Digital Currency Gets Real with New Bitcoin Alternative Backed by Gold
A new Bitcoin alternative – a math-based digital currency with which users can send and receive over the internet – is aiming to add real world value to the digital currency market by backing their digital coin with real gold and silver held in vaults around the world.
NoFiatCoin is hoping that their novel idea of backing the coin with valuable real world commodities can help to address some of the key concerns with digital currency and provide a more appealing alternative for those who see the potential for digital currency to transform our financial services industry, but are wary putting their money into a currency with no intrinsic value.
Digital currencies certainly have a huge potential. Not only are they a convenient way to pay for things online, but they can also enable peer to peer financial transactions of other kinds – like sending money to a friend or relative abroad. The remittance industry which currently handles such transactions is a huge business, and new services based on peer to peer digital currency transactions could easily undercut the currently high prices. Currency exchange, forex trading, and even the trading of other assets could also be affected by the ‘digital currency revolution’. This is exactly what the Ripple Network, within which the NoFiatCoin launched in early January 2014, is hoping to facilitate. Ripple offers a way for anyone to trade in and exchange a range of currencies and commodities through the medium of their own digital currency XRP.
By backing their new ‘alt coin’ – as alternatives to Bitcoin (the first digital currency) have become known – with real gold and silver NoFiatCoin are placing a real world value on one of these digital assets for the first time. The coins, which use the currency code XNF, can be redeemed for gold or silver at any time, from vaults across the world. If you are lucky enough to have gold or silver stored at home, you can also send it in to your local vault in exchange for XNF. This real world backing could add a new level of security and stability which is missing in other digital currencies.
NoFiatCoin also follows the model of Ripple’s in house currency XRP, avoiding the problem of currency becoming concentrated in the hands of a small group of ‘miners’ by distributing the currency themselves and using the funds to stock the vaults with gold and silver. Bitcoin, and most of the new alternatives which have popped up since it started to be successful, perform the initial distribution of currency by handing it out to people whose computers are first to solve a difficult problem. This means that wealth is concentrated in the hands of people who own the powerful specialist computers which can perform these calculations; running one of these computers is called ‘mining’. Although the ‘pre-mined’ method used by Ripple and NoFiatCoin has generated a great deal of controversy and opposition from these (now very wealthy) miners, it does at least put everyone on the same level from day one.
The value of NoFiatCoins has already gone up more than 50% in a week, suggesting a significant amount of early interest. If the idea catches on, however, this could pale in comparison to future gains.