Celent recently released a research report investigating whether gold could become a means of redemption again if Bitcoin blockchain technology was used. The report, ‘ According to John Dwyer, senior analyst at Celent Securities and Investments, a currency needs to have three characteristics: a store of value , a medium of exchange and a unit used to value goods and services . Although gold has been used as a form of money in the past, it is not currently used as such in society. Furthermore, the cost of storing gold is too high for practicality. However, blockchain technology can solve this problem. Putting gold on a distributed ledger means that ownership of the metal can be broken down into many smaller pieces, Dwyer said. As an example, he pointed to financial technology company Goldmoney, which puts gold in a vault and gives users a MasterCard that they can use to make payments. He said:
Banks get rid of high-denomination notesDwyer cited the fact that fiat currencies are experiencing negative nominal interest rates (NNIR), which means that these currencies are no longer sufficient to function as a store of value. According to Dwyer, Japan is responding to the NNIR by offering its consumers more safe deposit boxes, giving them a way to keep their money outside the financial system. He said:
However, this is unlikely to shift people's attention to gold anytime soon. Gresham's LawAccording to Gresham's Law, digital currencies like Bitcoin are an attractive form of money for people due to their lack of intrinsic value. However, these digital currencies do not have the long track record of gold, so they do not have a high degree of trust. Rus Newton, owner of Global Advisors, said:
Not only that, the total value of physical gold exceeds 7 trillion US dollars, while the total value of digital currency is only about 12 billion US dollars, which shows that digital currency still has a long way to go before it can replace gold as a medium of exchange. However, as CCN reported, Bitcoin trading volume has the ability to surpass gold. However, it will depend on whether distributed ledger technology and gold will come together in the future to reawaken gold as a form of exchange. |
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