
Hayek: Cryptocurrency backed by gold - prostoalex
http://www.businessinsider.com/hayek-cryptocurrency-backed-by-gold-2015-5
======
olefoo
E-Gold™ is back.[0] Now with added cryptocurrency.

Having a blockchain registry to track ownership of precious metals is not a
bad idea. But as the ultimate capitalists over at ZeroHedge [1] point out it's
a centralized system and vulnerable to both fraud and attacks from governments
( vaults full of gold are hard to hide and harder to move ).

0\.
[http://www.wired.com/2009/06/e-gold/](http://www.wired.com/2009/06/e-gold/)

1\. [http://www.zerohedge.com/news/2013-11-29/e-gold-founder-
laun...](http://www.zerohedge.com/news/2013-11-29/e-gold-founder-launches-new-
gold-backed-currency)

~~~
Kaizyn
It should also be noted that in a real crisis, getting gold out of a gold
hoard will prove problematical, especially if the vault is geographically
distant from you. Likewise storing a couple tons of gold under your bed isn't
terribly practical. Good luck trying to transport that if you need to leave in
a hurry.

~~~
omgitstom
How is this different than the fiat money we currently use?

In a real crisis, what is your money in your pocket or banked backed by? The
ability that the government can tell you that the value is what is on it's
face? How is that any better than gold?

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ecdavis
Hah. This is a subplot in Cryptonomicon. Neal Stephenson's books from the 90s
have proven remarkably prescient.

~~~
LordKano
Cryptonomicon was my first thought when I saw the headline. I can't help but
wonder if it was the inspiration for this.

~~~
s_henry_paulson
I'm gonna go with

[http://en.wikipedia.org/wiki/E-gold](http://en.wikipedia.org/wiki/E-gold) \+
bitcoin

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nosuchthing
Who's keeping the actual gold and who's to say it's all actually there?

also, why would I want gold/diamonds/seashells/feathers/arbitrary-relatively-
useless-material backing a currency?

~~~
rndmind
Could not the same question be asked about the gold held by the US government?

~~~
ecdavis
That question can and has been asked.

[http://www.bloomberg.com/news/features/2015-02-05/germany-s-...](http://www.bloomberg.com/news/features/2015-02-05/germany-
s-gold-repatriation-activist-peter-boehringer-gets-results)

~~~
MCRed
And answered.... the answer is that there was no gold, that we had sold
germany's gold, and repayment schedule was designed to allow us to print the
dollars and buy the gold to send it "back" to germany.

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qsymmachus
If fiat currency gives you the heebie jeebies why not just buy the gold
outright?

~~~
imaginenore
Because buying things with gold is a huge pain in the ass, especially online.

Storing and transporting physical gold is a big security problem that even
banks haven't solved perfectly.

A cryptocurrency backed by gold actually does solve these problems, assuming
it's is actually backed by gold, and can keep that gold, and can be audited
somehow.

~~~
wuliwong
I'm just reading about this for the first time but this is how I'm seeing it
as well. My first guess is that it isn't as much about being anonymous as
Bitcoin and more about (1) being able to buy gold more easily and (2) having
these transactions securely recorded in a blockchain. Though without a large
network, is the second part very useful?

~~~
Kaizyn
Once you have a currency that isn't controlled by any one single government,
then they all have to behave themselves better with respect to financial
management. That is the real point of one of these schemes - to make all the
governments more accountable through the global economy. If you have a gold
standard, then when a country is badly managed, much of the privately-held
gold naturally flows out of that country, punishing the misbehaving economy.
Likewise well-managed economies tend to have large inflows of gold.
Governments hate this because they're in the business of having the final say
in their respective geographic regions of control.

~~~
imaginenore
Gold is not very important in any economy. It's too cheap to represent even a
tenth of an economy.

USA holds 8,133 tons of gold. That's 260.26 million ounces. At the current
price that amounts to

260.26 * 1184.28 = $308.22 billion.

For comparison, US GDP is $16.77 trillion.

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salibhai
There's been a whole lot of these cryptocurrencies supposedly backed by
something that all failed... I would look at this with a whole lot of
skepticism.

Check here for a partial list of some of these coins:
[http://www.coinwarz.com/cryptocurrency](http://www.coinwarz.com/cryptocurrency)

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bcg1
I'm confused as to how an anonymous blockchain is useful for this, unless I
can buy gold from Anthem Vaults with the cryptocurrency. To implement that
without fractional reserve would mean that someone has to pay for the storage
of all that gold, so I would want to know how those costs are built into the
system (if at all).

GoldMoney solves that problem by charging a storage fee... not sure how you
would do that with a cryptocurrency except by devaluing each unit of the
currency.

Too many questions for me, quite possibly a scam or at least a bad idea with
the potential to become one. Gold is not really great for transactions in 2015
anyhow, but if you really wanted that capability a company like GoldMoney
seems much more on the up and up.

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rdl
A true Hayek currency would be backed by a market basket, not just gold.

