The debate becomes recurrent: at best, Bitcoin would be too unstable and fluctuating, unable to realize its potential as a safe haven, even less everyday currency.
Worse: for its most virulent opponents, it would still embody today only a currency of the darknet and laundering. As for the myriad of other cryptocurrencies, they would be on their side only vile artificial speculation instruments, based only on the conviction of their holders, in other words on vacuum, added with hot air.
And yet, 10 years after the birth of Bitcoin, one of its heirs occupies the scene in a new way: the stablecoin. It’s simple from the most authoritarian states to the most liberal societies, everyone wants their own!
Let’s continue today to explore the potential of this new class of digital asset. And we are particularly interested in it when it has the decisive advantage of being intrinsically linked to what Humanity considers to be the most precious and tangible standard for 50 centuries: physical gold.
From virtual assets to real underlying
In previous episodes
In the first part of this column, the opportunity was given to draw up a parallel between Bitcoin and physical gold, then talk about the properties of one of the heirs of the creation of Satoshi Nakamoto : the stablecoin. The stablecoin, this strange crypto-monetary creature rid of the annoying tendency of digital assets to fluctuate suddenly and randomly to say the least.
It didn’t take long for major players in the industry to realize that one of the most effective ways to combat the apparent – and sometimes repulsive – cryptocurrency instability was to tie them down, to “backer”Solidly, to tangible assets, as an underlying.
Lack of trust deserves
The tendency to fluctuation having been settled, it remained to establish a mechanism ensuring users a stability of sufficient value so that the stablecoins can be handled without fear.
In other words, that the trust both in cryptocurrency but also in the solidity of its underlying guarantees that the asset can be used everywhere and all the time. As a reminder, one of the most common criticisms of crypto assets – including the most important of them Bitcoin – would be precisely that they “Would not be based on anything”, risking consequently to lose any value in an instant, and at any time.
This argument would mechanically justify one of the main reproaches prominently on the long list of grievances of anti-Bitcoin: the absence of any tangible asset behind the value of the asset, “collateral”, would be the most obvious symptom of a giant Ponzi scheme, of which only the supply of fresh capital by newcomers would be able to maintain a semblance of integrity.
Of course, the crypto lover is aware that the value of Bitcoin, what founds its course as part of supply and demand, is both as intangible and fundamental as it is unprecedented and precious : a peer-to-peer monetary tool, offering as many people as possible to do without a bank or the least trusted third party, by delegating this function to a virtuous network by design.
However, if this Bitcoin value proposition is rock solid, we agree that it will resonate more particularly in the ears of technophiles and to a somewhat trendy category of individuals libertarian, concerned about their rights and presenting a small tendency to subversiveness. However, it must be admitted that this psychological profile only presents a few meager% of the modern population.
No matter, stablecoin backed by a precious raw material present all the arguments to convince the rest of humanity.
See it to believe it
This is a consequence of one of the heavy trends of our materialist era: the individual sometimes has a visceral need for an asset to be tangible, may its physical reality be attested, verifiable, audited.
So if an ever growing part of the population agrees to go to the other side of the crypto-mirror, evanescence and intangibility of Bitcoin’s value could be easily challenged by the solidity stablecoins pegged to an underlying made of precious metal. And this is precisely the deduction made by some players in the crypto industry.
Gold, blockchain, stablecoin. Potential and dangers
“The only reason for the existence of crypto is that the regulations prevent us from using gold as currency. “
Peter Schiff, economist in favor of a return of the gold standard for the dollar
Without perhaps falling into such an extremity, it will be agreed that Peter schiff, an economist by trade, puts his finger on an important point.
However, and even if we should remain enthusiastic, a warning is essential: no one is ignorant of the extent to which the world of cryptocurrencies swarm of crooks and all kinds of trappers (and if in spite of everything you had a doubt, it is high time to go and update yourself on some fundamentals by re-reading the 13 rules to boost your heritage in Bitcoin, before diving into the deep end).
So, already slippery, the field of crypto investment can become downright dangerous since in the equation is added the very particular magnetism that emerges the barbarian relic, gold and its incomparable brilliance, the very one that gives the famous fever.
The appeal of this combination did not escape the scammers and in recent years have seen it flourish number of questionable projects trying to hide their lack of substance behind a golden screen.
The argument is more or less always the same: the token where the corner (which may not fall under the stablecoin category) is presented as ” guaranteed By a certain amount of gold.
According to the universal adage, ” The bigger it is, the more it’s acceptable “, and as often in this kind of scam, no superlative is enough to try to convince the pigeon that his fortune is madee as the return (“guaranteed”, necessarily) looks colossal.
The old briscards may remember a certain project where the amount of gold supposed to guarantee the token was announced as amounting to more than 2 tonnes of gold (some contributors are even promised “Their weight in gold” during lavish ceremonies in flashy metropolises of the United Arab Emirates).
In the same vein (what could be more natural in terms of gold), we can also mention the few setbacks and unforeseen events in which the project Karatbar is getting bogged down these days, especially in Germany (Karatbar will have been one of the last projects to have benefited from the “advice” of stainless John McAfee before the person swears mordicus that he stopped promoting everything and especially anything).
For the anecdote, is because it is important in this matter to align stunning figures, know that Karatbar claims that his convoluted system of tokens (some stable, others not) would be guaranteed on … 24 tonnes of gold!
