Gold And The Blockchain – The Digital Gold Standard On Steroids

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I have been looking forward to write this post for a long time for it brings together two loves in my life, Gold and Bitcoin… The Eternal and the Upstart… But these two free market currencies will combine together perfectly to form the future of the global monetary system, and free Humanity from fraud and coercion addled Government and Central Banking… I will elaborate on how the physical/digital interface will work and how this leads to decentralized global price discovery on a mind bending scale… So to begin…

Centralization and Decentralization

In previous posts I discussed the Centralization Trend of the Twentieth Century, the bloodiest and maddest Century of History, and how that trend was now at an end… The new Trend is Decentralization… I will pick up from a point in that post, as to what comes next after the death of Central Banking, and quote,

“Gold and Silver… The eternal money the world over… But this time is different, right? Well, obviously not… Gold and silver will play a major part in the future of money… Precious metals are durable, portable, divisible, and have an intrinsic scarcity that cannot be created out of thin air by counterfeiting criminals, in short they make a perfect money… Gold (and Silver) is money… It is a hard asset that can be stored securely and you’ll always know it will be there when you need it, that it will always have value just because of its nature, something you will not be able to say about your bank account or the cash under your mattress soon… Gold (and silver) is your savings, your insurance policy, your pension, and your gift to your descendants all rolled into one

All that said, it should be clear that a purely physical exchange of gold and silver coins could only happen on a localized basis, and while gold and silver would most likely be exchanged globally, physical exchange of precious metals would be laborious and would very soon be rendered obsolete by superior methods in a global and increasingly decentralizing world… You have digital exchange of information, digital trade of physical and digital goods and services, but physical monies to facilitate all this exchange of both ideas, and production???!!! Well, obviously not… While you may hold the vast majority of your wealth in physical precious metals, if you want to exchange outside your locality, globally, you will need to cede counter-party risk and hold some of your physical wealth in digital form…” End Quote…

Let’s say you have one hundred ounces of gold as your unemcumbered personal wealth… These hundred ounces are held securely on your own person… Your gold is eternal, sovereign and totally independent of the machinations and manipulations of man made “Law”… Gold held securely on own property, is your sovereign private property, your savings… But what about your spendings? After all the reason you invest in gold is to protect your purchasing power no matter what, but to be clear it will eventually be to purchaseWe only produce and save in order that we may one day consume at least part of it… And here comes the drawback of trying to spend gold bullion physically… Even though one of the main utilities of gold as a money is its divisibility as a metal, we are talking about Twenty First Century life here… Shaving your gold (or silver) coins to pay for a cup of coffee or sending your gold coins through the post to purchase a large item in today’s globally connected digitized world, would be archaic and frankly absurd… But while you will struggle to spend your gold hoard physically, who says you cannot spend it digitally? All you need to do is calibrate your risk tolerance for ceding full sovereignty over your property… You are a conservative fellow, so you decide to allocate twenty ounces of your hundred ounce hoard, for spending digitally…

Now let’s be clear what you are doing here… You are sacrificing total sovereignty over your gold that you had by holding it on your person, for your ownership of it being held by a counter-party… And as the History of Banking will tell you only too clearly, when you have counter-parties you have risk… But you are willing to take the risk, because of the rewards of being able to spend your physical in any quantity or unit digitally… So where do you go to convert physical bullion into digital bullion?

Exchanges – Where Physical Meets Digital

An Exchange is exactly what is means, a place where you exchange… In this instance we are exchanging twenty ounces of physical gold for its equivalent digital value expressed in whatever currency you want to express it in… I have elaborated in detail in a previous post, why in my opinion blockchain technology will eliminate any major competitors because it eliminates counter-parties and risk and that also Bitcoin is currently THE ONLY globally scaleable blockchain, so we will be exchanging gold ounces for bitcoins

The Micro View – The Mechanics Of Individual Exchanges

There would only be two ways to invest in digital gold at your chosen exchange, either you purchase bitcoins to convert into gold, but seeing as you already have twenty physical ounces why not send them by recorded delivery in the post, and this is what I would expect to happen… You will in the future have either option, but either way ends up with you having ownership of physical gold at an Exchange… This physical ownership must be converted into digital ownership, and thus be instantly spendable on the Bitcoin blockchain… In order to hold this physical bullion digitally on the Bitcoin ledger, you need bitcoins, the currency

