Bitcoin Forum

Good day, guys.

A couple of projects are already proposing the issuance of asset-backed cryptocurrencies. Just like the era of the gold standard, cryptos could be backed by any popular commodity, real estate, precious metal, etc. The advantage is that it solves the problem of extreme volatility associated with purely speculative risk assets like Bitcoin, this factor has prevented many big players from investing in Bitcoin. Bitcoin still have its upsides, regardless. But in your opinion, I am very curious to know, will Bitcoin dominance be threatened should asset-backed cryptocurrencies begin to gain widespread adoption?

Asset backed cryptocurrencies are already a thing and there are many projects already launched in that field.

The disadvantage is that it is usually centralized, the asset in which it is backed in is kept in reserve and in control of a central authority. There have been cases of such projects team failing to make their audit reports public.
Also note that the volatility and speculative quality of Bitcoin is what makes it viable as an investment option. A currency backed by an asset promises stability, this is useful for making transactions but not as an investment.

No. Bitcoin is an asset-class on its own and has advantage of decentralization and immutability. Asset backed cryptocurrencies may become more popular for effecting transactions, but cannot replace BTC.

Can you mention any asset-backed crypto you know? I'm not thinking about stablecoins like USDT and PAX, they are just another dollar. I'm thinking of crypto that mirrors the performance of a real-world commodity, in the same light that the S&P 500 index tracks the top 500 U.S stocks. The closest project I can think of that has proposed and currently building something in this direction is AXIA... I am very much interested in knowing other projects doing same thing or something similar.

Digix (DGX) it's a digital currency backed by gold and mirrors it's real time price. One token is equivalent to a gram of gold.
You can research on digital currencies backed by physical assets to get more options.

Sure I will check it out, thanks

Before that Aurum is the first one to do that http://www.aurumcoin.com/ if i remember I stumble them back 2015 when I am not yet active in Cryptocurrency, just checking from time to time,  I just saw them launch a bounty campaign way back, I hope they can launch a campaign.

POW cryptocurrencies have different value propositions than the stablecoins, so I think it won't affect Bitcoin. The evidence is there if you look at USDT, TUSD, USDC, etc., and yet Bitcoin is still the king of all cryptos. One of the most important things is trust. Bitcoin doesn't require users to trust the central authority. Asset pegged coins still need users to trust and audit the issuers.

Bitcoin will not be threatened by those "asset backed' cryptos. There's no difference from those kind of cryptos from the ICOs that we have. Do you remember how many of those projects a few years ago claimed to be financially backed up, preciuos metals backed up and even real estate backed?

There were many of them but look hey, most of those projects are no longer existing today. They probably are existing but to not the point that they still have liquidity. They exist as a coin but no volume, not liquid.

Yep, and those are just lies to get the unknowingly and gullible investors. But the thing is we are talking about currency here, on which case people does not use bitcoin as a currency but rather as an investment. If there is a threat that you guys are talking about, that would be the CBDC centralized yet there is a certainty on the price that we can use best for daily living. I used to think that bitcoin will be the future and universal currency, but as we go into time it seems like there is another way than bitcoin.

It's futile to look back at non-existing projects, we already know what did the turn of events do to it, basically it uncovers the curtain of a possible weak foundation of the future.

Bitcoin doesn't necessarily have to be backed by those assets (esp gold) in my opinion. It is special in its own way. It's hard money like gold.
You could however create tokens within a cryptocurrency network to properly back virtual/physical assets... and they would be specially designed for that purpose.

When I think of asset-backed crypto, usually don't look at those backed by USD or another currency... I am looking at the possibility and dominance of a cryptocurrency backed by real-world assets such as real estate, precious metals, and other commodities. USDT aside, how will the world fare with an asset-backed cryptocurrency?

Am I the only one witnessing more threads related to asset-backed coin's adoption on random sections?

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We already have the assets and we are using the gold,silver or other assets as medium of exchange before fiat was introduced and even in the beginning fiats were printed based on gold reserves but now there is no end to the printing so asset backed currencies are not the solution it just another idea to make investors fall for your projects.

I also don't consider that CBDCs are going to be a threat for bitcoin. It's like you are comparing seas and rivers, bitcoin is decentralized and CBDCs are government backed which means they're all centralized so, the difference of the two is still considerably enough not to make any comparison.

