The Advantages of Digital Gold and Its Key Advantages Compared to Traditional Crypto Currencies
Throughout history, human beings have been fascinated by gold, and it had been mined long before other metals. Gold has a magical quality that other metals and substances do not, as it provides a sense of purity and infinity. It is also easy to shape in various forms. These characteristics explain why gold continues to remain valuable and be used in various currencies — both traditional fiat currencies and cryptocurrencies.
In this article, we will briefly discuss what digital gold is, why gold is more stable and more secure than conventional and crypto currencies, and the advantages of digital gold in comparison with other currencies.
Gold and Digital Gold
After the era of bartering goods, around 550 BC, gold coins were introduced as a currency by the King of Croesus of Lydia. However, some scholars posited that ancient Egyptian already used gold currency 3,500 years ago. Since King Croesus’ official use of gold coins, various types of coins were also used in several countries before the introduction of paper money in 600 BC by China.
In 1066, the British currency system introduced “the original pound,” which was a pound of silver. In 1248, they issued the gold florin, which was the first major gold currency. The era of using gold as monetary standard has officially started.
Fast forward five centuries later, in 1792, the United States started a silver-gold monetary system, which established that the value of one US dollar was equal to 24.75 grains of pure gold. At that time, notes can be redeemed into gold or silver. However, redeemability ended in 1933 for gold and 1968 for silver.
By the 19th Century, many major currencies were fixed to gold at a set price per ounce, under the so-called Gold Standard. The USA introduced its gold standard in 1900. President Richard Nixon, however, released this standard in 1971. Since then, the US dollar has no backing but debt, which is called “fiat money.”
Digital gold currency is a digital currency backed by mass units of gold that resembles the U.S. paper gold certificate used from 1873 to 1933, which was exchangeable with gold. Today, digital gold currencies are issued by companies, such as GoldMint, which is also a platform where users can pay each other in gold units that are as valuable as gold bullion. Digital gold currencies are considered independent currencies.
Why Gold Is More Stable
The market value of gold remains more stable than other metals. When other currencies are weak, gold value usually increases. One of the most told use-case stories is that people during the times of war or natural disasters often return to using gold pieces to pay for life necessities. In other words, when other currencies have no more value due to political, social, and economic uncertainties, gold remains valuable and is the most respected item for bartering.
Physically, gold does not corrode nor shift in shape despite changes in temperature, location, and time. Even after thousands of years, gold remains pure and free from external elements, which allows immediate processing, if needed. It is also non-toxic and portable — can be shaped in various forms. As a currency, these traits provide a sense of security that the value will be preserved as well.
Advantages of Digital Gold
Due to being backed by gold bullion, digital gold currencies provide the same sense of stability and security like gold bars and gold certificates. Users keep digitalized information on their gold units, which are backed by real gold. Such record is a proof of ownership of the gold units.
Thus, digital gold currencies also give protection against inflation and are timeless and convenient to store. The record of ownership will be kept in an online account, which users can use for various purposes, including currency exchanges and obtaining loans.
Compared with traditional (fiat) currencies, gold and digital gold provide a hedge against inflation. Also, when currencies are weak, gold value usually increases. Since digital gold can be redeemed, owners can use real gold units whenever needed.
Compared with other crypto currencies, like Bitcoin, digital gold currencies are more stable and secure. Digital gold currencies are backed by real gold bullion, while most other crypto currencies are not. However, in the case of Tether, which is backed by dollar, it is prone to inflation and the ups and downs of a fiat currency. Crypto currencies rely on trust that they have value, while digital gold currencies’ value is closely affected by the value of gold bullion.
Other advantages of digital gold currencies include:
1. Universality
It is a borderless global currency system independent of exchange rates and political situations.
2. Asset protection
Digital gold currencies hold 100 percent of ownership in gold units, which can be redeemed with digital certificates. Most fiat currencies, however, aren’t backed at all. The US dollars, for instance, are “legal tender” in payments of debts.
3. Investment
Digital gold currencies can be kept as investments. They can be used for various investment purposes among parties as well.
4. Exchangeability
Digital gold currencies can be exchanged through digital currency exchangers to be bought and sold. However, if necessary, owners can redeem the gold units and use them for transactions.
5. Non-reversibility
Digital gold currency transactions are final and can’t be reversed like in credit and debit card transactions. It allows transactions to occur without being able to be reversed in most circumstances. These characteristics allow digital gold currency platforms run without spending a large budget for dispute resolutions.
6. Immediacy
Due to the blockchain technology that supports digital currencies, like the GoldMint, transactions and exchanges can occur immediately with smart contracts. Smart contracts are computer software that provides instant execution of agreement terms upon met conditions.
In conclusion, digital gold currencies are the modern digital format of gold bullion. Thus, they have the same advantages as the real gold, while also enjoy the convenience and immediacy of digital currencies.
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