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Gold Tracking on the Blockchain: Coinage to Crypto #5

October 26, 2018

Gold Tracking on the Blockchain: Coinage to Crypto #5

The reasons for appreciating gold as an investment are numerous, and the need to account for its origins and distribution are growing.  We appreciate gold's liquidity, its relative privacy and, of course, its rarity.  Gold brings us a sense of stability as a commodity that retains its value.  Whether we prefer our gold as bullion, stacks of coins, or the iconic rare numismatics that attain value far greater than their weight, gold holds a special place for all who seek and acquire wealth.  For those who are interested in the safety and/or privacy of gold coins and bullion as assets, the blockchain may add a new development in the way we interact with our much-loved precious metal.  

Gold was used as currency primarily for two reasons: malleability and rarity.  The malleability and low melting point that allowed gold to be fashioned into coins and bars have become less significant, while rarity is king.  Rare commodities continue to become more scarce, allowing them to increase in value.  Simultaneously, increased scarcity creates new issues in sourcing and safety.  

In many developing countries, mining practices can threaten lives and damage the environment. Blockchain tracking of gold could ensure that everyone involved in the supply chain, including miners, would be rewarded. It would also reassure gold buyers and consumers that both people and the environment are being protected.

The tracking of gold bullion from its origin through its ownership and use cycle could prevent theft. It could also prevent illegal sales, smuggling, and use funding conflict and terrorism. Blockchain technology presents a feasible way to remove illegal or unethical gold from the markets.  

Bitcoinist explained recently that the LBMA asked its members for proposals in March 2018 regarding how to track gold and prevent forgery.  Reuters reported that the LBMA received 26 proposals, including pitches from technology startups, and also from IBM. Out of the 26 proposals, 20 incorporated blockchain technology.

The authority will now create a set of standards for services, whilst understanding what a “credible blockchain solution” is, said LBMA’s executive board director Sakhila Mirza.  





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