~~~
julespitt
Yeah, it's pretty sad. His design for a currency is fascinating, and
apparently unknown by these people.

~~~
rdl
A bearer-backed market basket currency (rather, the ability for anyone to
create a digital bearer token currency as a service; billions of currencies,
and realtime exchanges to determine prices and exchange currencies at
transaction time) is my #1 idea for a project. Unfortunately not really a path
to profitability, so I'll do something more mundane first.

I'm glad I ducked out of e-gold (we were building a digital bearer currency
backed by e-gold, in partnership with them) before the e-gold prosecutions
started. Kind of sobering talking to the lawyers 10 years later and seeing
what pain I missed.

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pakled_engineer
Reminds me of Pecunix, Cgold, Egold, Ebullion and E-dinar problems even though
this would be decentralized as no central accounting system taking IDs/making
user accounts there's still a pile of gold the US gov can seize if they want
claiming there must be IDs for transactions. Bitcoin there isn't a central
repository of btc keys printed in a bank they can go after making arbitrary
seizures more difficult plus no existing laws like there is for gold ownership
transfer. I like this idea but predict either a fractional reserve scam where
independent auditing isn't done or that tempting pile of gold gets stolen by a
government.

~~~
foobarqux
But unlike those systems there is no payment or ownership transfer system.

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natrius
To the extent that blockchains have a killer app, it's going to be fungible
contracts-for-difference. They make this sort of asset-backed cryptocurrency
irrelevant. Even while cryptocurrencies are unstable, you can build stable
derivatives on top of them that track any price you choose. You can peg a
cryptocurrency to gold without needing to hold gold, but more importantly, you
can peg a cryptocurrency to _anything_.

Instead of the oil-driven currency instability many countries are seeing
today, their currencies would be pegged to their local prices indexes.
Everyone will have stable money, not just people in the developed world.

~~~
wuliwong
I haven't really thought about the idea of pegging crypto-currencies to
something. I'm trying to think how this works and keep running into some
walls. In the case of this article, my presumption is that basically this
company is selling their gold to you and the cryptocurrency part serves like
the contract. In general though, pegging a currency by any group other than a
government seems to require that the "peggers" actually possess the asset.

Maybe another way to pose the question would be, if I were to want to create a
cryptocurrency pegged to the CPI in the US, how might I achieve that. How
would the first units be issued, to whom and for how much?

I've done some quick searching/reading about this topic but I figured I'd drop
a line here before the discussion got too stale.

~~~
natrius
The first units of such a currency are "issued" when someone takes the other
side of the bet. If I think bitcoins are going to be worth more soon, I can
offer to pay the system $100 worth of bitcoins to generate 100 cryptodollars.
If the price goes up, I make a profit because the size of my debt shrank. If
the price goes down, I lose money. These systems require the speculators to
lock money in the system as collateral to handle price swings. Meanwhile,
anyone who wants stable cryptodollars can use them without price fluctuations.

There are several ways to peg a cryptocurrency to a price described here:
[https://blog.ethereum.org/2014/11/11/search-stable-
cryptocur...](https://blog.ethereum.org/2014/11/11/search-stable-
cryptocurrency/)

Here's a slightly different method built on top of Ethereum, a platform for
defining transaction logic on a global database:
[https://www.reddit.com/r/ethereum/comments/30f98i/introducin...](https://www.reddit.com/r/ethereum/comments/30f98i/introducing_edollar_the_ultimate_stablecoin_built/)

We can create currencies based on any price, whether it's the price of an
existing currency, gold, or an abstract price, like a price index. This
ability will change the world.

My email address is in my profile if you have more questions. There's some
fascinating stuff going on out there.

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stevedekorte
Alan Watts on Gold

[https://www.youtube.com/watch?v=lC3qPUCv4bQ](https://www.youtube.com/watch?v=lC3qPUCv4bQ)

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xn
Sounds like the same fuzzy thinking behind NoFiatCoin, 'The coin will "be
valued at 1 gram of gold at the day's market price..."'.

Ripple Singapore's currencies are an actual digital version of Hayek's
proposal for competing currencies, defined as and redeemable for a specific
weight of metal.

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lewisl9029
I personally think [http://filecoin.io/](http://filecoin.io/) has the right
idea.

Cryptocurrencies backed by real, valuable, and _useful_ commodities is what
the world needs, in my opinion.

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digi_owl
Sounds like butter on fat, as the reason (as i see it) for Wall Street to be
all over crytocurrency (bitcoin in particular) is that the scheme behaves like
gold from the outset.

This in that you have a limited amount total, and as time goes on it becomes
harder to "extract" what has not already been put into circulation.

Frankly i find that the reason gold has this, frankly, silly position for some
is a flue of history.

Say you start out trading by weight. That takes time.

To speed it up you start using defined weights.

Then you find that you can just as well just tally up the weights and pass
those around as tokens.

Gold works for this as it does not perish if sitting at the bottom of a hole
for centuries.

So in essence gold would just be a shiny, soft, metal if it didn't have a
property that made it useful as a material for making weights/tokens out of.

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peter303
I'd trust the algorithm more than whether there is really gold somewhere. The
best block-chains havent been broken yet. Gold could be nonexistant or stolen.

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Retric
Frist off Taxes give currency value.

Sell a pig for 12 chickens and guess what the tax man does not want a chicken
they want their token. _Thus creating demand._

Second, with 7 billion people in the world there are a lot of suckers out
there. Even if buying something is dumb selling it can be very profitable.

~~~
wuliwong
Yes, value is subjective. I basically agree, just wondering why you wrote your
comment.

Taxes make value in the same way as someone putting a gun to my head and
saying they will shoot me unless I give them a rusty nail. In that moment, a
rusty nail has more value to me than nearly anything. I'd trade a 1,000 ounces
of gold for that rusty nail.

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crimsonalucard
when are crypto stocks going to get popular?

