Let's talk about backed (and not) Stablecoins - GOLD token 100% backed by gold.

[wwzsocki]

Simply stated 2019 was a stabelcoins year, so I thought it would be good to know more about them.

StableCoin is a cryptocurrency pegged to another asset, designed to minimize the volatility of the price of the stablecoin, relative to some "stable" asset or basket of assets.

IMPORTANCE OF STABLECOINS
Without both short-term and long-term stability, it is considered extremely risky for the mainstream public to adopt cryptocurrencies as a direct replacement for fiat or traditional assets. Larger mass adoption will always require some form of stability. From a consumer perspective, it’s risky and impractical to use cryptocurrencies for daily use. A volatile medium of exchange can compromise users' purchasing power.

Many people think about stablecoins that they are the crypto equivalent of fiat currency because of Tether (USDT) the first stablecoin which is pegged (1:1) to a dollar.
This is not true because stablecoins can be pegged to a cryptocurrency, fiat money or to exchange-traded commodities (such as precious metals or industrial metals).
I have to mention that there are also not backed stablecoins and I will explain it better later in the article.

Commodity-backed

Stablecoins backed by commodities such as precious metals (gold, silver, etc.) are much less likely to be inflated than fiat-backed stablecoins. It is harder to mine gold or silver than it is to "create money out of thin air." Holders of commodity-backed stablecoins can redeem them at the conversion rate to take possession of real assets. The cost of maintaining the stability of the stablecoin is the cost of storing and protecting the commodity backing.

The best example for commodity-backed stablecoin is GOLD (token) from the Digital Gold

GOLD is an Ethereum-based ERC20 token, convenient and instant way to store, buy, sell or transfer investment-grade gold. GOLD token is exactly what you need to purchase gold and store it digitally with complete anonymity and guaranteed protection of your assets from high volatility and loss of value. Each GOLD token is 100% backed by physical gold stored in a secure vault. Amounts of physical gold stored can be verified at any time. The Digital Gold Marketplace guarantees GOLD token's liquidity. An unlimited amount of GOLD can be purchased/redeemed on the Digital Gold Marketplace website instantly 24/7.
 

https://gold.storage/en/home

FIAT-backed

This is the common form of stablecoins. Fiat-backed stablecoin are fully backed by fiat money 1:1, meaning $1 of stablecoins is equivalent to $1 of fiat money. The idea is that their stablecoin is ‘backed’ by real fiat in real bank accounts. This category of stablecoins is indeed the most simple but also the most centralized. The best example is of course Tether (USDT) but today there are literally dozens of Fiat Backed stablecoins on the cryptomarket. Almost every infrastructural blockchain have issued their own stabelcoins already.

Cryptocurrency-backed

Stablecoins issued with cryptocurrencies as collateral, conceptually similar to fiat-backed stablecoins. However, the significant difference between the two designs is that while fiat collateralization typically happens off the blockchain, the cryptocurrency or crypto asset used to back this type of stablecoins is done on the blockchain, using smart contracts in a more decentralized fashion. In many cases, these work by allowing users to take out a loan against a smart-contract via locking up collateral, making it more worthwhile to pay off their debt should the stablecoin ever decrease in value. To prevent sudden crashes, a user who takes out a loan may be liquidated by the smart contract should their collateral decrease too close to the value of their withdrawal.

A prominent example of a crypto-backed stablecoin is MAKERDAO (DAI), project that has 2 separate coins: MKR & DAI. We will focus on DAI since it is a stablecoin-backed by other cryptocurrencies. Unlike other stablecoins, DAI does not rely on a centralized entity or third party since it lives completely on the blockchain. DAI is a decentralized, cryptocurrency-backed coin with a face value that is pegged to the US dollars.

ALL KINDS OF STABLECOINS

https://hackernoon.com/2019-complete-stablecoin-guide-0n9es3zab

I think that not many of you know that there are also not backed stablecoins which are worth to be mention here.

NOT BACKED STABLECOINS - redeemable in currency, commodities, or fiat money are said to be backed, whereas those tied to an algorithm are referred to as seigniorage-style (not backed).

