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. Tether gold crypto
In this post we look at TETHER GOLD. On the official website (https://gold.tether.to/faq) it is stated: “Tether Gold (XAU₮) is a product developed to combine the benefits of physical and digital assets by allowing its holders to own physical gold in the form of a digital token.
Launched in 2020 by TG Commodities Limited, Tether Gold (XAU₮) is a stablecoin that provides ownership on a 1:1 basis of one fine troy ounce of gold on a physical bar of gold that meets the Good Delivery standard of the London Bullion Market Association (LBMA). This technology allows access to a stablecoin that provides ownership of physical gold while avoiding the drawbacks associated with physical gold, such as high storage cost and limited accessibility.
Note: XAU₮ tokens can be fractionated up to six decimal places (i.e. in increments as small as 0.000001 troy fine ounce).”
5. Red flags
A) Restrictions on users
Not all persons (including US and Canadian persons) are able to open accounts on their platform.
B) Limited delivery options
Gold delivery is only within Switzerland. The only other option is to cash out in US dollars.
C) Failed attempt to contact
On May 19, 2024 I had sent my questions to them.
I got a confirmation that a response will be within 24 hours.
As of today, I have not received any response from them.
D) 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://gold.tether.to 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 Tether Gold 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.
E) Verification fees
There is $150 verification fee to verify information a user submit.
F) 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
