Gold-Backed Cryptocurrency: The New Gold Standard?

Cryptocurrency has long been on the verge of revolutionizing payments and banking globally. But it hasn’t quite happened yet, due to a slew of obstacles ranging from institutional opposition, to tech-related hurdles such as scalability and maintaining decentralization. Another key barrier to be examined is the volatility of cryptocurrency prices, the fluctuations of which cause many potential cryptocurrency users to be shy to adopt. Many users inside and outside the crypto space view the value of crypto assets as vulnerable to the whims of whales and market-makers — and in many cases they’re not wrong. Stablecoins such as USDS, USDT and USDC have begun to solve this issue by backing their tokens with fiat currency such as the United States dollar. But the possibilities only start there.

The Abandoned Gold Standard

It’s worth looking back at the history of currency a little further to get inspired about how to address issues in digital currency. Traditionally, paper money was backed by gold reserves which entitled the holder of the note to redeem it for an equivalent amount of gold. This was true of the United States dollar until 1933, and while you can fiercely debate about the advantages and disadvantages of that change, the dollar did lose something when it left the gold standard — in particular, being backed by gold has anti-inflationary properties that ensure a currency is stable and reliable as a mode of exchange. Up until this point, this solution has been examined and tried by a few in the cryptocurrency space. However, any one modern currency is not necessarily as stable as gold.

Gold’s Timeless Value

Legend has it that in Roman times, a high-class toga could be purchased for an ounce of gold — equating to USD1500 or so, which equates to a nice suit today. Our article here paints an in-depth look at the history of gold’s value and use as currency and currency backing. So why not cut out the fiat currency middleman and directly back cryptocurrency with gold reserves? A scenario like this will have healthy, anti-inflationary and anti-volatility properties, while also maintaining the typical blockchain advantages of being borderless, fast, cheap and transparent.