idea, poorly structured, or are simply scams, will in time, disappear. Some will remain, but it’s difficult if not impossible to predict with certainty which ones. The few that are similar in nature to the privately-issued banknotes which circulated in the U.S. during the 1840s and 1850s will almost certainly be deemed illegal. Gold (and silver), as they have been for several millennia, will still be around.
- Cryptocurrencies face ongoing security issues – with a number of exchanges being hacked for customers’ coin balances, not to mention online wallets, where the owner’s personal keys have been lost/compromised, suffering the same kind of vulnerability.
Gold can be stolen (and sometimes counterfeited, as this tungsten-“gold” bar nearby demonstrates), but normally, authenticity can be verified fairly easily. Nor does gold need a “private key” in order to make a transfer, like an online or an offline hard crypto wallet.
This short comparative treatise only scratches this topic’s surface. But it might behoove everyone in the debate to consider that just possibly – and actually quite likely – that both precious metals (as money and for use in industry) and crypto assets riding on the blockchain (as “currency” – a method of exchanging value without a middle man, and as an assignment of value for a business plan, can co-exist, and even enhance each other’s presence as the future unfolds.
BUT, “What if?” there was a Silver Backed Digital Coin?
What if a digital coin circulated that was backed by physical silver, available upon demand by its holder for delivery anywhere in the world? What if, no matter how many of these digital coins were newly-created, each and every one was fully supported by vaulted, recorded on the blockchain .999 fine silver? What if that coin could be purchased with either fiat currency, or exchanged for it via a cryptocurrency like bitcoin, ethereum, dash, or some other recognized digital “coin”? What if it came to be considered “money”? What if it was trusted, and looked upon as a reliable store of value? Well, finally there is an authentic silver backed digital coin, look at www.lode.one
Let the conversation continue!
Perhaps the biggest benefit of this rather spirited back and forth among all sorts of people inside and out the blockchain space, is that it has brought to the fore – in a very enhanced public manner – a wide-ranging discussion as to just what constitutes money and value.
Andreas Antonopoulos, one of the bitcoin-blockchain’s foremost exponents stated the following at a conference earlier this year:
Bitcoin is the radical proposition that anyone anywhere should have access to free commerce and free financial services…For many people – and governments – in the world, that is a terrifying proposition. I’m here to tell you it’s going to be ok. Because if we give people the ability to do these things, they will use them to do good.
But my other message is…even if you think we shouldn’t, mustn’t…it is done. It is a fundamental system based upon mathematics. It is now known. Anyone can download (open source on BitHub) and create a fairly workable digital currency – in a weekend, and then launch it on the world…we cannot unlearn this technology; we cannot put it back in the bag…We are living in a world where anyone anywhere can engage in commerce with anyone anywhere- and that system cannot be shut down (because it is decentralized and can be communicated over any medium)….The ripples are spreading; Most people have not yet noticed.
Antonopoulos closes, asking, “What if you learned about the Internet in 1991 instead of 2001? How would it have changed your business and your life? And what would you have done about it?”