Finally to be complete, there are many variations on the same theme, some projects highlight an underlying consisting of precious reserves (whose reality is most often very difficult to materialize), others play the card of a back-to-back stablecoin – hold on tight – rights to exploit lands reputed to contain gold. At this point, it’s no longer a scam, it’s art.
In short, the list could go on for a long time but just keep in mind that as relevant as the association of the blockchain, a stablecoin and an underlying made of physical gold, prudence must be your first virtue.
So, paradoxically enough, flee anything that shines too bright to be honest and especially projects that will try to blind you with large handfuls of glitter in the eyes in order to prevent you from going to check the details for yourself. In short, do your research and know how to carefully determine the companies in which you will place your trust.
If it is legitimate that the reading of the last lines has cooled you somewhat, know that all is not so dark and that the industry is full of nuggets that know how to exploit the vein with seriousness and respectability (and this is the moment when I stop multiplying mediocre puns, don’t thank me).
Take everything described above: tinsel, shocking announcements, improbable figures … More often than not serious players in the sector will avoid, like the plague, playing this score, preferring instead that of sobriety and thoroughness.
Of course, the nerve of war will obviously remain the own possession of an underlying in sufficient quantity to guarantee the stability of the token in a generally classic formula (1 token = a certain amount of precious metal), but businesses the strongest will also highlight the relevance of their technological and business model.
If in recent years, projects of stablecoins backed by physical gold have multiplied, many have failed to convince, or to grow their business models, not to mention the outright scams. However, we can retain a few companies that persist and deserve to be taken into consideration.
Lode.one, a stablecoin backed by physical money
A little out of category with regard to our theme of the day, but the philosophy is the same!
Associated with the token AGX, the Lode project tokenise physical money. There, network users receive physical Lode tokens in exchange for depositing physical money. The precious metal is in custody by the company and all transactions are recorded on the blockchain. 1 gram of silver = 1 AGX token. AGX tokens in turn feed a traditional commercial network, associated with traditional means of payment.
Digital Gold is a stablecoin backed by physical gold. The company’s reserves are audited by an independent third party (Bullionstar, for the anecdote, the start-up keeps 7.2 kilos of gold at the moment and … 5 grams of silver). Otherwise, smart contracts which operate the unit are also the subject of independent studies by the specialized company ChainSecurity.
1 GOLD equals 1 gram of gold.
Tether (USDT) is the star of stablecoin backed by fiat currency (in this case the dollar), there is talk recently of the launch by Bitfinex of Tether Gold, a stablecoin backed by physical gold. Announced a few months ago as to be released “at Christmas”, the project is obviously behind schedule, but deserves to appear in this selection.
Paxos, another important player in the stablecoin ecosystem with its PAX backed by the dollar, launched the Pax Gold. Each token corresponds to 1 ounce of gold (about 31 grams). At present, just over 9,000 PAXG are in circulation, with a unit value of around 1,400 euros. In other words, Paxos has tokenized around $ 13 million in physical gold.
Digix Gold Token
Founded in 2014 in Singapore, this token and the company operate in the form of a DAO (Decentralized Autonomous Organization). Digix is a bit of a pioneer on the subject. The system works as often around 2 tokens: DGX (which is equivalent to 1 gram of physical gold) and the DigixDAO. With regard to the DGX marketcap, these are more than 122 kilos of gold that are tokenized on the blockchain.
The seniority bonus: VeraOne
Despite a stubborn image that could falsely suggest that the exercise is very easy, you don’t improvise yourself as a gold seller. The regulations are of incomparable complexity, the subject is necessarily sensitive.
And if none of the previous projects have appeared in France, it is because, as with many things, our national legislation is notoriously finicky and rigorous for everything related to precious metals. It must therefore be agreed: setting up a crypto company in France with the ambition of launching a stablecoin backed by physical gold could seem impossible.
And that’s probably why the French VeraOne (AuCOFFRE.com group) did it, which deserves a crypto-cocorico!
VeraOne offers its backed token on gold reserves audited (by the very serious LBMA : London Bullion Market Association). 1 VRO equals 1 gram of gold. If the project is still in the testing phase and should have a very interesting 2020, 10,000 VROs have already been sold to VIP buyers, via the blockchain Ethereum.
We will remember for the time being 2 key features of the VeraOne project : on the one hand, 90% of the physical gold held in reserve falls into the “low impact” and “very low impact” categories from an environmental footprint perspective. In addition, as part of a monetary agreement with Gibraltar, it is possible for VeraOne to “mint change” and materialize your token in a physical corner. An amazing way to close the circle.
We said it, you don’t improvise yourself as a gold seller. And if the VeraOne project is so solid, it is probably because it is supported by a company which has been established on the street for more than 10 years and which, in this interval has become the French leader in the sale of gold to individuals. Experience makes a big difference here.
So ends on this high potential project – which we will have the opportunity to talk about again in Bitcoin – the second part of this series dedicated to stablecoin backed by physical gold. Stay tuned to the subject, it will embody a large part of the future of the industry.
Nice to meet you, it’s Hellmouth! Editor-in-chief of Bitcoin, the crypto media you are honoring to survey right now (well done, you have taste).
Crypto-enthusiast of the second hour, nothing is more important to me than supporting the global adoption and democratization of the treasures that the blockchain offers us.
I write articles between two cocktails in Tahiti, my adopted island, and do not hesitate, if the opportunity arises, to feast on a plump scam or a little too enterprising Ponzi pyramid.
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