Back a few years ago before Bitcoin was all the talk, as if
Bitcoin is going to be the new money of the future, or a one world
currency. Obviously that hasn’t happened
but the Crypto market is growing by leaps and bounds. We’re going to take a look at a few exciting
projects and let readers decide for themselves.
But at first glance, projects are taking shape they are just taking
longer than usual. We’re not going to
get into a discussion about tZero, the first regulated securities token, which
is still delayed. But we are going to
look at what some on the fringe have been doing, and their tokens and products
are just launching. We’re going to look
at how these solutions solve major problems.
First, the problem of Crypto not being ‘backed’ by
anything. A token is being launched called Kinesis (KVT)
that is backed 1:1 by gold and silver. By itself that’s not a new idea or so novel –
but how they are doing it is looking that this launch can be successful. The
founder has explained more about this in a Forbes article:
Kinesis Money is fully operated by the Allocated Bullion Exchange
(ABX), an institutional marketplace set up in 2011 for the trade of physical
precious metals, gold and silver, being two of the most stable and definable
stores of value, across seven global locations.
For the benefit of Kinesis Money, ABX provides the comprehensive
infrastructure with the advent of blockchain technology - and the introduction
of cryptocurrencies. This gives it a firm advantage over other cryptos in the
gold space which simply do not have this backing.
So this isn’t just a couple of kids in the garage – this is
a serious commodity backed exchange.
What other types of players have entertained the idea of Gold backed
currency? Russia’s
Central Bank has even considered a gold backed Crypto Currency:
“As for mutual settlements, we will consider, of course, [the] proposal
on … a gold-backed cryptocurrency.
As most people know, the fundamental difference between
Crypto currency and fiat currency is that fiat currency is backed by banks,
which are backed by central banks, so it’s notable to watch what central banks
are doing in the crypto market. And
what’s ironic about a Gold backed currency – Gold is used as a reserve by some
central banks as a physical commodity that always has value. This has become unpopular in the last 10
years, but China and Russia are hoarding Gold.
In particular, Russia
There’s
even a long list of Cryptocurrencies that are backed by gold in some form. But also the fact that there are so many
novel approaches to the same concept solidifies the idea.
“There’s no monopoly on Great Ideas” Randall S.
Of course, this is all digital so the big risk is going to
be getting hacked. If your ‘digital’
gold get’s hacked it’s the equivalent of your Gold storage being looted. That’s where Dark Vault comes into
play, a new custodial and security service launched by Crypto startup
Blackwatch. Just like in the
example with Gold tokens, there are secure custodial solutions out there, but
this one seems to be unique. If it’s as
good as it looks, this can create a situation where once again fiat investment
dollars will be flowing into Crypto.
We interviewed a former employee of tZero who wishes to
remain anonymous, and this is what he said:
“There’s an unknown number but in the billions of dollars waiting to
invest in Crypto if someone can solve the security issue. Everyone is afraid of being hacked.”
So as institutional investors feel safer, we believe they
will start investing in coins like Kinesis, just like investors hold cash. When you are holding cash you are actually in
a Forex trade, that’s denominated in US Dollars (if you are in the US). Stablecoins are the future, not wild volatile
tokens like Bitcoin. What Bitcoin did
was attract attention of the world and get the Crypto market started, which was
great – Bitcoin was the prime mover. But
you can’t pay your salaries in Bitcoin nor is it really a good ‘investment’ as
due to the mining feature it requires more and more US Dollars to flood into it
in order to support the price.
Actually banks and central banks have been thinking of
issuing their own coins for a long time.
Just as recently as March 2019, IBM
announced 6 banks to issue stablecoins and use the Stellar XLM platform (just
as Kinesis):
Announced Monday, six international banks have signed letters of intent
to issue stablecoins, or tokens backed by fiat currency, on World Wire, an IBM
payment network that uses the Stellar public blockchain. The network promises
to let regulated institutions move value across borders – remittances or
foreign exchange – more quickly and cheaply than the legacy correspondent
banking system. So far three of the
banks have been identified – Philippines-based RCBC, Brazil’s Banco Bradesco,
and Bank Busan of South Korea – the rest, which are soon to be named, will
offer digital versions of euros and Indonesian rupiah, “pending regulatory
approvals and other reviews,” IBM said.
Clearly, Crypto is not just a fad – it’s changing the
underlying architecture of the global financial system. But this is something that’s been happening
over a long time frame. Crypto is a
technology, not a form of money. But
that technology was utilized in the ultimate use case to be a form of money in
a Crypto currency.
As
explained in Splitting Bits, the US Dollar has been used and traded
electronically since the 1990s. So the
idea of electronic currency is nothing new.
What’s new is currencies are no longer created exclusively by central
banks. Now many new currencies are being
created almost on a daily basis. Many of
them will fail, but the ones that survive the test of the markets, may be the
next G8 currencies traded on the Forex market.
