For centuries, gold has been heavily relied upon in economies around the world, prized for its cultural symbolism and financial worth.
Addressing the World Gold Council in 2017, former Federal Reserve Chairman Alan Greenspan stated that he “viewed gold as the primary global currency.” He further explained that gold and silver are the only assets in the world that have “intrinsic value.”
This is one of the main reasons why the United States decided to create the gold standard in 1792, backing their newly minted dollar currency and joining countless others who relied upon the strength of gold bullion to provide stability and insurance against potential market volatility.
While the gold standard is rumored by many to have failed society in the 19th century, Greenspan believed that the true culprit behind gold’s downfall was politics.
“World War 1 disabled the fixed exchange rate parities and no country wanted to be exposed to the humiliation of having a lesser exchange rate against the US dollar than it enjoyed in 1913,” he explained.
This resulted in economies abandoning the very insurance that they initially sought out, leaving them vulnerable to market fluctuations and uncertainties.
While society has begun to depart from pegging physical gold to global currencies, disruptive technology like blockchain is starting to bring new life to the asset as it regains its former glory as the world’s greatest currency and investment.
Here is how blockchain technology is driving gold innovation to new heights around the world.
When it comes to valuable assets like gold and diamonds, it’s essential that proper security is in place. One of the historic drawbacks of trading and investing in gold bullion was the logistics behind storing and transporting the physical asset without risking its value or safety.
Blockchain technology gained its following primarily from the industry-changing security and transparency that it provides various systems.
Each blockchain network’s digital ledger is cloned multiple times on numerous computers called “nodes”. Once an aspect of the blockchain network is altered, the nodes verify that the change is valid before it is approved. Since they all collectively agree on a shared history at all times, there is no chance for human error or tampering.
The digital ledger is public to all users and records alterations in real time, ensuring fraudulent transactions can’t be performed without others noticing. In addition, the decentralized nature of blockchain technology protects systems like gold supply chains from external threats. This is because unlike the complex systems featured in most banks and financial institutions, blockchain technology doesn’t have one single point of failure.
Tampering with blockchain-powered systems is extremely difficult since it requires what is known as a “51% attack”, which means that it takes the majority of the users hacking the system simultaneously to succeed.
Blockchain security has clear applications in protecting physical and digital gold and is helping to provide new innovations to the legacy asset. Combined with gold tokenization, blockchain technology, and its advanced security can facilitate the digital transfer of gold assets around the world without fear of security breaches.
In various industries, blockchain technology has drastically redesigned processes that once required third-party verification, significantly streamlining operations.
For instance, in the case of the finance sector, blockchain technology removes the need for banks and other financial institutions to facilitate the sending and receiving of funds from one individual or business to another. Not having to rely on financial institutions cuts costs, saves time and provides the ability for businesses and individuals to be more autonomous.
Together, blockchain technology and gold tokenization provide a digitized platform of trust that makes investing and trading in gold easier than ever before. Once a token or coin is issued with a value that it represents — one coin equals one gram of gold as an example— it can be traded like any other currency, while the physical asset stays stored in a secure location.
This is a similar convenient setup to the debit and credits issued by banks and other financial institutions, except it’s built on the intrinsic benefits of gold bullion.
One advantage that gold tokens have over other currencies is that they are pegged at a certain value of gold. That means that while a gold token could have high demand which results in an increase in value, the lowest the price could go is the value that it represents in physical gold.
On the other hand, traditional currencies that aren’t protected by assets with intrinsic value like gold and silver are vulnerable to hyperinflation and other market effects that could entirely diminish the value of a currency.
A prime example of this can be seen with the Zimbabwe dollar. Without a strong foundation to base the value of the currency upon, Zimbabwe’s paper bills became virtually worthless, resulting in 79.6 billion percent inflation at its peak in November 2008.
Essentially, gold tokenization provides a built-in stop loss that shields gold owners from asset depreciation and market volatility.
When it comes to valuable assets like diamonds and gold, undoubtedly proving important factors like grade, ownership, and origin can weigh heavily on price and rarity, particularly as these precious metals become more scarce over time.
This is why companies and institutions around the world are investing in blockchain technology to provide additional assurance and clarity as assets travel along complex global supply chains.
By 2019, the London Bullion Market Association (LBMA), considered one of the global authorities on gold and its corresponding international trade market, is planning on tracking the world’s supply of gold bullion using blockchain technology. This illustrious organization represents some of the world’s largest gold miners, refiners and investors, and is coordinating with these partners to establish a set of standards for ethical blockchain-based gold tracking.
Blockchain technology is the ideal solution as it can be relied upon as a platform of trust that has no bias to any particular party.
By tracking and recording each gram of physical gold as it travels from the mine to its final destination — whether its a jeweler, manufacturer or everyday consumer — blockchain technology establishes a proven asset value that is immutable and auditable.
This removes any risk of fraud that was formerly associated with purchasing assets like gold and diamonds, opening the global market to greater access and uses for physical gold.
Making Gold the Most Liquid Asset on Earth
Gold remains one of the world’s greatest assets. With the disruptive nature of blockchain technology, the legacy asset is reminding the world why it has been relied upon for centuries.
G-Coin understands the value of gold. That’s why we’re harnessing cutting-edge blockchain technology to reinvent the way that gold is used for payments and investments.
We’ve engineered gold tokens that are digital certificates to real physical responsibly-sourced gold, allowing owners to use each G-Coin token as a store of value, redeem it for physical gold, exchange it for currency, or spend it on a purchase.
Plus, we use the most advanced blockchain technology to track gold as it travels from mine to refinery to vault, ensuring origin, provenance, ownership, grade and more.
Our Responsible Gold supply chain relies on Ethereum-based smart contracts, robust anti-money laundering, and fraud compliance to promote end-to-end visibility and ensure your gold is protected at all times.
G-Coin allows users to bypass the antiquated financial institutions with their volatile currencies and their outdated international payments rails. Our digital gold tokens are a stable currency with zero transaction fees and settlement within seconds.
Contact us today and experience the future of payments and investments.