This is an extremely important point… If you are holding gold physically at an exchange, then in order to utilize it digitally (which is the whole reason your gold is at that exchange to begin with) you have to hold a digital currency against it… In other words you can’t only hold gold, you must also hold bitcoins of an equivalent value as its digital manifestation… That physical gold and digital currency will exchange at a ratio, and a price discovery point…

Understanding The Relationship Between Physical And Digital Scarcity

Gold is scarce, we know that… The scarcity of gold is its main utility as money (means of exchange, unit of account, store of value), and a scarcity that cannot be conjured away by counterfeiting Central Bankers… Gold has physical scarcity… Even though it is digital and electronic and ethereal in nature (like the electronic Fiat currency in your bank account if you think about it), the Bitcoin ledger also has a scarce currency… It is a currency that has been programmed and is regulated by algorithms and cryptography to be artificially scarce… Bitcoin has an artificial cap of twenty one million units (bitcoins), that cannot be expanded or printed by anyone, but can only be (costly) mined until the 21 million units are exhausted… We therefore have at a Gold/Bitcoin Exchange, the interface between physical scarcity and digital scarcity

To illustrate further, a simple thought experiment… We know the maximum cap of Bitcoin is 21 million, so let’s take that figure and play around with it… Imagine you have 21 million ounces of gold as the combined wealth that is stored in Exchanges on the Bitcoin blockchain which also has 21 million units of internal currency known as bitcoins, an ounce of gold therefore would exchange at one bitcoin, the exchange ratio and price discovery pointBoth physical and digital scarcity clear at 1:1… Now add another 21 million ounces of gold to the blockchain… You have 42 million ounces on the ledger, but 21 million is the maximum cap of the Bitcoin currency, which means that one bitcoin exchanges for two ounces of gold… Add another 21 million gold ounces and a bitcoin would exchange at three gold ounces, and so on… Even though you might consider gold infinitely more valuable per ounce than a bitcoin at any price, on the Bitcoin blockchain you are working with both mind numbing utility but also intrinsic scarcity, which is Marginal Utility, and the ultimate derivation of Subjective Value… The value of bitcoins is dependent on its utility and scarcity like anything else, physical OR digital…

So that is a brief description of an exchange at the micro level, a vault for storing physical bullion, while at the same time holding that physical value on a digital value platform, with the market clearing the exchange ratio between physical and digital scarcity… As I described in my last post, once you are on the Bitcoin blockchain (utilizing a decentralized internet) that is the end of your counter-party risk… There are no banks or clearing houses or any weak point that can be corrupted and taken over and used to enslave people… The Bitcoin blockchain is totally neutral and doesn’t discriminate with regulations and licenses, you have the same access to the platform as the biggest bank or exchange or whatever… The only counter-party risk you have holding your physical gold, is your exchange… So it is down to you as a responsible adult to do your due diligence on the exchange you decide to store your precious gold at, what storage and insurance arrangements they have, and your online trading and digital gold platform

If you would like an idea of how this Gold/Bitcoin exchange will look, then I advise you to check out Vaultoro and BitgoldThe first two of many in the blossoming precious metals blockchain space, they allow physical ownership of gold bullion, in digital form… Whether you are hedging your bitcoin price volatility by holding gold or just want to spend your physical gold digitally, these allow it fully insured and audited with a really slick online platform… This bodes very well for the future

