[Cryptography] Perth Mint to back crypto-currency with gold

[Patrick Chkoreff]

Erik wrote on 01/24/2018 07:30 PM:
>> ``Cryptocurrency backed by gold being developed by Perth Mint to entice
>>   investors back to precious metals.
> 
> Every day I hear of some new idea to put something on a blockchain. It
> started with currency, then deeds to property, then people were putting
> their marriage vows on the blockchain, Kodak wants to put photos on the
> blockchain so they can sue people for using them, and now we're trying
> to put gold on a blockchain. Crazy days we're living in.

As I understand it, a principal purpose of "blockchain technology" is to
track ownership of assets on a ledger that is distributed among a large
number of computers in such a way that it is not vulnerable to
alteration or destruction at any single location.  With that in mind, I
don't understand what is crazy about this particular application of
blockchain technology.

However, it is important to note that arbitrary "mining" of digital
coins almost certainly cannot be allowed in this case, since the digital
coins represent claims of redemption on a specific reserve of physical
assets held on terms of bailment.  I would think that the custodian must
remain in total control over the production of new authentic digital
coins, and issue them only in response to and strictly commensurate with
physical bailment activity.

Unless, somehow, the custodian is prepared to add to the reserve from
their own outside holdings upon the mining of new coins, in a way that
is statistically offset by accumulated storage fees or other revenues
earned by the custodian.  It might be possible for the custodian to make
this economically feasible.  If so, then the independent mining of a
coin would be akin to winning a small "lottery" at the expense of the
custodian.

I don't see anything in the article that addresses how they would handle
the issuance of new digital coins.


-- Patrick