Over the last few years, there have been discussions of digital currencies, crypto currencies and blockchain technology. But what role will gold play in all this? There are currently plans underway to digitize gold, which will open new doors for investors worldwide. 

The Advantages of Gold Digitalization

While gold has a number of inherent advantages that make it well suited as a medium of exchange, it also has some disadvantages. In an internet driven world where people have become accustomed to shopping online and engaging in global commerce, traditional commodities such as gold are too difficult, costly and clunky to move around. 

For instance, let’s say you want to buy a luxury watch from a seller who resides in another state or country, but you want to trade in gold. You would be reluctant to the send the gold to the seller by mail, because it could be lost or stolen or perhaps the seller would just take the gold and then refuse to send you the watch. And the seller would be worried about sending you the watch first because your gold could be fake or perhaps you would simply take the watch and keep it without sending them the gold.

Another solution is to sell the gold for cash, and then take the currency to a bank to get a money order, and then send that instead. As you can see, trading gold is no easy process. There are a bunch of hurdles you have to jump through and the same is true of other commodities such as oil. This is why David Tait, the CEO of the World Gold Council, shut down commodities during his Credit Suisse tenure. Precious metals are valuable but too slow and tedious to exchange in a day and age of digital commerce, especially when compared to crypto currencies such as Bitcoin. 

The Downside to Existing Crypto Currencies

While crypto currencies have their advantages, they too have a number of disadvantages which have been exposed in recent years. First, too many people use crypto currencies for speculation rather than as a hedge against inflation or a decentralized method for transferring money. Second, the Ukrainian war has demonstrated that crypto isn’t actually a good inflationary hedge.

Third, crypto currencies are still not as convenient to use as credit cards or cash. You can walk down to any store and use either cash or a credit/debit card to easily purchase goods, while most shops still do not directly accept crypto currencies such as Bitcoin. Those with crypto wallets must first convert that into real world cash that they can then use. But this is an inherent vulnerability because hostile governments can go after crypto exchanges or they can collapse in scandals such as the FTX debacle.

How Digital Gold Solves All These Problems

Creating a cryptocurrency that is backed by physical gold in the real world is the ultimate solution. By combining gold with blockchain, users around the world will have a safe and convenient way of exchanging funds that could usher in a new era of prosperity for humanity. Once gold is fractionalized, each token will represent it, and every financial institution can convert it based on a taxonomy which has been agreed upon.