1. The main problem of fiat based cryptos
The most famous and popular cryptos (btc, eth, etc.) are based on fiat money (see [1]). Even the title of the famous paper has the following meaning: “bitcoin is a digitized on blockchain fiat currency”.
Here is the famous paper https://bitcoin.org/bitcoin.pdf"
Let us look on the title “Bitcoin: A Peer-to-Peer Electronic Cash System”. Cash means -fiat currency. Electronic cash means -digitized fiat currency. Peer-to-peer system means -blockchain. If we put all pieces of the puzzle together then we get that bitcoin is a digitized on blockchain fiat currency. In other words, all cryptos (over 27 thousands), which are not backed by hard assets (gold, etc.) are FIAT money in a digital form. For this reason, they can not be a hedge against inflation of other fiat money (in variety of different forms).
People buy cryptocurrencies using fiat currencies and wait for their price to rise. They will be disappointed, because when cryptos reach millions in fiat money these millions will be worthless, like in Germany during hyperinflation on in Zimbabwe (when many people had useless millions). Think about a crypto coin as a bag with fiat money. The amount of money in the bag is equal to the price of this coin. The higher the price, the more fiat money is in the bag. But, when fiat money are useless (hyper inflated) it does not matter what amount of useless fiat money is in the bag. Therefore, it does not matter if bitcoin price will be million or billion in fiat money if fiat money will be useless.
Only cryptos backed by hard assets (gold, etc.) will preserve wealth, because if you redeem gold backed crypto on physical gold you will have the physical entity (gold) with intrinsic value, which can not be inflated to zero as fiat currencies. See [7] on historical performance of gold during long periods of inflation.
2. Advantages of gold backed cryptos over physical gold
The first obvious advantage of gold backed cryptos over physical gold is portability/transportability. You do not need to take with you bags with gold when you are moving, relocating, or traveling.
The second obvious advantage of gold backed cryptos over physical gold is a speed of conversion to fiat or other crypto currencies.
The third advantage of gold backed cryptos over physical gold is availability of two ways to increase wealth. The first way is from appreciation of gold over inflated fiat currencies. The second way is from profitable trading during speculative bursts (see [2]).
3. Disadvantages of gold backed cryptos over physical gold
The first disadvantage is a counter party risk. This is a risk that the counter party will not deliver gold to you.
The second disadvantage is a technological risk. This is a risk that due to an error, malfunction, etc. some or all of your cryptos will disappear and then you will not be able to redeem them to real physical gold.
4. GoldCoin crypto
In this post we look at GoldCoin (https://goldcoin.com/ ). On the official website, it is stated: “The Digital Gold Standard has arrived!
Introducing GoldCoin- an ERC-20 gold-backed cryptocurrency that is built on the Ethereum network. Purchase gold instantly in a safe, secure and anonymous method that gives you total economic control and freedom. Established in 2010, we here at GoldCoin believe in the principle of sound money. And it is this passion that has led us to come together to create a financial asset that gives everyone access to free and honest money in the form of digital gold.
The team is made up of an eclectic group of individuals with considerable experience in traditional finance, legal, IT, international banking, cryptocurrency and blockchain technology. Our goal is to create a highly accessible, liquid and easy-to-use gold -backed digital asset that gives the investor direct exposure to physical gold while enjoying the flexibility of frictionless money.”
5. Red flags
A) Failed attempt to contact
On their website they claim to have “a World class customer support team that is available to assist you 24 / 7 with any questions you may have about our products and services.”
On May 20, 2024 I had sent my questions to them.
As of today, I have not received any answer.
B) Not ready for post quantum era
The majority of credible experts made public statements that the Q-day is very close (see [3-5]).
I have not found on https://goldcoin.com/ site any document which gives answers on the following important questions:
1) Which post-quantum encryption algorithms will be used to secure their post-quantum blockchain?
2) When the post-quantum blockchain will be operational?
Except Vitalik Buterin’s proposal (see [6]), there is no any publicly available document which addresses the Q-day problem. There are no answers on these questions on GoldCoin and Ethereum Foundation websites. All blockchains which will not be ready for post quantum era before the Q-day will disappear after the Q-day.
C) Fees are arbitrary and can be changed anytime
They have different types of fees, but do not provide exact numbers.
D) Trust score is low on scamadviser.com
Scamadviser.com gives low score.
References:
[5] https://dynpass.online/pqc.html
[6] https://blockchain.news/news/vitalik-buterin-proposes-a-quantum-resistant-hard-fork-for-ethereum-
[7] https://www.youtube.com/watch?v=NpNhXl714gk
