The idea of digital gold is nothing new. Essentially it’s a development of representative money back in the days of the gold standard. Instead of handing over pieces of gold, which are cumbersome to transact and risky to transport and store, instead one would hand over a piece of paper signifying ownership of a quantity of gold and all safely held in a bank vault.
The gold standard, which most nations abandoned as the basis of their monetary systems at some point in the 20th century, was a monetary system in which the standard economic unit of account based on a fixed-quantity of gold. And, three types can be distinguished from the time, namely: (1) Specie; (2) Bullion; and, (3) Exchange. The US used just such a system as late as the 1930s.
But take the same principle and move it online and you have the advantages of gold’s universal reputation as a store of value along with the speed and convenience of transacting over the internet. Gold advanced to its highest level in a year after the European Central Bank indicated that it would not cut interest rates further, boosting the euro and making dollar-denominated bullion less expensive for investors. Image taken on March 10, 2016. (Photo: Akos Stiller/Bloomberg). Now fintech platform OpenLedger is set to host trading for the DigixDAO asset – or DGD for short – leveraging the interest in smart contracts (i.e. applications or ‘apps’) via Ethereum , a decentralized platform with apps run on a custom-built blockchain, and the popularity of physical gold. All with the touted “power and network effect” of a decentralized asset exchange.
That said, there are problems with digital gold. Nowadays we rely on private companies rather than banks. And, you have to trust that they are holding 100% of the reserves of […]
