From the desk of Rudy Fritsch
My friend and editor Mr. Barton has decreed that I write about Gold, not about crypto currencies. After all, this is the Gold Standard Institute, not the Bitcoin Standard Institute… so, fair enough; I write about Gold. Nonetheless, it is inevitable that crypto currencies and so called ‘alt-coins’ get my attention. After all, ten baggers (thousand percent gains) are rare in the investment world; but ten baggers are but average in the crypto world.
Now before Mr. Barton gets out his cat’o nine tails and starts cracking it, please note that I am NOT writing this article about Bitcoin, Litecoin, CloudCoin, or any one of a thousand crypto currencies in existence; I am in fact writing about Gold in the twenty first century. Namely, I am writing about a digital Gold coin, specifically about Digix.
You see, Digix is ‘tokenizing’ Gold, thereby creating a cryptocurrency that provides stability for investors. If you have kept an eye on the crypto world, you know that stability is the exact opposite of what most crypto’s provide; namely, they provide extreme volatility and terrific speculative gains opportunities… and terrific lose your shirt opportunities.
Bitcoin and most crypto currencies are linked to exactly nothing… no more than pure Fiat currency is. The perceived value of Bitcoin is in the eye of the beholder; blockchain security, limited supply, and a way to avoid bank issued and bank controlled Fiat. Ask a Venezuelan if Bitcoin is not a life saver for them…
Now Digix is working towards a different end; each Digix ‘coin’ or better ‘token’ represents a real, physical asset; namely a gram of allocated Gold stored in a secure, private vault in Singapore. This concept reflects the Gold Standard, under which the world’s currencies were directly linked to Gold. That is, Digix represents a fully redeemable currency, something the world has not enjoyed for over a century. More, Digix represents a fully redeemable digital currency, something the world has never enjoyed.
The ramifications are awesome; Gold is making a comeback, going into circulation again… but this time in a digital, internet compatible format. In other words, Gold is entering the twenty-first century. Of course, this poses a few dilemmas, a few potential problems. Mainly a problem of trust; is a Digix token really supported 100% by physical Gold, or is it or will it degenerate to fractional reserve, like all G’man/bankster controlled currencies have degenerated?
Digix operates using blockchain technology; a public, virtually unhackable, distributed ledger system. That is, many private computer systems hold, duplicate, and confirm every Digix transaction. This is a huge builder of trust; unlike a bank issued Fiat that is subject to the whims of the bankster… and, unlike Bitcoin, there is no Digix ‘mining’. Mining Bitcoin involves solving a complex mathematical problem… a problem that grows ever harder as the number of Bitcoins in existence approaches the ultimate, designed limit.
This means that mining Bitcoin takes ever more expensive, ever more sophisticated, ever more power hungry special computer technology; this in turn means ever more concentration of the Bitcoin blockchain into the hands of a few powerful mining outfits. This clearly works against the purpose of Bitcoin, concentrating rather than distributing the blockchain. Digix has no such problem; the limit to the number of Digix tokens is not arbitrarily set… it is simply the number of Gold grams in existence. There is no Digix ‘mining’. Further, Digix uses the Etherium blockchain technology; newer, much faster than and even more secure than Bitcoin.
Now the question still remains; is Digix actually Gold, or at least is it ‘as good as Gold’? Of course not. Only the ‘yellow metal’ itself, preferably in the form of a minted coin of standard weight and fineness residing in the owner’s pocket or wallet is real Gold. A Digix token is simply a claim on Gold; but how good a claim?
Remember, even a Real Bill (Bill of Exchange) was simply a document, a claim on Gold… a claim that would mature into physical Gold coins within ninety days. The reason Real Bills worked ever so well was a question of trust; the Real Bills market self-corrected, threw out fake bills, only bills representing real consumer goods in high demand on their way to the consumer were supported by the Bill market. Remember, enormous quantities of Bills were in circulation before WWI, supporting multilateral trade; most Gold simply sat in vaults, gathering dust… until a breakdown in commerce caused Gold to move.
The bill market supported worldwide multilateral trade to such good effect that it took seventy years for world trade to recover to pre-war values after the destruction of the Bill market in WWI. So, with trust in the system, the Real Bill system worked very well thank you. Will Blockchain ensure trust in digital Gold? To the extent that there was trust in circulating Real Bills? Time will tell.
Nevertheless, a trustworthy system of Gold circulation is monetary Nirvana; Gold is the ultimate extinguisher of debt (unlike Fiat currencies that are borrowed into existence). Gold is the only financial asset that is not someone’s liability (except for Silver, Gold’s little brother).
There are several other ramifications; for example, Bitcoin and all other cryptos are (currently) valued in the USD… so, what happens when the USD sinks without a trace? Will Bitcoin then be valued in Bitcoin purchasing power? Will Bitcoin become the new numeraire? This is what you may call a ‘big ask’…
On the other hand, Digix is not measured in Dollars, Euros, or any other Fiat; it is measured in grams of Gold. While Fiat is undoubtedly heading to Zero value, going ‘off the board’, Gold is not. Today you can still buy Gold for Fiat; thus, you can buy Digix for Fiat… but once Fiat collapses, this will no longer be possible. On the other hand, you will still be able to trade Gold for Digix, and vice versa. The Dollar is not in the Digix loop… neither is Yuan, Yen, Euro, SDR’s, whatever…
Like many other crypto’s, Digix has two aspects; one is the Gold token itself, DGX; the other is the alt coin DGD that is like a share in the Digix outfit; this alt coin will offer appreciation and dividends based on the growth of DGX. For more info about all this, visit https://digix.global/
In the meantime, I as always, strongly suggest that you trade some Fiat for Gold and Silver while your Fiat still has perceived value.
Rudy J. Fritsch