From Micro View To Macro View – Scaling Up

We have our mechanics for one exchange (micro), so just scale it up for the macro… Imagine a hundred Gold Exchanges operating on the Bitcoin blockchain, all with physical premises, gold vaults, insurance and guards with machine guns, etc; but all trading, exchanging, spending etc, being done digitally, in bitcoins… This should be a pretty simple concept to grasp, that all these gold exchanges would CHOOSE to use the same asset ledger as each other to trade and clear settlement, for many reasons… Think of the blockchain as the SWIFT or the CIPS Banking System equivalents, but without the banks (the miners confirm transactions), without capital controls (have you ever tried moving money around in the Fiat System?! LOL good luck) or restrictions on amounts or destinations of funds, for virtually ZERO fees (as opposed to the criminal remittances and wire charges of the Fiat System)… The Bitcoin ledger is completely neutral and anti discriminatory so anyone can join the network, with no need for “Licences” (Think Banking) or “Regulations” (Government bureaucracy and shakedowns), which allows you the same platform as the biggest and most powerful exchanges, and FREE COMPETITION… No cartels, no price rigging, no centralized exchanges… No COMEX or LBMA paper naked shorting and criminal suppression of gold prices, because the Bitcoin ledger is decentralized it cannot be riggedFree Markets at last!!!

After scaling up the blockchain these hundred physical gold exchanges that now use it as their common digital trading platform, each exchange constitutes a price discovery point… Not a gold spot fix run by the Rothschilds, the CRIMEX, the LBMA, or the Shanghai Gold Exchange, but an independent (of the State) price discovery point… A hundred exchanges is a hundred price discovery points… Stretch your imagination and imagine a thousand exchanges, or ten thousand exchanges, or even a hundred thousand exchanges, and you will have a thousand, ten thousand, one hundred thousand price discovery points!!! The blockchain allows decentralized price discovery on an absolutely epic scale! If you are not familiar with Nassim Taleb’s writing on Antifragility, then look it up and grasp the concept… The blockchain (being a decentralized but inter-connected network of individual users) is the very definition of anti-fragile, and the antithesis of the Modern, Financialized, Cartelized, Centralized system which is controlled by a small Elite Cabal

Central Banking was bound to failure because it centralizes risk and moral hazard, up to the point (we are currently at) where the failure of ONE Central Bank will take down the ENTIRE Financial System… These clueless Central Planners have reduced the Global Financial System to Central Bank price discovery points, having printed clouds of “money” funding unproductive ventures and distorting price discovery to such absurd levels, that the collapse of less than two hundred Central Banks obliterates the price discovery mechanism of the Global Financial System! Blockchain technology distributes and decentralizes risk, by giving a value free platform allowing free competition for whomever wants to compete in that space, and so if one exchange fails (except for the unlucky few who stored their gold at the wrong exchange), then who cares? Even if there were a calamity (as is about to befall us) where two hundred exchanges (banks) collapsed simultaneously on the blockchain, would the other hundreds, or thousands, or tens of thousands of exchanges be affected? The answer is clearly, no… The blockchain as a decentralized asset ledger replaces banking with a trustless asset transfer system, thus distributing and decentralizing all risk from the centre to the periphery of the network, its billions of potential users… This is what anti-fragility and price discovery really looks like!

As I described in a previous post, the decentralization trend that began with the internet decentralizing information exchange first, leading to online commerce and decentralization of trade, would eventually inevitably lead to the decentralization of currency and financial system… While Centralization of Banking and Government will naturally lead to the centralization of industries and industry in fewer and fewer hands and in bigger and bigger behemoths, centralization can only take you to a certain point, this point being that the Federal Reserve and Petrodollar World Reserve Currency Status is the only “price discovery” point left in a world where too big to fail will inevitably lead to total fail… A decentralized financial system (Gold and Bitcoin in tandem) naturally leads to the decentralization of industries and industry in general, as the Elites cannot control, regulate, rig, pillage and consolidate power and wealth by distorting the free market into a fragmented, atomized, miserable socialist “nirvana”This will apply to the Gold Industry like any other industry… Exchanges will become more localized, mining and resources exploration will become more localized, and minting, storage, and everything else will become more localized… As Central Banking centralizes (and distorts) price discovery, the blockchain decentralizes (and distributes) price discovery, leading to efficient and sustainable capital allocation