Seigniorage-style coins - that utilize an algorithmically governed approach to expand and contract a stablecoin money supply, just like how a central bank prints or destroys money. As the total demand for the coins increases, new supply of stablecoins are created to reduce price back to stable levels. The main objective is to get the coin’s price as close as possible to USD $1.

A prominent example of a seignorage-style coin is BASIS.

Previously known as ‘Basecoin’, Basis is a stablecoin that peg its value to the USD through algorithmic adjustments of the coin’s supply. Price stability is achieved through the monitoring of various external exchange rates that are verified by an oracle system. If Basis is trading above USD $1, new stablecoins are created and distributed. If, however, Basiscoin is trading for less than USD $1, Base Bonds – which is another separate currency – are created and sold in an open auction to take coins out of circulation.

Hybrid StableCoin - is two or more of the crypto categories, (Fiat, Crypto, or Metal Collateralized and Algorithmic StableCoin Model) applied to one token.  
Hybrid StableCoin Model holds value partly being both the asset and algorithmic modeled.

Here the most known Hybrid StableCoins:


https://medium.com/@alyzesam/a-simple-understanding-to-hybrid-stablecoins-with-2019-complete-guide-2a9b55af1de2

https://gold.storage/en/home
https://hackernoon.com/2019-complete-stablecoin-guide-0n9es3zab
https://masterthecrypto.com/guide-to-stablecoin-types-of-stablecoins/
https://en.wikipedia.org/wiki/Stablecoin
https://medium.com/@alyzesam/a-simple-understanding-to-hybrid-stablecoins-with-2019-complete-guide-2a9b55af1de2

https://bitcointalk.org/index.php?topic=5218372.0

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[Aabcde]

Stable coins are good for most traders to secure their funds when the market turns red.
My focus is, where is the existence of fiat or commodities that are backed their cryptos? I mean where do they store their physical form?
I don't really want to find out more about stable coins, but the question above really makes me curious.

[wwzsocki]

...My focus is, where is the existence of fiat or commodities that are backed their cryptos? I mean where do they store their physical form?...

I hope, I understand your question correctly and will try to answer.

As you can see in my opening post I have provided an example of Digital Gold project and their GOLD stablecoin as a commodity backed.

Digital Gold use https://www.bullionstar.com vaults to store the physical gold which is pegged to the GOLD token.

Each GOLD token is 100% backed by physical gold stored in a secure vault. Amounts of physical gold stored can be verified at any time. The Digital Gold Marketplace guarantees GOLD token's liquidity. An unlimited amount of GOLD can be purchased/redeemed on the Digital Gold Marketplace website instantly 24/7.

I hope this answers your question and if I haven't understood you correctly, then please be more specific.

[Ucy]

Interesting.
If you ask me to choose any of the stablecoin, especially the one that will be most reliable, decentralized, can't be seized in the future or does not depend on fiat for stability... none really qualify but DIA is probably safer

[wwzsocki]

... none really qualify but DIA is probably safer

Do you mean DAI?

...MAKERDAO (DAI), project that has 2 separate coins: MKR & DAI. We will focus on DAI since it is a stablecoin-backed by other cryptocurrencies. Unlike other stablecoins, DAI does not rely on a centralized entity or third party since it lives completely on the blockchain. DAI is a decentralized, cryptocurrency-backed coin with a face value that is pegged to the US dollars...

Or something else?

[desticy]

Cryptocurrency secured by gold may very well become the best substitute for both regular currency and stable coins.
However, I am most confused by the centralization of such assets.

After all, without physical access to gold, we will only assume that this gold lies somewhere and, if desired, we can verify this.
But again, we have to trust third parties who can act as they like in the event of a collapse or a full-blown crisis.

[coinfinger]

You can't really "redeem" gold can you, I mean you can redeem "gold" on paper but when it comes to actual gold that you can hold in your hand, that would take a lot of time and effort and cost to actually redeem.

