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 values, 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. Meld gold crypto
In this post we look at Meld GOLD ( https://www.meld.gold ). On the official website, it is stated:
“We believe in the stability of gold as an asset, and we champion its role as the global currency of the future.
That is why we are so passionate about delivering a robust technology solution that can improve and amplify gold’s utility for businesses and customers alike.
Meld supports the entire gold supply chain, offering a safe, secure, and stable platform on which investors and industry partners can rely on.
Introducing the world’s highest-performing digital gold token. Securely buy, sell, and transfer gold backed digital certificates.
One Meld Token equates to one gram of the corresponding precious metal that is fully redeemable and housed in a network of secure vaults and facilities.”
Steve Kokinos, Former Algorand CEO and current Algorand Senior Advisor:
“Algorand’s layer-1 technology was designed to enable efficient and transparent transactions across different asset classes, maximizing value for everyone involved.
Working with Meld, we’re helping to modernize the gold industry and bring innovation that connects the physical and the virtual worlds.”
5. Red flags
A) Not responded to my request
On May 22, 2024 I had sent them request with questions.
I have not received any response, as of today.
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://www.meld.gold 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?
There are no answers on these questions on Meld Gold website. All blockchains which will not be ready for post quantum era before the Q-day will disappear after the Q-day.
C) Right to refuse
Meld Gold reserves the right to refuse, restrict or reject the issuing, transfer or redemption of Meld Certificates (including blacklisting your Ethereum or Bitcoin address) at any time at Meld Gold’s sole discretion.
D) No legal challenge
The Customer will not, in any way or at any time, challenge or dispute Meld Gold’s rights, title or interest in the Platform or any Modifications connected to, or of, those assets.
E) Assets in not active accounts can be confiscated
If there are funds in your Account and there has been no activity in your Account for a period of time prescribed by applicable law, Meld Gold may be required to report such remaining funds in your Account as unclaimed property in accordance with applicable law. If this occurs, Meld Gold will use reasonable efforts to provide written notice to you. If you fail to respond to any such notice within seven Business Days of receipt, or as otherwise required by law, Meld Gold may be required to deliver any such funds to the applicable jurisdiction as unclaimed property. Meld Gold reserves the right to deduct a dormancy fee or other administrative charges in connection with these unclaimed funds.
F) Algorand (used by Meld Gold) was hacked
Algorand, which is used by Meld Gold, was hacked ($9.6 millions lost) and they were not able to find out exactly how it happened (see [8]). Also, Algorand Foundation CEO Falls Victim to X (Twitter) Hack (see [9]).
References:
[4] https://www.financialexpress.com/opinion/the-quantum-race-quantum-day-2025-has-ignited-a-global-race-reshaping-computing-and-cybersecurity/3399085/#:~:text=Projected%20for%20as%20early%20as,data%20transmitted%20on%20public%20networks
[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
https://blockchain.news/news/algorand-wallets-hacked-again
https://cryptoslate.com/algorand-blasted-over-inaction-on-ongoing-wallet-drain-hack/
https://www.blockhead.co/2023/03/09/a-truly-difficult-time-algorand-releases-hack-statement/
[9] https://dailycoin.com/algorand-foundation-ceo-falls-victim-to-x-twitter-hack/