Bitcoin Is The New Banking – A Simple Analogy

To reduce and clarify further, go back to the Origin of Banking… A bank originated as a storage facility for precious metals in exchange for a paper claim upon them, paper money… A pound note for example, was a paper claim upon a pound of Sterling silver, a five pound note a paper claim upon five pounds of Sterling silver, and so on… As time went by, these paper tickets were exchanged directly in the market as exchanging them directly for goods and services was more convenient than taking your paper claim to the bank to get your silver in order to exchange; in effect paper money was a derivative layer that superseded the exchange of the underlying physical… Now stop here, before we get into the financial crime of Fractional Reserve BankingAs long as the banker only issues as many paper tickets (currency) as there are precious metals stored in the vaults to back it (money), then gold and paper exchange at 1:1, in other words the paper money conserves the full purchasing power of the underlying physical (and very scarce) metals… As long as the bankers didn’t print more paper tickets (the financial crime of Fractional Reserve Banking otherwise known as counterfeiting), paper money made for a more efficient financial system than physical precious metals… Now just flip this more convenient paper currency, into a more convenient digital currency, Bitcoin… Now handcuff the banker and sabotage his printing press, making him unable to print more currency than he has money (gold) to back it, which is the mathematical and cryptographic nature of the blockchain… You have a virtually scarce digital currency running on an underlying scarce money (gold) exchanging at a certain ratio, but maintaining the purchasing power of both… Now remove the banker from the equation completely, because with blockchain technology you don’t need banks, it is designed to run without any need for centralized clearing houses… The monumental invention of Satoshi Nakamoto is really to eliminate human weakness in asset ownership and transfer… The biggest weakness of Banking is the human element and betrayals of trust and fraud that hurt ordinary hardworking people… Bitcoin doesn’t use bankers, it uses mathematics, cryptography and predictable and self correcting algorithms… It cannot be printed and it cannot be controlled for nefarious purposes… It works as an independent and incorruptible electronic ledger, that doesn’t require human control, thank God!

The End of Fractional Reserve Banking And The Death Of Boom And Bust

When Bankers engage in Fractional Reserve Banking, they create the Business Cycle and this perpetual Boom Bust Economy that blows up every seven years like clockwork and gets ever more volatile, extreme and unhinged… As described in a previous post this money printing leads to a mis-allocation of capital which will eventually have to be liquidated when the bust hits… Of course seeing as the Elites control the same Banking System that they pump and then dump (after positioning themselves financially to profit handsomely from both obviously), they are able to buy low and sell high thus enriching themselves at the expense of the REAL goods and services and property of everyone else, creating ever further centralization of resources and wealth and spiraling inequality until collapse… Unlike Fiat money Bitcoin has intrinsic scarcity (and maximum cap) and it CANNOT be printed… You have the combination of scarce underlying money (gold exchanges) and scarce overlying currency (bitcoins) which clear on a decentralized network of exchanges (price discovery points), which eliminates the Business CycleI will repeat that, in case that didn’t sink in the first timeBitcoin abolishes the Boom and Bust Cycle…  It is only by printing money (fractional reserve banking) over and above base money (whether gold or Central Bank Fiat) that an excess of currency is funneled into the economy leading to starting more ventures than the underlying savings of the economy can sustain and complete, in other words capital mis-allocation… The Bitcoin ledger and its internal currency cannot be printed or distorted and therefore the mis-allocation of capital and mass bankruptcies of depressing bust periods that is a direct symptom of fractional reserve banking, cannot occur

Just think of the profound implications of the end of the Business Cycle… And end to mass bankruptcies, the end of “recessions” and “depressions”, the effective and predictable decentralized and localized allocation of capital by property owners, businessmen and entrepreneurs… Market set Interest Rates, based on supply and demand of REAL capital (time preference), and not distorted by the actions of corrupt and greedy bankers… Make no mistake REAL interest rates would decrease over time with blockchain technology, but lowering interest rates would be as a by-product of the more efficient capital allocation and the increasing savings (capital) underpinning the economy, NOT lower interest rates because they have been suppressed (temporarily) by counterfeiting currency and creating mis-allocation of capital in the process; a crucial difference

