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Bitcoin, Precious Metals, PAX Gold & The Future of Blockchain

By Thomas Wolf | Thomas Wolf's Den | 15 Apr 2023


The more I learn about the history of money, the more I’ve learned about misconceptions in the cryptocurrency space; this article is meant to fairly and accurately compare precious metals, a gold-pegged cryptocurrency, along with legacy and modern cryptocurrencies.

“A US dollar is an IOU from the Federal Reserve Bank. It's not backed by gold or silver. It's a promissory note that doesn't actually promise anything.” ~ P. J. O’Rourke


I long made note of the notion that all currencies are conceptualized, it is people believing the currency has a value that gives it value, but after looking more closely at use cases and other properties, as well as history, I no longer believe that is entirely true.

Gold is unique.  It is the only element used in virtually every industry known to humankind.  This is why gold scarcity continually demonstrates this precious metal as a several thousand-year-old proven store of value that ultimately coined the term, “The gold standard.”

The main historical figure that disagreed was Adolf Hitler, quoted as saying, “Gold is not necessary. I have no interest in gold. We’ll build a solid state without an ounce of gold behind it. Anyone who sells above the set prices, let them be marched off to a concentration camp. That’s the bastion of money.

Clearly, that didn’t go as Hitler had planned, and one should note that the Nazis loved gold, and Neo-Nazis still do.  The Nazis were also heavily involved in advanced sciences, which required gold to function.  I am not surprised at the blatant hypocrisy of such a sadistic individual or his fellow fascists.

Gold doesn’t get old, it’s durable and heavily resistant to tarnishing, it’s relatively portable for a physical (tangible) possession, and it’s fungible unlike NFTs (Non-Fungible Tokens), making it universally tradable for gold of equivalent value.  Gold is currently valued at $2,020 USD per ounce.

Gold is universally recognized and most importantly, it is not correlated with fiat like a pegged cryptocurrency such as USDT (Tether) while maintaining some of the most important use cases humankind has, therefore acting as a hedge against inflation, especially during uncertain economic times like the times we are going through now.

That is not to say gold doesn’t have its downsides.  Try sending your gold around the world with nearly no transaction fee in under a second; it is physically and financially impossible.  You also need to provide security for it while it is in your custody, making it easy to steal unless you are very difficult to steal from; unlike cryptocurrencies which use cryptographic encryption through all durations of all transactions.

Bitcoin is digital and is not required by any physical industry, so while tokenomics make it scarce over time, it has absolutely no value in the real world.  Gold is a human evolution requirement, Bitcoin is optional, and is already a far outdated cryptocurrency in terms of slow transaction finality and high energy consumption, among other things.

Silver shares many of the same properties, and in some ways is considered a better long-term investment due to being disproportionate in price with gold at a ratio of 1:8 gold to silver for the cost it takes to physically mine and mint.

Currently, silver is at around an 80 to 1 ratio with gold, which due to scarcity and its many use cases will eventually balance out.  It’s the perfect budget precious metal for holders and is also used in almost every industry humankind requires, especially since you can buy it in smaller denominations making it ideal for most forms of barter, a proponent of divisibility.

Knowing this, I thought a gold-pegged cryptocurrency such as PAX Gold (PAXG) which is backed by physical gold and routinely audited by trusted authorities, as well as sharing the properties of the old non-fiat US Dollar by being redeemable for physical gold would make for a perfect store of value.

The properties of PAX Gold that I think are superior to physical gold are divisibility, total accountability, and security.  The smallest denomination of gold typically sold is one gram, which is currently valued at roughly $65 to $70 USD.  An ounce of silver is currently running between $25.50 and $35 USD comparatively and can be bought in even smaller denominations.

I was able to purchase a dollar’s worth of PAX Gold on KuCoin.  This is relevant because a person cannot readily break down gold to easily pay for goods or services below that one gram amount, silver is ideal for that purpose due to its lesser value.

Imagine trying to buy a sandwich or a bottle of water with one gram of minted gold and what a headache that process would be.

While PAX Gold has 18 decimal places giving it an insane amount of divisibility, there is a major drawback that defies the point of such divisibility; it’s an ERC-20 token and is subject to Ethereum gas fees which are notoriously ridiculous and go well beyond the lowest denomination possible via its 18 decimal places just by moving it one time.

The famous actor Keanu Reeves recently stated in an interview with Wired magazine during the promotion of his new film John Wick 4 that he supports the idea behind cryptocurrency, stating “I think the principle, and the ideas behind an independent currency, are amazing.”

Reeves further stated, “To pooh-pooh crypto or the volatility of cryptocurrency is only going to make it better in terms of how it is safeguarded.”

These statements from Reeves demonstrate clear support for DeFi (decentralized finance) versus a centralized banking system while not promoting any one cryptocurrency in particular, a wise move to deflect the SEC.  I took notice of the use of independent gold coin minting in the John Wick films he is the star master assassin in, as well.

Some of you may know I am a survivalist.  As such, I follow some preppers.  One goes by the YouTube handle of “Canadian Prepper,” or CP for short.

CP routinely roasts cryptocurrencies and promotes precious metals, which is typical for preppers, and even brought a pro-crypto worker in (not an expert) from his company warehouse to discuss the differences with a precious metals expert.

The difference with CP is that he is right about most of the things he talks about after interviewing and consulting many renowned financial and economic experts.  I’ll grant him that, but sometimes people need a reality check from someone qualified on both sides of an argument.

Nate, the name of Canadian Prepper, recently had an interview with Lynette Zang, who has been the Chief Market Analyst at ITM Trading since 2002.

