It was only a matter of time before the success of Bitcoin led to a new attempt to create a digital currency backed by gold. It seems as if that day has now arrived.
Douglas Jackson is the founder of e-gold, which was shut down by U.S. authorities a little over five years ago under accusations of money laundering. While I fully think the ultimate monetary solution will be a decentralized payment protocol that merges Bitcoin-like technology with the ability to back it with gold, silver or whatever people want, I am of the view that it cannot be done from an overly centralized authority or protocol. There are several reasons for this.
First, when you have a centralized single issuer of a currency who also is responsible for vaulting the gold within the payment system you have an enormous degree of counter-party risk. The vault itself could be seized by “authorities” in whatever jurisdiction it is located in.
Second, the human beings or company behind any currency system can themselves be pressured or threatened in order to comply with more powerful interests. The beauty of Bitcoin is that there is no “Bitcoin corporation.” It truly is decentralized and anarchic in nature. It basically puts “the powers that be” in a position that if they want to completey destroy it, they’d have to destroy the internet itself.
That said, I do believe the evolution of money is headed to a Bitcoin type system with the ability to have whatever backing is desired by the market. So at this point my questions to Mr. Jackson would be:
1) How decentralized is this currency system intended to be if at all?
2) Will there be an open source protocol available to all?
3) Are the units of currency distributed to those that own gold in a particular vault or vaults under a the custodianship of a particular company?
4) Is the currency limited to those who own gold in the currency issuer vaults, or will they be linking vaults all over the world if such vaults care to be linked.
While I love the idea, it would have to be done right or it will be doomed to fail. I’m very curious to learn more about this and I’d also love to hear reader feedback on this.
From the Financial Times:
The founder of one of the earliest virtual currencies has re-emerged with a rival to Bitcoin, more than five years after his first venture, e-gold, was shut down by the US Department of Justice
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