Blockchain Technology And The End Of National Currencies

I have previously described Bitcoin as the only globally scalable blockchain at this current time, but this does not mean that it will be the only blockchain… You can have many blockchains that span local, national, or international economies, blockchains that are industry or sector specific, any type you want… These blockchains will scale to the respective size of the markets they occupy(economies of scale), and can also connect (through exchanges) to each other, but they will ultimately need to connect to a global blockchain to transfer wealth globally… So take the Bitcoin blockchain and scale it up globally to thousands of gold exchanges in numerous countries, all using the same platform, with one currency (bitcoin)… I told you that Bitcoin kills Banks, and this is just one more aspect… Forget exchanging and trading gold in dollars, euros, pounds, yen, and so on… Forget foreign currency exchange (Forex) and the incredible waste involved in exchanging currencies when crossing “borders”, and all the fat fees that banks are able to command for shifting wealth around a nationalized, communized, fragmented, archaic and moribund financial system… With Bitcoin, an exchange in Wales, or England, or the U.S. or Russia or China, would be using the same global platform, and the same currency… One world currency, but a digitally scarce, decentralized and incorruptible currency with no counter-parties, capital controls, fees… Physical ownership of property can be controlled by borders and Customs and regulated by whomever controls the monopoly over law and order (Government) within those borders… Digital ownership of that physical property that Bitcoin affords eliminates all those borders, controls, and regulations of what you can do and where you can send your own property

Blockchain Technology And FOFOA’s Freegold Thesis

Years ago I went deep into the writing of FOFOA and by extension Another, and Friend of Another… The Thesis of Freegold as I understood it was to demonetize gold from the financial system so that it could be freed and find its appropriate value, outside of Political and Elite Control… We all know why Elites and Central Bankers hate gold, because it is their kryptonite… Gold backing limits the printing of inflation and plunder of the people by the State (Elites), which is why eventually to fulfill its totalitarian desires, the State (and its Central Bank) has to unchain from gold as Richard Nixon did in 1971… But even after effectively outlawing gold as a medium of exchange with “Legal” Tender Laws and having banished the thought of barbarous relics and pet rocks from Academia and Education, gold is still a huge problem for the Elites… Gold is still a counter-party and politics free store of value outside of any Government Decree, and as such gold still has this hold over them… A rising gold price tells you that the Fiat System is inflating and robbing you blind of your purchasing powerSo not only do the Elites have to outlaw it, they also have to artificially manipulate its price downward, to give a veneer of respectability to their financial instruments of plunder… How do they do this? By destroying price discovery of the physical underlying scarcity, with layers of paper derivatives and shorts… The only way that this can be done is through centralized exchanges (Think CRIMEX and LBMA) and by centralizing price discovery in a handful of Government and Central Bank decreed “regulated” exchanges, so they can “regulate” the price of gold… Suppression of the gold price is perhaps the most important part of modern Central Banking, so to suggest that there is no manipulation of gold is laughable! But this soon will all collapse, and the price of gold will be freed far higher… How will this likely play out?

As Central Banking and Government “Legislate” the price discovery point of physical gold by drowning it in paper, so the blockchain will decentralize and free it… Put a hundred thousand Gold exchanges on the Bitcoin network, and allow the digital claims (bitcoins) that exchange against the underlying physical to give you REAL price discovery, and then some… A hundred thousand exchanges is one hundred thousand price discovery points, exchanging and trading on one global distributed network, global price discovery of the REAL gold value, expressed in bitcoins not Dollars, Euros, Pound, Yen… You will have price signals from every locality on the face of the earth connected to the same network, with price variables being arbitraged and traded away giving you a spot price, but based on hundreds of thousands of individual but inter-connected price signals… You want to know the REAL purchasing power of an ounce of gold, then the blockchain will find it for you, as long as you use it of course… While physical gold remains locked and registered in vaults, a digital trading layer on top transcends physical constraints and gives it unlimited virtual utility and value… Bitcoin is Freegold

What Is A Gold Standard?

