Humans have always been in love with gold. The story of the yellow metal is unique as it has changed with time according to changes in society. Gold has been used in almost everything from crockery, jewelry and as money for the store of value. For the last 200 years, nothing much has changed in the world of gold. But change is right around the corner and it seems as if nothing will be untouched by crypto, not even gold.
Gold money
Gold has a unique place in the periodic table which makes its properties unique. Unlike other metals, It doesn’t tarnish, rot, evaporate or decay. In other words, its immortal, it doesn’t have a life cycle. Once gold is extracted, it stays like that forever. Then the rarity of gold and the effort needed to extract it makes it valuable. All of the said properties make gold a perfect candidate for use as money. Money has three properties: store of value, unit of account and medium of exchange, and gold due to its unique properties can satisfy all of these. This is the reason why from early civilizations onwards, gold was used as money. Gold has acted as the default currency for thousands of years until modern fiat currencies were invented. Recently, the US dollar has taken the position of global reserve currency and many are calling for the return of gold as the reserve currency. But gold does not have some of the properties of fiat currencies, i.e. portability and accessibility. This is where cryptocurrencies come in.
Internet gold: Crypto currencies
Fiat money is money that does not have intrinsic value and does not represent an asset in a vault somewhere. The value of fiat money comes from the trust we have on the issuing authority, usually a government. The properties of fiat currencies are durability, portability, divisibility, uniformity, limited supply, and acceptability. Fiat money is essentially backed by the trust we put into it. When someone accepts a US dollar in return for a service, the person accepting the dollar can exchange the same dollar for services he requires. This is how fiat money works. A closer analysis at cryptocurrencies reveals that all of the properties possessed by fiat currencies are inherent in them. Also, they are free from the monetary policy of central banks making them immune from manipulation. This lack of control by governments is what made cryptocurrencies popular with many. Along with the properties which make gold money (unit of account, store of value and medium of exchange), cryptocurrencies have one advantage. They are portable, i.e. unlike gold cryptocurrencies can be sent to anyone in the world with the click of a button. This is why many consider cryptocurrencies as gold or better than it. In the event that gold is replaced by cryptocurrencies, the price of gold will plummet. 40 percent of demand for gold arises from investment and such news will send shockwaves in the global financial system. Many see gold as a safe investment, this can kill that perception. But unlike gold cryptocurrencies don’t have any intrinsic value.
Gold stable coin
Stable coins are cryptocurrencies whose value is fixed. For instance, one coin equals one dollar. Stablecoins are great when it comes to avoiding volatility which is a major problem investors face in the crypto space. It also solves the problem of intrinsic value since stablecoins are issued by keeping a reserve, for example, the US dollar. In effect, stablecoins act as a certificate for owning that reserve. So what about a stable coin which keeps gold as a reserve? In this manner, both the properties of gold and cryptocurrency can be combined. The gold will act as the value and a stable coin will solve the issue of portability. Gold can now be sent to anyone in the world and with stable coins, gold can also be tokenized, i.e. broken down into pieces and distributed to many, something which is not possible with physical gold. In fact, gold stablecoins are now growing in number and the future looks promising for them. Gold stablecoins look more promising than crypto or gold taking on US dollar alone. One problem this area faces is the lack of legislation, which will be solved in the coming years.
Follow us on Twitter, Facebook, Steemit, and join our Telegram channel for the latest blockchain and cryptocurrency news