Zang theorizes that Bitcoin’s release in 2009 was a result of the 2008 housing crash (my family lost their home in that crash) because it encourages investors to put their fiat into digital currencies, therefore keeping the prices of precious metals lower for governments, banks and individuals in the know to purchase. 

Because Satoshi Nakamoto is anonymous, this theory cannot be ruled out.  Allen Taylor and I once discussed the possibility of Bitcoin being a test run for CBDCs as a real possibility, long before I heard this theory.  While I don’t suggest this is the case, it’s entirely possible Satoshi was a government (or even private sector) actor.

One thing I found interesting that was pointed out to me by a former Cryptowriter C-Level is that Satoshi Nakamoto uses two spaces between sentences, just like me.  As a top-honors STEM student, my English PhDs would have failed me had I not used two spaces between sentences as required for their format, but this is not a standard format for the entire world.

This is a writer's idiolect, the same type of writing behavior that led to the capture of the Unabomber, Ted Kaczynski.  Why would someone who was likely educated in the United States use an Asian alias, especially if they were an Asian American?

Kaczynski, a mathematical genius, was illegally searched and prosecuted and therefore under constitutional law should have been released via fruit of the poisonous tree, a legal precedent that says anything found using illegal search and seizure is forfeit in court.

Due to Kaczynski's extreme and violent nature, the government will never allow that to happen.  He is serving life without the possibility of parole in a supermax prison in Colorado, having unwillingly forfeited his right to appeal.

Some say all cryptocurrencies are a scam.  Most are statistically speaking, but this isn’t true at an open-source developer level, so the people who say this are simply ignorant of legitimate projects.

The rise in cryptocurrency scams has made early investing a far more dangerous gamble, which is not to say that exponential growth in cryptocurrencies won’t happen again.

I’d bet my life it most definitely will, however, most likely not during the harshest economic times the world has ever seen, soon to come via de-dollarization and through a continued war between the East and West with the potential to go nuclear.

Precious metals are immune to EMPs (Electro-magnetic Pulses), but crypto is not.  You may want to research Faraday cages!

I predict crypto will make its true bullish rise after the third world war is finished.  A war economy typically uses a large number of its assets for the war.  This has a lot more to do with current inflation than most would think.

The US government puts trillions into its defense budget without question while Congress and the Senate argue over millions and billions for things that should be no-brainers.

At the time of writing this article, Tom Bilyeu just put out an Impact Theory interview with Ray Dalio warning about the collapse of the US banking system, the US Dollar, and the upcoming recession - as if we weren’t in one already.

I am a fan of Impact Theory and Tom Bilyeu who started as a copywriter and a crypto advocate, who created and sold his first business for 1 Billion USD.  Now he spends his time interviewing prominent people (often authors) while aiming to help people empower themselves - Impact Theory is a successful business in itself, providing a wealth of information to the public.

Bitcoin is often touted as the digital equivalent of gold, a cryptocurrency store of value.  It isn’t.  In order to be a true store of value over time, the currency cannot be volatile or have hard percentage increases or decreases regularly, which BTC is well known for.

This is not an unpopular opinion, it’s just an important aspect of a currency that evades people in the crypto realm.  To argue any differently is to say that any cryptocurrency (or any currency for that matter) is a store of value which I used to believe, but I no longer view any that way, stablecoins included.

Stablecoins are pegged to fiat like US Dollars which have lost over 97% of their value since they were created and are subject to the same inflationary consequences for holders.

SPOT was an interesting attempt at creating a currency that stopped at a certain level of inflation, however, US dollars lost most of their value long before SPOT was created, and I do not see the tokenomics being able to survive the test of time for thousands of years, imagine the technology and software we will have if we manage not to go extinct in that amount of time.

People should also factor SPOT is an ERC-20 token that is subject to high Ethereum transaction fees and has no track record of maintaining its value like physical gold.  As my fellow Publish author and friend PVM has said, “The first $10 in SPOT is for the fee.”

Given the fact most tips on Publish come in the form of SPOT, readers are unlikely to hit that minimum anytime soon and it ultimately punishes writers too, especially those who cannot write for low pay routinely.

So, knowing all of this, what is the future of currencies?

Well, I believe if you’re interested in a true store of value, physical gold in your custody is the safest bet.  As for PAXG, I do not trust PAX Gold because it is not in my custody, and much like the saying we all know, “Not your keys, not your crypto” I have to say “Not in your custody, not your gold.”

As far as the future of cryptocurrencies, I have no doubt central bank digital currencies (CBDCs) will be a failure despite the fact we are in an almost entirely digital and cashless economy already.  CBDCs go against all that decentralized finance stands for and will never win the hearts and minds of those who want financial freedom; mine included.

I believe crosschains are the future of cryptocurrencies, as they are software and constantly changing, upgrading if you will, and in need of interoperability for ease of use, longevity, and flexibility.

Crosschain currencies and self-custodial silver appear to me to be the best investments in these uncertain times, although gold is likely a safer store of value in the event of a fiat crash accompanied by bank runs.

My conclusion is that I am both pro-crypto and pro-precious metals.  Diversity is wisdom, and the best defense against economic disasters is education followed by preparation.

For those that have no disposable income to invest, your first priorities should be shelter, water, and food.

As always,

Stay smart & Stay safe.

-Thomas Wolf

Pronouns: He/Him/His

DISCLAIMER

I am not a certified financial, tax, legal advisor, analyst, or planner.  The above information should not be considered advice but an opinion intended to share information and ideas for entertainment and independent research purposes.  I am not responsible for any losses or damages incurred due to misinterpreting my personal opinions for professional advice.

15% of all of my writing income is donated to charities via The Giving Block.


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