The meaning of the Gold Standard should be obvious, a Standard for (global) exchange based on weights and measures of gold… With this Standard being controlled by Governments (Elites), it was corrupted and eventually abolished for Moar War, whether the End of Western Civilization and World War I (the Classical Gold Standard), World War II (Bretton Woods) or Vietnam (Fiat Petrodollar)… A Century after being debased by Politics, gold is about to be freed from Political Constraint and criminal manipulation, but there will be no Gold Standard to be clearThe Standard will not be based on gold, but on a digital standard totally independent of gold, utilized as a common resource for anyone who wants to hold or exchange gold globally, instantly, and freely from both control and feesSo Bitcoin will be the Global Standard on which gold will reach its full potential and expression

Bitcoin Is Far More Than A Gold Standard, Bitcoin Is An Exchange Standard

I dedicated this post to explaining and elaborating in detail how blockchain technology and Gold will work in a decentralized digitized Twenty First Century, but gold is only one commodityNow take all I have said about gold, and apply it to silver, and the Silver Industry, copper and the Copper Industry, platinum, palladium, zinc, iron ore, steel, and well, you get the picture… As blockchain technology frees gold and the Gold Industry from the price discovery distorting and destroying Fiat Central Banking System, so it applies to very other commodity, good, service or property of any kind that can be stored digitally on the ledger… Decentralized price discovery is now everywhere, in every industry… There can be no mis-allocation of capital except on the individual basis, which ends mass bankruptcies, business cycles, recessions, depressions, mass unemployment, and general all round misery for people who are FORCED to put up with this plundering and EVIL Financial System! The opposite of inflating and plundering Fiat, is deflating and benevolent scarce monies, but with Bitcoin being the Standard for gold AND every other commodity, it should be clear that Bitcoin will deflate at a far higher rate than gold, with an exposure to both giving a guaranteed (and rapidly) rising standard of living, and more time to pursue the finer things in life with the people that are important to you… I don’t care about Gross Domestic Product or the state of the macro economy, I care about the purchasing power of my investments… I believe that investing in scarce monies (both physical and digital) that are outside of a visibly dying Fiat Banking System is the biggest no-brainer ever, and when the System does collapse these monies will be revalued radically higher, and then I will be able to enjoy my hyper-deflating purchasing power… Soon enough

The Price Of A Bitcoin Backed By Gold

To get some grasp of how far higher Bitcoin has to scale for just the Gold Industry, I have come up with a figure taken from this World Gold Council article, which may or may not be accurate, of approximately one hundred and eighty billion in 2013… As we are engaged in a simple thought experiment, translate this Fiat value into Bitcoins… Let’s take the maximum cap of twenty one million bitcoins (21,000,000), and divide it by that hundred and eighty billion (181,000,000,000), which gives a value per bitcoin (expressed in dollars) of some eight thousand six hundred dollars ($8,600), and a near thirty fold increase in your purchasing power from current levels… That is one commodity in one sector of a global economy… Let your imagination run wild

Conclusion

Banking originated as a paper derivative layer built on top of physical precious metals, along the way started printing excess paper derivatives and got badly lost and corrupted… As a result it is about to die a nasty and very well deserved death to the absolute astonishment of the Professional (State and Central Bank Funded) Intellectual Class… The days of banks and whomever is crazy enough to still be invested in them, are over… The days of paper schemes controlled by fraudulent middlemen is over, now we have the blockchain, an asset ledger without the banks or the humans… An independent digital layer that trades on top of physical property, which anyone with a smartphone or laptop can connect to with a simple application download, and where all it takes for the biggest or the smallest gold business is to set up a sophisticated website and use bitcoin as their medium of exchange! It’s really that easy, and the best thing about it is, there’s nothing these insane Elites can do about it… You are not forced to use Bitcoin, but you can choose to accept it, which you would expect to happen as its utility and scarcity (rising price in Fiat) starts asserting itself and becomes more apparent, and as the utility and scarcity of Fiat vanishes into the ether…

