Thinking of making a new coin.

[LordJohn]

Ok, like the title says. I'm thinking of making a new coin but with a difference of it being backed by an asset. The asset I was thinking of using would more than likely be silver. My idea behind this is that at least then there is some actual starting value.

Any thoughts from you guys. It's only a thought at the moment just trying to gauge what the interest in such a coin would be like.

[1715102976]

1715102976

[Rofo]

Good idea and currently explored by many. The key thing to remember is, depending on which country is your primary residence, the second you back a cryptocurrency (even in an unregulated market such as this where anything goes) with gold/silver things can change. Historically and theoretically, in some countries the second you officially or semi-officially 'back' a digital currency or currency-like service (tokens, digital, crypto., whatever) with gold/silver it gains a different level of legalities and regulations (often simply made illegal) irrespective of the current cryptocurrency market.

This fact is overlooked by many or not mentioned on purpose, generally because those touting it are completely oblivious to legal and real requirements, are running a pseudonymous coin that's acting in a grey-area or 'less restrictive' country (not something you can consider trustworthy/long-term/legitimate when it comes to your gold/silver), and/or have no intention of actually delivering anyway.

Edit: It also means you need to have the resources and desire to back a currency that's most probably going to be taken for a ride with your own gold/silver or that of others.

[LordJohn]

I'm from England. Will have to research into regulations.

Resource wise I should be ok with. I was thinking of setting it up with an initial amount and increase it over time as more is mined. The value may inflate over what is in storage but would never be worthless. Pretty similar to a good share/stock

[Rofo]

Good luck I know it's being explored and tried to varying degrees of 'success' by some coins here. Just be prepared to perhaps have paperwork, legal information, regulatory & laundering reporting requirements, etc. etc. crammed down your throat. Not sure on how it sticks in GB though. In Australia last time I did the research a cryptocurrency would gain official 'currency' standing if it were backed by gold. That would mean it & myself/others who use it would have to subscribe to the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006. Because BTC/alts aren't backed by something the Act isn't applicable (yet). I understand the US is even more strict, to the point most people in this environment would not want to even attempt it.

- http://www.austrac.gov.au/files/typ_rprt12_full.pdf

That being said half of this is open to interpretation and we'll probably see a lot more legalities/regulations be put into place for cryptocurrencies backed or otherwise.

[hashman]

Ok, like the title says. I'm thinking of making a new coin but with a difference of it being backed by an asset. The asset I was thinking of using would more than likely be silver. My idea behind this is that at least then there is some actual starting value.

Any thoughts from you guys. It's only a thought at the moment just trying to gauge what the interest in such a coin would be like.

There is no such thing as "backing" tokens (digital, paper, or any other) by physical metals.  People have had luck pretending that such an idea exists, so you could go that route if you are interested in fraud. 

Another option is to set up a company / entity that promises to redeem any tokens with the precious metal.  In this case all users are trusting the central company/entity to do the redeeming so there is no need for the decentralized structure of a block chain.  If this type of operation is what you seek (a la e-gold), you can make a better service without mining and an altcoin style ledger. 

[jaberwock]

What would happen if the value of the coin increases so much than the value of assets backing it?

[LordJohn]

The backing would be done through bullionvault. Or I could use bitcoin as a backing with the wallet being public and viewable.

I have thought about inflation of the price going over the asset value. It would be similar to a stock/share/company bond though with a positive net asset value.

For example:

The Company Bond starts with a value of £100. Market is good and news is positive for the company. The bond now trades for £150 but still only has a value of £100. However can also go in reverse market is in decline and bond now trades for £70 but still has a value of £100 when it matures and is cashed back in with the company.

It's just an idea at the moment and any thoughts are greatly appreciated be they positive or negative.

[KaChingCoinDev]

This has already been explored.

I believe MinaCoin tried to do this

[rapsaodan84]

What is your idea about trust?

I mean you'll need a very trusted escrow to hold the silver. Or think of a way to make the system trust-less.

People would worry about you selling all the silver away.

[Shibboleth]

The backing would be done through bullionvault. Or I could use bitcoin as a backing with the wallet being public and viewable.

I have thought about inflation of the price going over the asset value. It would be similar to a stock/share/company bond though with a positive net asset value.

For example:

The Company Bond starts with a value of £100. Market is good and news is positive for the company. The bond now trades for £150 but still only has a value of £100. However can also go in reverse market is in decline and bond now trades for £70 but still has a value of £100 when it matures and is cashed back in with the company.

It's just an idea at the moment and any thoughts are greatly appreciated be they positive or negative.

I know for a fact having dealt with BullionVault many times over the years, that they would have major problem with that idea. Also IMHO backing of an alt coin with physical assets crosses the Rubicon for many regulators. For starters if you where using silver, there would be VAT implications within the UK.


I applaud you for thinking "out the box" but the FCA, SFO and HMRC would be all over it.   

[LordJohn]

Hmmm, just had a look into Minacoin and E-Gold and I think I need to go back to the drawing board with this.

Many thanks for your thoughts and comments.