Gold-Backed Bitcoin Spinoff Aims to Keep Some Fun in Virtual Currency
On the spectrum of currency ideologues, gold bugs and Bitcoin enthusiasts occupy equal but opposite positions. They’re both suspicious that governments are going to meddle around with normal money so much that it becomes useless — it’s just that one group thinks math is the antidote and the other believes in hoarding metal bars.
This week has seen the emergence of two separate plans to have the best of both worlds. Ripple, a digital payments network that allows people to transact in a range of virtual and traditional currencies, said it had developed a way for people to transact in a digital form of gold. The announcement on Tuesday came one day after a company called Anthem Vault said it had created its own virtual currency backed by gold, known (inevitably) as Independence Coin.
Anthem Hayek Blanchard, who runs Anthem Vault, believes the time has come to convince believers in the gold standard that Bitcoin is more than a Ponzi scheme. Finally the two armies can join forces! “We don’t need to fight. We can coalesce,” he told Bloomberg News.
Ripple, on the other hand, hasn’t actually created a new currency. Instead, it has reached a deal with GBI, a precious metals provider, to allow people to buy gold that will sit in GBI’s vaults for an annual fee of 0.5% of the value of the holdings. That stash can be used as the basis for transactions on Ripple, so that one side of the transaction spends gold and the other side receives Bitcoins or another form of payment.
The caveat is that both parties in the transaction have to be willing and able to use Ripple’s payments protocol. If anyone gets spooked, he can simply call GBI and it will provide him with the actual gold that has been backing his digital transactions.
These ideas couldn’t have come at a better time. Bitcoin has been losing its luster as the basis of a weird social movement and speculative tool as the financial grown-ups get hold of it and the conversation turns to transaction prices and capital controls. Bringing the gold bugs into the party creates at least some potential for fun. “You could live your whole life in gold and make payments in Bitcoins, or dollars, or whatever,” says Phil Rapoport, Ripple’s director of trading and markets.
It’s all the convenience of Bitcoin (to the extent there is any convenience in using Bitcoin) without the Bitcoin risk. All you have to worry about are the massive fluctuations in the price of gold.
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This article originally published at Businessweek