“I had to change my thought process to understand that bitcoin is no enemy of gold and silver,” says monetary expert Andy Hoffman, who writes for the precious metals website Miles Franklin. “When bitcoin hit price parity with gold in 2013, I was angry. I knew nothing about it. I assumed it was like the Federal Reserve. That, instead of 21 million coins, there could be 21 trillion coins at someone’s whim”. Today, Mr. Hoffman regularly covers bitcoin and calls gold and the digital currency “natural allies.”
A symbiotic relationship between precious metals and bitcoin has formed over the years. It started first with numerous gold dealers accepting the digital currency for metal. From there, the relationship blossomed.
Makes sense. Digital currency bitgold programmer, Nick Szabo, and the pseudonymous bitcoin creator, Satoshi Nakamoto, both understood Bitcoin as a commodity-based money, like gold.
Physical Gold Delivery for Bitcoins in Europe
“It had been our idea for quite some time,” explains BitStamp CEO Nejc Kodrič of the world’s second largest bitcoin exchange’s decision to add physical gold delivery as a withdrawal option.
In early 2015, Bitstamp announced that, in cooperation with central European MORO & Kunst d.o.o, the exchange would offer its European clientele gold products by Argor heraeus, Switzerland the Austrian Mint.
“Bitcoin is an evolutionary step of money and store of values,” Mr. Kodrič told Bitcoin.com. “I think it’s the last step in this evolution.” The bitcoin exchange founder believes that, in general, money is an abstraction.
“Even gold,” he says. “All it takes is for a critical mass of people to believe something has value. To hold this value, it needs certain properties. Gold is just a rock. It has value because it has the properties that bitcoin copies. A lot of goldbugs have a quasi-libertarian mindset, so they don’t trust government nor paper money, and more such people are becoming interested in bitcoin.”
The Future of Gold & Money, Inspired by Bitcoin
“The math, the proof of work, and all the technology behind bitcoin represents the greatest experiment in money of the last few hundred years,” says Josh Crumb, co-founder and Chief Strategy Officer of Bitgold, now operating as GoldMoney. “Digital currency was always designed to mimic gold equity-based money, instead of debt-based money.”
GoldMoney added a technical layer to traditional third-party gold storage. The company sought to make the ‘yellow metal’ interoperable with the banking system.
The company’s CTO was an early security consultant for Ripple and early bitcoin community member. He built a bitcoin wallet into the front end of an early version of the Bitgold website.
“We are a hybrid between bitcoin and currency,” Mr. Crumb explains. “We don’t pretend to be fully decentralized nor anonymous. We have an equity-based money that is also a very good store of value.” GoldMoney was inspired by bitcoin to make cross-border microtransactions over the internet.
“We can’t be fully distributed like bitcoin,” explains Mr. Crumb. “If the person is not present to their titled gold, you have to have an intermediary. We must also know our customers. But we can use the principles of decentralization.” Bitgold strives to act as merely software architecture.
“We have Brinks and Royal Canadian Mint as custodians, but also as clearing agents,” says Mr. Crumb. “We may have bought gold just seconds before from a bullion bank, and Brinks or the Royal Canadian Mint clear the transactions.” Bitgold seeks to recreate gold with a digital, distributed and payments emphasis.
“A ledger where third parties confirm transactions,” Mr. Crumb explains. “Different price feeds from different bullion banks, settlement confirmation by various custodians and security. We saw the open nature of bitcoin and thought gold should be transacted as such.”
Mr. Crumb suggests bitgold is as decentralized as Coinbase, the popular San Francisco-based bitcoin exchange. “People are trusting bitcoin to the custodial nature of Coinbase,” he says. “We have a similar type of business model, as an exchange, payment operator and custodian for those who wish to use gold as money.”
He adds: “We know gold works as store of value, tested with math and history. What we want to do is make it a good medium of exchange.”
Bitcoin, Gold and Central Banks
Different people have different views about the relationship between gold and bitcoin. Yet, there seems to be some common ground.
“Today I see that both are fighting against the fiat regime in different ways,” explains Mr. Hoffman, who believes bitcoin is more speculative and risky than gold. “I’ve been searching my entire career for anything else besides gold and silver that serves as money and a store of value, and this is the first thing I’ve found.”
GoldMoney, furthermore, is not designed to be antagonistic to bitcoin. “Bitcoin is making everybody think more about what is money, and whether or not our money serves us well,” Mr. Crumb says. “Bitcoin motivated us to take gold from an archaic business to a modern technology. We are happy gold and bitcoin are having an influence on central banks together.”
What do you think about gold and bitcoin? Let us know in the comments below.
Images courtesy of the Shutterstock, BitStamp, GoldMoney
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