Gold is one of the few assets recognized around the world for retaining its value. Precious metals have a history of maintaining and even increasing in value during times of economic crisis. Gold’s scarcity and durability make it almost impossible to debase and it cannot be synthesized. It’s easy to standardize due to its homogenous nature- meaning one ounce is almost indistinguishable from another. – GSB Gold
The current fiat system is easy to devalue simply by printing more money. The purchasing power of money declines as inflation continues to climb. The only benefit of this system is how digital friendly it is. Gold is significantly less portable, taking a great deal of cost and effort to move. Despite this, it continues to rise in value.
Companies like GSB Gold Standard Group have begun using blockchain to circumvent this issue and make it more digital friendly. Visit https://www.kingoldjewelry.com/gsb-gold-standard-group-review/ to explore a more in-depth review of GSB Gold Standard Group. Blockchain technology opens up new investment avenues by issuing gold backed tokens, circumventing the transport issues.
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The Basics of Blockchain
What started as a research project in 1991, became a widespread application in 2009 with Bitcoin. The concept has since spread to many different types of applications like smart contracts, non-fungible tokens, and other cryptocurrencies.
To put it in the simplest terms, a Blockchain is a shared ledger that records transactions and tracks assets within a network. Assets can be tangible or intangible items. Almost anything of value can be tracked and traded through these networks, reducing risks and cutting costs. This ledger is immutable meaning it can be added to and distributed but not edited.
The data is all stored in a digital format, spread across a computer network. Spreading the application out among several network nodes creates both redundancy and failproof security. If someone tries to tamper with the data, the other nodes can cross-reference and point out the false data. It also protects against power loss and human error that might delete data.
To validate new entries and avoid falsified data, a majority of the computing power must agree to it. The chains are secured by consensus mechanisms that allow for agreement since no single node is in charge. The decentralized nature makes all transactions visible, protecting transparency yet still keeping the transaction owners anonymous.
While it plays a key role in cryptocurrency systems like Bitcoin, it has useful applications for a wide array of industries. Blockchain guarantees security and trust in the system without involving extra parties. The data is structured in blocks that hold sets of information. Blocks have storage capacities and are closed when the capacity is reached, then linked to the prior filled block. This forms a chain of data, lending it the name “Blockchain.” This makes a data timeline that is irreversible and almost entirely tamperproof. A filled block cannot be changed, and is given a time stamp to solidify its place in the timeline. Click Here to learn more about Blockchain.
Gold and Blockchains
This data storing method is proving to be useful for far more than just Bitcoin. Companies like Unilever and Walmart have incorporated blockchains to store data about other types of transactions as well. Chains help companies track products and financials and can be used to track currencies and precious metals.
The price of digital currencies remains volatile due to the general public’s hesitancy to fully trust the market. In answer to the caution, stablecoin was created. Traders can safeguard their investment positions using this currency. A stablecoin is backed by an asset like the US dollar, though any low-risk asset can be used to back the currency. It stabilizes prices and gives peace of mind to traders.
Tokenization is converting the right to an asset into a digital token. It is then issued on a platform that supports smart contracts, like Ethereum. The tokens can then be bought and sold on different exchanges. Buying the token means you have bought the commodity without having to worry about moving it. Once you have made a purchase, it is recorded in the blockchain, locking in the data and ensuring ownership.
Gold and other precious metals are used as assets to back the stablecoins. An issuer can create as many tokens as they want, as long as they are all backed with the same amount of gold. They are circulated around the world and traded back and forth digitally until someone wants to liquidate them. Whoever holds the coins can trade them in for physical gold, or leave them as the digital currency to avoid transportation fees.
Assigning gold tokens circumvents many of the issues that the gold market has faced in the past. Unless a person plans to physically use their gold, the tokens make it more functional. Digital data is simple to store, it’s easily accessed and tracked anywhere there is internet access, and it can be traded worldwide without the cost of moving the physical asset.
This product not only opens doors to new investors, but makes things easier for long term veteran investors as well. Trading is simplified and there is no need to take physical possession of the gold holdings. The financial world will benefit from the price stability that comes with government guaranteed gold safeguarding their financial investments.
Some see Blockchain gold trading as a return to how financial systems were originally designed. The fiat financial system requires no set amount of gold or silver backing. Stablecoin, on the other hand, cannot change the specific amount of gold backing it. More paper money is printed and distributed regularly without backing, which destroys the value of the money already circulating. It is much harder to drive down the value of the digital currency, because you can’t just create more coins without having the precious metal to back it up.
The landscape of the financial world is ever changing and becoming increasingly focused on digital transactions. Blockchain in gold markets will create better accessibility in the digital markets and provide price stability.
