What are cryptocurrencies backed by? This is one of the contentious issues surrounding digital currency. Whereas traditional fiat currencies are thought to be backed by the commodities in the economy, cryptocurrency does not have a guarantee should the market fail.
Before we delve into the core topic of this article, let’s first take a look at the importance of guaranteeing currencies.
Cryptocurrencies are based on a mathematical science which creates a public ledger and records all transactions in a blockchain. Transactions made in digital currencies like Bitcoin are ‘mined’ by using complex mathematical problems based on algorithms.
This problem solving takes a considerable amount of time, electricity, hardware power and other resources which all together create the intrinsic value of a cryptocurrency. Sounds pretty good! And indeed it is! But if a digital token fails, investors lose money.
However, if you guarantee your investment with something like gold that has real has you create a currency that is has an intrinsic guarantee – like the US dollar used to have before the senate abolished the gold standard in 1933.
Some people still think fiat currencies and related investments are backed by precious metals. They aren’t unless investors also buy gold to act as a guarantee that protects their investment portfolio. If one stock fails, gold is normally the saviour because gold never fails.
Therefore, backing cryptocurrency investments with gold offers something way more than an ordinary cryptocurrency.
Why you should back cryptocurrency with gold :
If a cryptocurrency is the ‘alpha’ of monetary systems, a gold backed cryptocurrency would be considered as the ‘uber-alpha’. The benefits of a gold-backed cryptocurrency outweigh those provided by an investment that has no fall back. And by a significant measure. Let us take a look how.
Zero Dependency on Government Stranglehold:
Governments usually manipulate currencies based on whims and change of policies in order to fulfil certain criteria and show economic growth on paper. The reasons can be numerous. But the end result hurts investors, businesses, ordinary folks and the economy as a whole.
An honest currency like GoldBitsCoin, or any other cryptocurrency that is completely backed by gold, cannot be subjected to government policy because digital transactions are peer-to-peer reviewed in an incorruptible blockchain and eliminate the risk of fraud and market manipulation.
It’s well known that the current banking system is rigged and the function of altering the value of currency is common practice designed to meet benchmarks according to their annual planning goals and policies. A currency that is not manipulated by financial institutions can be trusted.
Significantly Low Volatility:
The problem with fiat currencies is that they are so volatile that currency investors and businesses are always on tenterhooks of uncertainty. Stockscan dip or rise. This volatility is caused by a myriad of factors, but mostly due to being backed by the unreliable US dollar which is manipulated to change the value of the currency.
But GoldBitscoin and any such currency that is backed by gold does not ride in waves since it is backed by a stable metals market that always shows growing trends over the long term.
Since gold does not jump high and low with the uncertainty of cryptocurrencies, backing digital currencies with precious metals is a sensible investment.
Retains The Asset Value, Despite A Dip In Demand:
If you invest in digital currencies backed by GoldBitsCoin – a gold backed cryptocurrency – you don’t have to face the possible consequences of loss if the digital currency you invest in fails or falls in price.
Even if a cryptocurrency loses its demand over a period of time, it still retains its asset value – given that it is backed by gold. The intrinsic value of gold is safe from falling prey to the volatility that might plague other cryptocurrencies in the future and contribute to bursting the cryptocurrency bubble.
It Has A REAL Intrinsic Value:
Now, this is not to say that non-gold backed cryptocurrencies don’t have any intrinsic value at all. However, their intrinsic value is defined by a process of computational mathematics and the resources that go into extracting it. Compare this to a metal that has been trusted for thousands of years the world over.
The intrinsic value of gold, coupled with the rare source code of the cryptocurrency, create an unstoppable force that will stay steady in an ever-volatile cryptocurrency and financial market as a whole. This will help you to have at least one option of trust that you can redeem in a sea of financially volatile products.
Physically Convertible to Gold:
If you have had a cryptocurrency for too long in the form of 1s and 0s, you can redeem it in the form of gold. You don’t have to rely on its digital format as you have to in the case of non-gold backed cryptocurrencies.
If you want the protection of gold in your reserve, why not convert your cryptocurrency from its digital form into gold. This flexibility and fluidity will empower the holder of protected digital currencies without having to depend on the digital form in order to trade.
Here is a bonus benefit.
You can also convert your GoldBitsCoin to a fiat currency backed by gold :
That’s right. If you’re considering buying reserve stocks in any fiat currency that is backed by gold, you can convert your gold backed crypto to that currency as well. This is unlike an ordinary crypto where you are not allowed this facility since you cannot escape its digital form.
We are sure that you must have noticed that a gold-backed cryptocurrency opens up a lot of avenues for free conversion. You are not restricted to the one-dimensional stranglehold of the currency as you would be in case of Bitcoin, let’s say.
This makes a lot of difference and even moreso when you’re looking to diversify your financial assets. Some financial pundits and experts have stated that we are in the midst of a crypto bubble that is about to burst. The aggressive rise of Bitcoin in 2017 portends to this forecast.
We have already had the dotcom wave riding high and strong on the internet during the late nineties, and the housing bubble that caused the devastation of the 2008 banking crisis. The rise of cryptocurrencies is the next bubble waiting to burst.
When you have a cryptocurrency backed by the gold standard, you can rest assured that it is not only going to stay strong but will secure most future transactions. The safe way to invest in digital tokens is to buy gold backed cryptocurrencies that make a difference.