It's not that futile but OP have opened up about these "backed up" cryptocurrencies and we're used to it before. Those years from 2016-2018 and we have seen how they fell shortly.

The advantages are there but the challenges are there as well. We all know how they are dealing with USDT and even with that, something that is digital most of the time and just numbers on your bank account it wasn't 1 to 1 backed for a long time, now they claim it is 1 to 1 backed once again which I do not believe them but at least they say it is back. Now think of how hard it will be for gold.

Could you imagine a company making a coin that is 5 billion dollars in market cap? I mean that would mean they would have to have 5 billion dollars worth of gold on reserves to be 1 to 1 backed by it. I do not see any company being able to buy that much gold in any reason at all just to back some crypto. Is it theoretically possible? Yes, it is possible and legal, but it is going to take a lot more than just some ICO to make it happen.

Valid points there mate, that's why I feel crypto will struggle without the gov't involvement or some big players... that's the only way they could adequately back some large billions of cryptocurrencies without much sweat.

I mean -- threre really should be nothing wrong with cryptocurrencies being started that are backed by some sort of real world asset. The only issue that presents itself to me is the custodial risk of holding these real world assets.

Because in the case of holding securities like Real Estate, Bonds, Stocks, Gold, etc -- you're going to need someone to actually have ownership of these assets in the real world and for them to be held in a secure custody without the ability for any one party to remove the backed assets from custody.

I'd rather be holding some secure backed gold then secure backed dollars though. That's just me.

It's actually a topic worth talking about especially now that the world is on the verge of another financial crisis.

Asset-backed cryptocurrencies are bullshit since no one can grantee you that that asset actually exist. It is totally pointless. Why woudl you rather have a token representing 1 oz of gold instead of 1 oz of gold?

That is why there are banks with their safes.
Kdet is not so easy to get out of them.
Yes, I completely agree with you that gold is better than dollars and euros.
Gold, it will be gold. Despite no trouble. It will not depreciate. Even if the market collapses, then everything will stabilize and the price will return.

But do we gonna get any benefits from moving to asset-backed cryptos?

I don't find any reason for these asset backed cryptos to have existed here.

Volatility might be a problem but it is also the reason why there are a lot of people investing in crypto currencies mainly bitcoin. I don't kniw how it works but if that will silve the problem with volatility, then it will not be decentralized, isn't it? I will stay here, and as the other posts said, there are already some cryptos that are asset-backed.

The problem of assets backed crypto is that we still need a trusted central (3rd) party to manage the assets, which is a common enterprise, by definition. There is nothing new about it, and you can learn from the history of why it is full of shenanigans. Hence, it won't ever be used as currency.

For example, coins backed by gold, or commonly referred to as Digital Gold Currency (DGC). https://en.wikipedia.org/wiki/Digital_gold_currency#Providers
You might see popular names like Liberty Reserve is now defunct.

* In FIAT, you trust the Government;
* In POW crypto, you trust the math;
* In assets backed coins, you trust the issuers.

Gold is a commodity, meaning it's pretty much uniform, and yet the trusted 3rd party still showed incompetence. How can they manage such complex assets like real estate?

Right.
 Centralized currencies moving over to the digital world doesn't really pose a threat to well decentralized currencies on level playing field. They will probably be threatening to centralized "cryptocurrencies" because there isn't much difference.
The uniqueness of decentralized cryptos and their features are part of what attract "the right people" to crypto world.
Maybe we will see those who joined crypto for the wrong reasons move over to the centralized national coins

Yes, the threat should go to the stable coins and other centralized projects that claims to be that they are not. They are actually many of them but there's no need to mention those projects.

People will still go for centralized coins, they will feel safe in it and there's an approval from the government. As long as they don't understand how important it is and the difference of centralization and decentralization, they'll stay and choose to go for centralized coins like cbdcs.

We are all here, it will be interesting to see how all this plays out in the future

The game has already begun and some tokens backed by the commodity such as gold storage has already exist and it can solve the volatility because the price totally depends on the gold market.
We can also determine the result of the coin backed by the asset.

Bitcoin is more like a valuable and rare assets. It don't have to compete with stable type of coins. While stable coin can increase the crypto adoption and become the day to day trading coins with largest volumes and probably marketcap but bitcoin would still have it's place as the gold of cryptocurrency. The rise of stable coin doesn't threaten the dominance of Bitcoin.