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Author Topic: CryptoGold  (Read 1725 times)
DariusAsh
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March 19, 2012, 10:30:15 PM
 #1

Gold coins used to be a form of money, but one problem with them is that they are not easily divisible, and they can be troublesome to handle.

Bitcoins can be a form of money, but is not recognized by many outside this community as worth anything. One common argument is that it is not backed by anything.

So, how about an alt-cryptocurrency backed by gold. 1000 units of it would be equal to 1 ounce of gold (so right now 1 CG would be equal to about $1.60).

I could see this implemented in one of three ways:

1) A central banker holding physical gold and paying out physical gold to anyone who brings him 1000.
2) A central authority who will dispense 1000 units to any individual that holds a single ounce of gold that they are willing to pay out on demand to anyone. This class of person we will call a reservist, and they will be well vetted, and keep an account of gold available to exchange for units. They will have a limit of some amount that they will be liable for (maybe 10 ounces) and be selected so that they are spread out throughout the world. When they pay out a gold coin, it will only be done when the units are sent to an address that in essence destroys them.
3) Any holder of gold can become a reserve bank, and create a sub chain with a certain amount of units in it that will be exchangeable for their own gold. The software client handling transactions would have to be able to deal with the mixes of multiple subchains.

The third one seems to be the least centralized and would allow for any number of holders of gold to be agents that could exchange units for physical gold. They would have the advantage of being able to use their physical gold as currency, and spend it around the world and in whatever small quantities they feel like.

The biggest issues with all three methods is trust. Why accept any units of cryptogold unless you can trust that you will get paid out at sometime in the future for them. The person issuing them could be evil and never pay out, or could experience a theft or loss of his gold, or could just up and die leaving his inherited liabilities in question.
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March 19, 2012, 10:49:09 PM
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Yeah, you've basically nailed why decentralized cryptocurrency backed by gold can't really work (as far as anyone knows). Sooner or later, there has to be someone willing to cash in your coins at their "face value", and then you have to trust them to actually deliver. At which point, there's logic to just making it a currency instead of a cryptocurrency (e.g. Pecunix).

If there is something that will make Bitcoin succeed, it is growth of utility - greater quantity and variety of goods and services offered for BTC. If there is something that will make Bitcoin fail, it is the culture of naive fools and conmen, the former convinced that BTC is a magic box that will turn them into millionaires, and the latter arriving by the busload to devour them.
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March 20, 2012, 01:06:16 AM
 #3

Bitcoin's greatest strength is that it has no counter-party liability... there is no need to trust anyone.

Compare that with any system where the money is "backed", and you'll find there is counter-party liability and a requirement of trust.

"Backing" Bitcoin with any asset defeats the purpose of Bitcoin. Bitcoin doesn't need backing, for it is its own commodity (just like gold doesn't need backing, for the same reason).
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March 20, 2012, 08:36:06 AM
 #4

Forgive me, I did not read your entire post.  All I kept thinking was... there's a reason we moved off the gold standard...

Let's not move backwards.  Let's move forwards.  No need to "tie" bitcoin to anything.  We are what backs bitcoin!  We don't need anything else.

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March 20, 2012, 08:39:15 AM
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I had this idea a while ago too, if you choose to peruse it contact me please.

What you need is some kind of blockchain based Web of Trust. Instead of mining people are hired to "guard" the network, providing secure transactions. People claiming to posses gold must validate it (show it) to others in the area in their physical form in regular intervals.
So in order for it to work you must be able to meet with someone in your area. Some of it could be concentrated when a guard redeems his income for physical. (Could be some fractional like 1/10 oz, single ducat, sovereign, 1/4 oz...)

First they ignore you, then they laugh at you, then they keep laughing, then they start choking on their laughter, and then they go and catch their breath. Then they start laughing even more.
Bitinvestor
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March 20, 2012, 08:19:02 PM
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ElectricMucus, I think you might find this message from fellowtraveler enlightening:

https://bitcointalk.org/index.php?topic=64610.msg764337#msg764337

Those who cause problems for others also cause problems for themselves.
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March 20, 2012, 08:46:40 PM
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How is it that you're allowed to post here as a Newbie?

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March 20, 2012, 08:57:10 PM
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How is it that you're allowed to post here as a Newbie?

maybe it's allowed in this subforum because the alt-chain crowd burns identities fast Wink

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ElectricMucus
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March 20, 2012, 09:09:15 PM
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ElectricMucus, I think you might find this message from fellowtraveler enlightening:

https://bitcointalk.org/index.php?topic=64610.msg764337#msg764337

thanks,

I enjoyed reading that.  Smiley

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March 21, 2012, 09:18:08 PM
 #10

eGold all over again, stick to bitcoin its back by itself.

Will code for coins, python c#, php(+html, jss, sql) scripts can also pen testing(not a skid) PM me https://bitcointalk.org/index.php?topic=71889.msg813212#msg813212

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ElectricMucus
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March 21, 2012, 10:01:43 PM
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eGold all over again, stick to bitcoin its back by itself.
Not for you? I'm fine with that.

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March 21, 2012, 10:21:15 PM
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Bitcoin is backed by the power needed to mine it.
Okay idea though.
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March 22, 2012, 06:28:19 PM
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Bitcoin is backed by the power needed to mine it.

No it's not. At least not in any redeemable way.

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drakahn
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March 22, 2012, 11:53:46 PM
 #14

This idea (a backed cryptocurrency) has been thrown around a bit... in the end, you would need to always have gold ready in case every coin was cashed at once, you would need to be trusted, you would need a way to make sure none of the gold ever goes missing, i'm sure there would be taxes on holding that much gold, who foots the bill for that?

so many problems that the only solution would be to throw money at it, and the only chance for profit would be to risk the 'warchest', and you can't risk the warchest

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