This is the first node of our new Gold-Backed Cryptocurrency Monitor directory and sector coverage here at Dollarcollapse.
It’s a work in progress, so if you want to me notified as additions and updates occur, drop your email in the form at the bottom of this page.
The Epochs: Evolution of Gold-Backed Cryptos
Gold-backed alternative payments systems and stores of value have been a feature of the Internet for over 20 years. They’ve been around since before Bitcoin kicked-off the cryptocurrency era we’re in today.
But even those were not the first attempts at alternative payment systems.
1990 – The Original Cryptocurrency Prototype: Digicash
Before the advent of gold-backed cryptocurrencies, there were early prototypes of digital currency, like Digicash in 1990 which was based on David Chaum’s 1983 paper, “Blind Signatures for Untraceable Payments” . Although innovative for its time, Digicash was not backed by gold or any other physical asset. This early form of digital currency laid the groundwork for future developments in the cryptocurrency space.
1996 – 2006 – The DGC era (Digital Gold Currencies)
The DGC era marked a significant shift with the introduction of gold-backed digital currencies.
Pioneers in this field included E-gold, E-bullion, Pecunix, and Liberty Reserve. Each of these platforms sought to combine the security and inflation-resistance of precious metals backing, with payment system capabilities of digital currencies.
Among these, Goldmoney emerged as the only player with staying power. Founded by James Turk, Goldmoney initially focused on digital gold currencies before transitioning into a vaulted gold platform (see below). In 2015 it was acquired by BitGold (founded a year earlier by Roy Sebag and Josh Crumb) and became a publicly traded company on the TSX (under the ticker TSX:XAU).
Online Gold Vaults / Vaulted Gold
Goldmoney’s evolution into an online gold vault highlights the broader industry shift towards secure, digital storage of precious metals. Online gold vaults like BullionVault and Goldmoney allow users to store bullion in various secure locations around the world. The value prop of these platforms is store of value, protection from inflation, and to a lesser extent – capital mobility (we will look at the shortcomings in this latter aspect in a separate post).
The rise of cryptocurrencies
The Bitcoin white paper, released on October 31st, 2008, changed the game and ushered in the cryptocurrency era we’re in today.
Where Bitcoin positions itself as “digital gold”, later blockchains, such as Ethereum – added tokenization protocols at the second layer (“Layer 2” or “L2”). These token specifications (e.g ERC-20 on Ethereum and Avalanche, BRC-20 on Binance Smart Chain) facilitated the creation of gold-backed crypto tokens.
Gold-backed crypto tokens
With gold-backed cryptocurrencies we see the attempt to create a true, digital bearer asset that is backed by gold or other precious metals – right down to having bars in a vault correlated by their serial numbers to circulating tokens.
These systems try to combine store-of-value (precious metals backed tokens) – that can be redeemed by the bearer, with payment systems that leverage the underlying blockchain mechanics to transfer value at a distance.
Some of these emergent gold-backed tokens are listed below:
Swiss-based Lode AG has created AUX token – backed by gold, AUG which is silver backed and their own native LODE token. They are al ERC-20 tokens running on the Avalanche blockchain.
AUX Token: Gold-backed
Each AUX token is backed by one-milligram of “vaulted, audited, and insured” 99.99% (bullion grade) gold. AUX-tokens are redeemable (minimum redemption size is 10oz).
AGX Token: Silver backed crypto
The AGX token is the same concept as the gold-backed AUX, above – except each unit represents one gram of investment grade silver. The minimum redemption size here is 100oz.
LODE Token: The Native Cryptocurrency
The LODE token serves as the native cryptocurrency within the Lode AG ecosystem. Unlike AUX and AUG, which are backed by their respective precious metal, the LODE token represents a stake in the Lode Project itself. The LODE token is akin to a “governance” token seen in other projects and DAO’s (Decentralized Autonomous Systems) – it also earns a stake in the fees generated by the ecosystem.
Pax Gold by Paxos
PAXG is an ERC-20 token that is backed by physical gold reserves, stored in London vaults. Each token is equivalent to one fine troy ounce of a London Good Delivery gold bar.
Paxos is a stablecoin operator, of which PAXG is just one of their offerings. Their other products are PYUSD – the Paypal USD stablecoin and PUSD, their own USD stablecoin implementation.
They were the sponsor of Binance’s BUSD stablecoin, in 2023 they ceased activities amid regulatory uncertainty in the US.
Kinesis Money, was founded by Thomas Coughlin in 2018. They also have both a gold token (KAU) and a silver one (KAG). The KAU is backed by one gram of physical gold, while the KAG by one ounce of silver. Gold can be redeemed in 100g minimum’s, silver in 200oz – there are six “redemption hubs” dispersed globally.
Their vaults are distributed globally – and the tokens are exchangeable only via the Kinesis exchange platform, which the company operates.
There is also an ecosystem token: the Kinesis Velocity Token (KVT) which is earn 20% of the system fees.
The KAU and KAG tokens also earn yields by being awarded 6% of the platform transaction fees.
KAU, KAG and KVT are all only available via their proprietary exchange platform.
- Gold-backed Crypto-currencies: Icing on an already tasty cake, John Rubino’s 2018 piece here that looked at some of the earlier crypto gold platforms.
It’s early days, and these projects aren’t 100% there in terms of a totally frictionless bearer instrument backed by precious metals. Some systems operate within their own walled gardens (like Kinesis) while others are on less accessible Layer 1’s (like LODE on Avalanche).
But it should be noted here that most of the impediments to these systems are regulatory, not technical.
There is still a degree of trust in these systems – there is some reliance on the platform intermediary – although in the case of LODE, they’re doing a good job building continuity and zero-trust into the system. Lode’s smart contracts are open source and can continue to run independently even if the company were to cease to exist.
More on that (and much more) in future updates to the new Gold-Backed Crypto Monitor (GBCM) by DollarCollapse.
To receive updates as they happen, sign up for the Dollarcollapse mailing list, below (you’ll also receive our editorial newsletter and articles) – as well as a free e-book “Nobody Knows Nothing” by investing legend Bob Moriarty