So the idea is amazing, hopefully it will take off and the company behind it is not as shady as Tether, however you have to understand why people are not entirely certain about how it can be backed by gold when its something physically possessed but digitally attributed to your name instead. Don't get me wrong, I really think the idea is a very valid idea, I wish all stablecoins would be backed by commodities instead of fiat because fiat always loses its value whereas commodities keep on gaining value over the years, yet that doesn't change the fact that people could still have doubts for a project like this.

[joinfree]

Wow, this piece was really worth reading! So much knowledge shared in this post and i am amazed when i thought all these currencies were backed tokens yet most of them aren't hmmm. In other words they still provide a hedge for cryptocurrency traders like myself in extreme volatile waves. Sometimes it hurts rather to miss the upward trend of volatility when you had converted your funds into stable currencies.

[wwzsocki]

Cryptocurrency secured by gold may very well become the best substitute for both regular currency and stable coins.
However, I am most confused by the centralization of such assets...

Indeed centralization is the biggest issue about stablecoins and if there will be finally a solution introduced to this problem, then such project can be very successful one day.

...without physical access to gold, we will only assume that this gold lies somewhere and, if desired, we can verify this.
But again, we have to trust third parties who can act as they like in the event of a collapse or a full-blown crisis.

I fully understand your concerns and I think that the most important thing to look at in such circumstances is the reputation of companies involved in storing and insuring of this physical gold.

When it comes to the Digital Gold project the company which is storing their gold in vaults is Bullionstar and they have really great reputation on the market.

Just read what people are saying about Bullionstar in their reviews all over the internet.

[wwzsocki]

You can't really "redeem" gold can you, I mean you can redeem "gold" on paper but when it comes to actual gold that you can hold in your hand, that would take a lot of time and effort and cost to actually redeem...

This is indeed the truth that in the Digital Gold project there is no way to redeem gold from the BullionStar vaults but this is only because of the very high costs involved.

If this will be cheaper and easy to do then for sure would be implemented but is really a pain to send real gold using available services and do it in an efficient and secure way.

[wwzsocki]

...In other words they still provide a hedge for cryptocurrency traders like myself in extreme volatile waves...

The GOLD token is exactly what you need to purchase "tokenized" gold and store it digitally with complete anonymity and guaranteed protection of your assets from high volatility and loss of value.

We are entering a new world of investing possibilities here. We are the first to put our hands on this tech and from what Iknow the first movers were are the most rewarded once.

Wow, this piece was really worth reading! So much knowledge shared in this post and i am amazed...

Thank you, I am happy you like it.

[xvids]

It is one of the greatest project that I have seen so far,
I hope that they wouldn't turn to be a scam project just like what most of the good project back then.
And proud to be part of their campaign for a couple of months.

[knuckey]

I agree that stablecoins don't have to be backed by dollars or fiat currencies, commodities like precious metals that you say are the right choice for that, because since ancient times similar things have been done, such as the Roman nation with gold coins, the Persian nation with silver coins and to this day continued by the Dinar and Dirham.

So stablecoins backed by gold are a good idea, another advantage is that gold prices tend to increase every year and are resistant to inflation. It's just that stablecoins backed by fiat are more popular, but it's only natural because he's a pioneer.

[wwzsocki]

...since ancient times similar things have been done, such as the Roman nation with gold coins, the Persian nation with silver coins and to this day continued by the Dinar and Dirham...

I fully agree with you and is enough to add that until FIAT money was backed by gold the world economy was in a much better state.

There was not so much debt and problems with rising inflation or economic crisis every 10 years.

From the moment that FIAT money was no more backed with gold, the money printing party started and is ongoing until today.


https://fbkfinanzwirtschaft.wordpress.com/2011/02/21/6-charts-which-prove-that-central-banks-all-over-the-globe-are-recklessly-printing-money/

[wwzsocki]

It is one of the greatest project that I have seen so far...

I understand that you are talking about the Digital Gold project and their GOLD token because this is the only stablecoin that had/has a bounty campaign on our forum to which I am also enrolled.

...I hope that they wouldn't turn to be a scam project just like what most of the good project back then...

I don't think this opinion past to stablecoins because as for now I haven't heard about a scam with a stablecoin project.