People keep asking me what backs Bitcoin? It’s worthless, just another version of Fiat that will soon be controlled by the Federal Reserve, if it wasn’t already created by the CIA, bla bla bla… Well I’ll attempt to answer that question conclusively once and for all… At the moment all that “backs” Bitcoin is currency speculation and a small amount of merchants and enthusiasts that use it as a medium of exchange, with more recent uptake in the really bankrupt Socialist Banana Republics… We have endured a brutal eighteen month bear market, that has driven down the bitcoin price thus inhibiting further merchant and consumer adoption… You cannot blame people for shunning a currency that keeps stripping them of their purchasing power over time, especially one as volatile as Bitcoin… The late 2013 spike that may or may not have been manipulated by external actors (they control everything else, would it really surprise you?!) happened at a time when Bitcoin was too immature to handle it… There were only a handful of small Fiat to Bitcoin exchanges and the notorious Mount Gox to handle that manic speculation, and when Gox melted down the spike was pierced, Bitcoin died a million deaths in the Mainstream and Alternative Media, the price plummeted, and interest waned… Now it seems we are in the early stages of a new bull market for the currency, which will first be backed by more rampant currency speculation, but with a rising price will give merchants and users an increased incentive to start accepting Bitcoin alongside Fiat as a medium of exchange… We have a infinitely more mature and developed Bitcoin infrastructure consisting of Fiat/Bitcoin exchanges, remittance companies, big name merchants, not to mention the staggering increase in interest by the Legacy Banking System and card processing giants in Bitcoin and the blockchain lately… Increased use of Bitcoin as a medium of exchange will itself create a feedback loop that will increase the price as more seek to use it and save in it, further reducing the flow of available Bitcoins that the miners (the sole issuers of bitcoins) sell into the market, and driving up the price… So Bitcoin “backing” will morph from currency speculation to REAL goods and services… As I previously described, if you “backed” Bitcoin with seventy trillion (expressed in Fiat dollars) in global annual Gross Domestic Product, and divide it by twenty one million bitcoins, would give you a value (expressed in dollars) of over three million dollars a bitcoin, and a thousand fold increase in purchasing power from current levels… So what “backs” Bitcoin? Whatever you decide to back it withThere is an unlimited amount of physical property (goods and services, real estate, capital stock, gold, silver, and so on) that can be added to the blockchain, but that infinite physical property to trade on the blockchain must take a digital manifestation and can only be divided by the maximum cap of twenty one million Bitcoin units… All you need to understand is that as well as physical scarcity there can also be digital scarcity, and if I could be so bold as to state, digital scarcity can be infinitely more valuable than physical scarcity depending on what utility digital scarcity can give you over physical scarcityDigital scarcity renders borders, Governments and Banks obsolete, at the same time freeing your physical property from “Legal” counter-party risk

I could go on ad infinitum on this post, but I will conclude with this rallying cry for Gold Bugs; if you want price discovery of physical gold (as a guide I would look to how much the dollar has lost in value since 1913 and the Fed, down approx 98-99%, so revalue Gold a hundred times higher or a value of approx $100,000.00 per ounce expressed in today’s dollars) then the blockchain is the only way you will free it from the iron grasp of Central Planning… Like Gold, Bitcoin does not rely on Politicians, Governments or Bankers; it is a politics and banking free global decentralized price discovery mechanism, that will change everything… Freegold is Bitcoin, and Bitcoin is Freegold

[Post Script]

Further Developments in the Precious Metals/Bitcoin Space

Bitstamp Opens Gold Buying Service to European Customers

Precious Metals Dealer JM Bullion Accepts Bitcoin

Bullion Bitcoin To Launch Gold-Bitcoin Exchange (London)

Exciting times!

Bitcoin Donations Gratefully Received:

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12 thoughts on “Gold And The Blockchain – The Digital Gold Standard On Steroids

  1. Hi, One question I have is about the gold exchanges that would allow you to transfer to the blockchain or bitcoin. Wouldn’t those exchanges be tempted to do what the bankers of the 19th century did? They could use some of the gold in the exchange for other purposes other than backing bitcoins. How would that problem be addressed? Another great article. Thanks.

  2. Hi! Yes in my post I refer to due diligence when choosing exchanges and what arrangements they have for fully backing your bitcoins… At the end of the day this is a contract between you an your exchange, and a free market of competing private gold exchanges would at least give you a choice… I would also expect some kind of independent auditing system maybe becoming a standard voluntarily adopted by many private gold exchanges, in order to make themselves more transparent to gold investors…

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