Gold has been a payment method for over 5,000 years and it is needless to say, that it is an important part of most if not all the cultures. Being the main means of payment centuries ago, now it competes with a variety of alternative payment mediums which emerged during the last decades.
Still, quite a large number of people choose to buy gold even today. For many people gold is kind of protection against currency devaluation and inflation, which mainstream currencies are more and more prone to. In other words, gold can be characterized as low-volatility asset.
However, along with this doubtless advantage of the yellow metal, there are some “inconveniences” which should be considered when buying it. First of all, depending on the type of gold (coins, bars, jewelry, etc.) it is sold with different fees imposed. This can lead to the situation when an investor loses up to 20-30% of the value of the gold due to fees, which may even surpass the return planned.
In order to soften this fee burden one may buy bigger bars, but here another problem arises: large bars cannot be liquidated in parts. Coins, in their turn, tend to have high transaction costs, which can be manipulated by a dealer by concealing their actual rates or fees. Jewelry, at the same time, is extremely volatile because of changing fashion trends. Trendy bracelet today may lose half of its price tomorrow if a new trend arrives.
Other great concerns when speaking about gold include its insurance, secure transport and (especially) storage.
One could store gold in the safe at home worrying about possible thefts and other forms of home invasion. Of course, it is rational to use the services of banks or other secure storage units especially when you are ready to be charged high fees.
Another potential danger for the asset is, strange as it may seem, the government, which, potentially, could confiscate it if such a need arises: for example in case of economic depression, war or other extreme circumstances.
Bitcoin and other crypto currencies held on a decentralized blockchain provide a solution to these problems – each transaction is recorded and kept, eliminating storage costs, and risks of loss. Du to network’s decentralized character, no financial authority can confiscate or freeze the assets stored.
For the context, yesterday Bitcoin broke its next all-time high of $4,200, with total market cap surpassing $135B. Today, according to the CryptoCurrency’s Market Capitalizations Index it is priced at $4159, which is three times higher than gold price per ounce, constituting $1285.14, according to the goldprice.org. It’s interesting to note, than not so long ago these two assets were of equal price.
However, it is quite true that Bitcoin as well as other crypto currencies are prone to rather high volatility which makes them risky. Sometimes there can be seen 10-20% swings daily.
To tackle the problems connected with gold ownership and cryptocurrencies’ volatility Singapore-based crypto project GoldMint plans to provide a solution.
GoldMint project plans to offer GOLD, a 100% gold-backed token, which is expected to make things better for cryptocurrency investors, according to the company’s press-release.
The new token GOLD takes the best from blockchain (transparency, security, cost-efficiency) and real gold (hedging capabilities, stability) to create a new crypto asset perfect for any investor to include in their portfolio.
GoldMint will ensure the coins value (which are equal to 1 oz of real gold priced according to LMBA rates) using paper (ETFs and futures) and physical assets. Additionally, GOLD holders will be able to use their tokens in guarantees, loans, and escrow services. GOLD will be subject to a 5% purchase and 3% sale fee.
GoldMint will also release MNT, its utility token used for operations, implementation of smart contracts, and for rewarding block creation and transaction confirmation. For facilitating the blockchain, MNT owners will receive 75% of the commissions taken from processing GOLD transactions. Initially, MNT will be sold and distributed on the Ethereum blockchain, according to the company’s blog.
Several technological advancements will be incorporated into its project:
- Custody Bot, used for inspection, temporary and long-term storage, and transfer of physical gold, jewelry, coins, or gold bullion.
- Graphene based PoS blockchain will be launched after MNT is distributed to make the process safer, more productive and faster.
- own custom API, used for the development of third party apps and other interfaces.
Detailed information about GoldMint’s ICO will be posted on August 20, 2017 at the project’s website.
Meanwhile, GoldMint project is not the first, who intends to connect gold and cryptoassets: earlier this year Euroclear, a leading provider of post-trade services, and Paxos, the blockchain platform provider that focuses on revolutionary solutions for global financial institutions, completed its first pilot trades to adopt the blockchain technology for the London bullion market. The platform is expected to bring instant settlement and simultaneous delivery versus payment to the London bullion market, reducing risk and capital charges incurred under the current process.