Of course, I don't think about Tether (USDT) and ongoing scam with market manipulation and money printing from thin air but an outright scam that some stablecoin project made, let's say an exit scam or something like this. Truly I haven't heard about something like this and I am talking about well-known stablecoins, so maybe there was a minor project which already started and scammed people just after. If this is the case then please let me know what for a project that was?

Still, you are right and the centralization of stablecoins is a big concern for users and to be honest, the best once are the most centralized once.

[Pffrt]

I think the project is a good one although most backed coins are not really backed by anything.

The project had a good bounty campaign. Will you mind to answer my question whether the above article was paid one or there was no financial motivation behind the article? Never mind. It seems a paid article to me.

[wwzsocki]

... Will you mind to answer my question whether the above article was paid one or there was no financial motivation behind the article? Never mind. It seems a paid article to me.

So are you asking me a question and don't want to hear the answer, looks like your own answer is more than enough?

No, it is not paid article, as you know Digital Gold bounty campaign doesn't offer such a possibility.

This thread is not only about Digital Gold and their GOLD token but also about MakerDao, Basis, Tether and all kinds of stabelcoins but many members noticed and wanted to talk about the Digital Gold token, which is very good, of course, because it's a good project, which is really worth attention  .

If you would do a little research before accusing me, you will see that I work and have worked in the past with many projects and maintained threads for them.
I do it already for a couple of years and never got any incentive. For me, enough motivation is to be invested in these projects. This is obvious, I assume, for every investor.

Additionally, as you know Digital Gold project offers a bounty for Ambassadors and to be one of them you have to do something for the project, so to mention them in my thread is a very good idea because Ambassadors are the people who spread the word about the project. I have already written a couple of articles about Digital Gold in two languages here on the forum and will try to spread the word further, maybe finally they will take me as an Ambassador.

So that was my motivation.


PS

WELCOME ON MY IGNORE LIST.

[Mighty_crypt]

My doubts about coins backed by gold will always be around just like i used to doubt A.I projects that have no proof that they have any Artificial Intelligence platforms or tools or machines, we are been only told that a certain coin is backed by real gold and that is not good enough to change a tough mind like mine

[wwzsocki]

...we are been only told that a certain coin is backed by real gold and that is not good enough to change a tough mind like mine

I advise you to read the discussion in the Digital Gold announcement thread because there are many questions like yours answered in detail.

Even here in this thread, you will find answers to your doubts "if the stablecoins are really backed by any gold?".

...Each GOLD token is 100% backed by physical gold stored in a secure vault. Amounts of physical gold stored can be VERIFIED at any time. The Digital Gold Marketplace guarantees GOLD token's liquidity. An unlimited amount of GOLD can be purchased/redeemed on the Digital Gold Marketplace website instantly 24/7.
 

https://gold.storage/en/home

...When it comes to the Digital Gold project the company which is storing their gold in vaults is Bullionstar and they have really great reputation on the market.

Just read what people are saying about Bullionstar in their reviews all over the internet.

As you can see almost all important websites and other pages are clickable in these quotes, so I advise you to check them by yourself to verify everything.

Believe me, I will not advertise this project if I would be not convinced that this is not a scam.

Of course, nobody can be sure 100% and in the end, there can be an exit scam but this is the problem with all centralized cryptocurrencies not only stablecoins like GOLD token.

[Tytanowy Janusz]

As i know tether is also working on stable coins backed by gold (https://cointelegraph.com/news/tether-launches-gold-backed-stablecoin-and-begins-trading-on-bitfinex). I wonder if they will steal "gold token" customers and dominate industry or will increase awareness of such assets and in fact bring more customers to gold token - those who are sick of tether scams and tether fud.

I like to see that you can now invest in gold by buying crypto asset but i think that it is only the beginning. We should see silver pegged stable coin, platinum, S&P500, NASDAQ, google share, Netflix share etc. Over a year ago i was writing about that while everyone was waiting for bakkt.

https://bitcointalk.org/index.php?topic=5091123.msg48962463#msg48962463

Why are so focused on listing bitcoin and other coins on regulated markets? We should focus on creating better trading/investing environment and make those old guys from wall street come to us.