Gold Standard Returning in Online Form?

GoldMoney, with the technical help of Dimension Data (DiData), is in the demonstration phase of its GoldGrams electronic payment system, a competitor to a similar system from e-gold. The concept is to use gold to effect online transactions — specifically international ones.

The immediate question is “What value does gold have in a digital economy?” When governments no longer back their currencies with gold, why back online transactions with the stuff? What place does an inescapably physical thing like gold have in cyberspace, where the bulk of the worlds money resides as nothing more than ones and zeroes?

Ironically, it is gold’s tangibility, combined with its status as an international medium of exchange and its liquidity, that makes it an attractive e-currency. Plus the fact that gold is an asset, not a liability (i.e. it’s not a substitute, it’s the real thing). When you open an account at GoldMoney, you dont transfer a long string of ones and zeroes to their servers: you buy bullion, stored in large, well-guarded vaults somewhere in the world.

You can then use this gold to make transactions with other account holders. The transaction occurs in real time, without the three or four day clearance delay typical of international transactions, and with lower transaction costs. (GoldMoney charges the recipient 0.1 percent of the payment amount, to a maximum of 1 goldgram, and an annual storage fee of 0.5 percent).

And unlike credit card transactions, these transfers of goldgrams cannot be repudiated.

In order to establish the concept, GoldMoney is currently demonstrating the working process with a B2C version. And where better to facilitate the transactions between consumers and business than online gambling? was told that several online casinos — anxious to avoid non-repudiation — are using GoldMoney to accept money and make payments to winners.

However, the real market is the B2B market, specifically International Transfers that don’t fit onto any credit card. The B2C market, as per usual, seems to be the cream, not the meat.

Gold backed e-currencies, GoldMoney and e-gold, are gaining in popularity. There are even gold-backed anonymous cyber-currencies being established (e.g. DigiGold), with the same risks and advantages associated with cash in the hand. Other metals are being transformed into similar currencies; “metal” banks are starting to appear, offering interest rather than charging storage.

Given its advantages — speed, non-repudiation, low charges — these currencies should continue to gain in popularity, particularly for international transactions where these characteristics are important. Not that youll be throwing your credit card away just yet. Amazon doesnt accept e-gold, there are still very few interest bearing storage options and there’s no possibility of debt. But perhaps this will all be changing in the near future.

GoldMoney was founded by James Turk, who owns two patents on using gold for online transactions. DiData have created the secure hardware and software environment required for the enterprise.

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