If by 'backed by gold' you mean physical gold, then how would you propose funding the acquisition of any where near enough gold to be able to back the goldcoins?
Similar to Bitcoins, the largest number of Goldcoins that could ever exist would be 21,000,000. Since above I defined the exchange ratio to be 1000 goldcoins for an ounce of gold, the most gold that would ever be necessary is 21,000 ounces of gold which is just a small fraction of the amount of gold mined each year.
The success will depend on the "strength" of the backing, and this is not addressed in your system.
If someone wishes to attack the currency, the first place is to attack the backing. So even if the backing hasn't failed yet, it stands to be very weak unless there is some mechanism to make it robust. Weak backing does not deserve the term backing.
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Figuring out how to set up anonymous, decentralized, guaranteed redemption is the hard part, not how to set up auctions and create the currency.
I agree that creating a good backing system is difficult, and I didn't address this issue because I am trying to convey a different point about the importance of backing. I also agree that the stronger the backing the better. This is precisely the point I am trying to convey, a stronger backing is better than a weaker backing and so even a weak backing is better than not having any backing at all.
That would mean that each bitcoin/goldcoin would have a fixed value and cannot rise in value as more people adopt it.
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And question, how would you decide how much gold each coin should be worth?
The amount of gold the goldcoins could be redeemed for would be set at a fixed value at the launch of goldcoin. In my example implementation above, I picked 1000 goldcoins for an ounce of gold to be this fixed ratio. However, this is not the maximum value of goldcoins as it is only their minimum value. In other words, 1000 goldcoins gets you an ounce of gold, but an ounce of gold may not necessarily get you 1000 goldcoins.
Bitcoin is ok as it is, no backing is necessary. You are free to create your own goldcoin or such, good luck.
I don't plan to create Goldcoin. I just wanted to use it as a thought experiment to make a compelling case that a Bitcoin clone that is backed by something has the potential to eat Bitcoin's lunch. The reason I mention this isn't to cause fear, but rather to suggest that it may be possible to slightly tweak Bitcoin so the current Bitcoin system could be backed by something. For example instead of giving the new bitcoins to miners who heat their homes with GPUs, you could sell the new bitcoins in an auction and use the proceeds to back bitcoins. In other words, instead of the proceeds of newly issued bitcoins going to pay electric bills and purchase CPUs which only benefit the Bitcoin users who like subsidized transaction fees, the new bitcoins could be sold and used to benefit Bitcoin users by backing their bitcoins.
kwhcoin: but what backs gold?
Two questions:
1. How do you want to guarantee redemption if there is no central responsible party (because if there were, it would not be decentralized)?
2. What is gold backed by?
I am assuming gold is backed by the many commodity uses for gold (i.e. gold is in cell phones, computers, automobiles, hospitals, and probably even GPUs, etc.)
The transaction system of Goldcoin would be identical to Bitcoin and therefore it would be just as decentralized. However, you are correct that the backing method I suggested would need to be run by a centralized responsible party.
Because of the security requirements it is very expensive to store gold. How will this be charged to the end user?
What if the backed gold is stolen? Isn't this simply a liability when compared to bitcoin?
Below are some excerpts from my original post that answer your two questions. The first excerpt addresses the gold storage issue with a 0.2% storage fee per year. The second excerpt addresses the failure scenario and how it is not a liability compared to Bitcoin.
“Lastly, anyone can redeem 1000 goldcoins at any time and receive the current value of an ounce of gold less a storage fee which would be around 0.2% per year starting from the launch of Goldcoin until the date the goldcoins are redeemed (i.e. if you redeemed your goldcoins in five years from the launch of Goldcoin you would have a little less than 1% deducted from what you got for redeeming your goldcoins).”
“However, in the disaster scenario where the Goldcoin system of auctioning goldcoins and redeeming goldcoins completely fails (i.e. government crackdown, gold gets stolen, etc.) then the backup plan could be to have Goldcoin automatically revert to the exact same system Bitcoin uses of awarding new coins to miners. In other words, the failure scenario for Goldcoin could be to revert to the Bitcoin system.”
you already have a representative failure of this concept; its called GoldMoney by James Turk.
i foresee a Bitcoin backed USD system in the long term.
Goldmoney has both a centralized backing system and a centralized transaction system. The Goldcoin system mentioned above would be different because it would have a decentralized transaction system identical to Bitcoin. Also, I don't think goldmoney has failed yet, and I believe you may be referring to e-gold as the digital gold currency that has failed due to a government crackdown.
