Skip to main content

Load of bullion: new gold-backed bitcoin is a disaster in waiting

Load of bullion: new gold-backed bitcoin is a disaster in waiting


Minacoin sounds like a libertarian dream, but it doesn't make sense

Share this story

Exactly one year ago, a bitcoin was worth roughly $101. In November, it was worth $1,100. Today, it’s worth $432. That zigzagging price chart is why the digital currency is often criticized for not being a "stable store of value." You have no idea what it will be worth tomorrow.

Melvin Ng, who ran the now-shuttered LibertyBit bitcoin exchange, and David Gallo, a data-center operator who took up bitcoin mining, are hoping to fix that problem with a new cryptocurrrency called Minacoin. Minacoin is based on the bitcoin protocol, which means it relies on a network of programmers to authenticate transactions and prevent double-spending. But unlike bitcoin, it’s backed by gold.

"Bitcoin is an amazing technology. It’s almost like the internet reinvented again with currency in it," Ng says. "But the currency can lose its value within a day. Gold has been around for the last 5,000 years."

Minacoin is backed by two 400-ounce bars of gold

The Toronto entrepreneurs purchased two 400-ounce bars of gold worth $1,050,000 as reserve. The total number of Minacoins will be capped at 21 million, meaning each coin is worth a nickel. And unlike actual gold, users can send Minacoins back and forth easily over the internet.

The idea is very similar to E-Gold, the infamous digital currency backed by gold, silver, and platinum that its operators stored in bank vaults in London and Dubai. E-Gold soon became popular with credit card thieves. In 2007, its founders were indicted for facilitating money laundering. After a plea agreement, the company found that it was impossible to comply with all the relevant regulations.

Unfortunately, Minacoin doesn’t seem to have learned E-Gold’s lesson. Ng and Gallo are not sure whether Minacoin will be structured as a currency backed by a reserve of gold, which would subject it to anti-money laundering regulations, or simply a way to trade gold, which would mean a different set of regulations.

"The original concept was a currency that was not a currency, kind of an IOU backed by gold," Ng says. "In terms of the technology, it’s there. In terms of the gold, it’s there. But in the last three days we’ve had a lot of issues in terms of legality and dealing with the terminology that we use."

Unfortunately, Minacoin doesn’t seem to have learned E-Gold’s lesson

It’s also unclear whether Minacoin has anything to offer. It would essentially enable the use of gold for quick transactions, but it’s unclear why anyone would want to do that. Most gold bugs stockpile their loot as a long-term investment rather than use it to buy breakfast (although the latter does happen in the woods of New Hampshire at the annual libertarian Porcupine Fest).

"As an economist, I’m almost always skeptical of people that think gold is the one true answer to all of our problems, so that already raises flags," says Eli Dourado, a research fellow at the Mercatus Center at George Mason University. "Just looking at it, these guys aren’t ready for prime time."

If you want a store of value, why not just buy gold? he asks. And if you want a currency, why not just use bitcoin?

"These guys aren't ready for prime time."

Minacoin says it believes it is not obligated to collect information on its users, which is basically a siren call to both criminals and the FBI. But again, there is no reason why criminals should use Minacoin over bitcoin.

At least the company doesn’t plan to start selling coins right away: Minacoin will soft-launch today with preorders, in order to get a sense of the demand. Ng and Gallo hope to fully launch in June.

"It’s hard to believe that the company will be able to launch in a month if it intends to target US residents," says attorney Carol Van Cleef, who was retained by E-Gold to assist in compliance. "The Department of Justice set out its expectations that a gold-backed currency needed to [be] registered as a money-services business and licensed."

Today’s Storystream

Feed refreshed 55 minutes ago Striking out

External Link
Emma Roth55 minutes ago
California Governor Gavin Newsom vetoes the state’s “BitLicense” law.

The bill, called the Digital Financial Assets Law, would establish a regulatory framework for companies that transact with cryptocurrency in the state, similar to New York’s BitLicense system. In a statement, Newsom says it’s “premature to lock a licensing structure” and that implementing such a program is a “costly undertaking:”

A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases, and is tailored with the proper tools to address trends and mitigate consumer harm.

Andrew Webster5:33 PM UTC
Look at this Thing.

At its Tudum event today, Netflix showed off a new clip from the Tim Burton series Wednesday, which focused on a very important character: the sentient hand known as Thing. The full series starts streaming on November 23rd.

The Verge
Andrew Webster4:28 PM UTC
Get ready for some Netflix news.

At 1PM ET today Netflix is streaming its second annual Tudum event, where you can expect to hear news about and see trailers from its biggest franchises, including The Witcher and Bridgerton. I’ll be covering the event live alongside my colleague Charles Pulliam-Moore, and you can also watch along at the link below. There will be lots of expected names during the stream, but I have my fingers crossed for a new season of Hemlock Grove.

Andrew Webster1:05 PM UTC
Looking for something to do this weekend?

Why not hang out on the couch playing video games and watching TV. It’s a good time for it, with intriguing recent releases like Return to Monkey Island, Session: Skate Sim, and the Star Wars spinoff Andor. Or you could check out some of the new anime on Netflix, including Thermae Romae Novae (pictured below), which is my personal favorite time-traveling story about bathing.

A screenshot from the Netflix anime Thermae Romae Novae.
Thermae Romae Novae.
Image: Netflix
Jay PetersSep 23
Twitch’s creators SVP is leaving the company.

Constance Knight, Twitch’s senior vice president of global creators, is leaving for a new opportunity, according to Bloomberg’s Cecilia D’Anastasio. Knight shared her departure with staff on the same day Twitch announced impending cuts to how much its biggest streamers will earn from subscriptions.

Tom WarrenSep 23
Has the Windows 11 2022 Update made your gaming PC stutter?

Nvidia GPU owners have been complaining of stuttering and poor frame rates with the latest Windows 11 update, but thankfully there’s a fix. Nvidia has identified an issue with its GeForce Experience overlay and the Windows 11 2022 Update (22H2). A fix is available in beta from Nvidia’s website.

External Link
If you’re using crash detection on the iPhone 14, invest in a really good phone mount.

Motorcycle owner Douglas Sonders has a cautionary tale in Jalopnik today about the iPhone 14’s new crash detection feature. He was riding his LiveWire One motorcycle down the West Side Highway at about 60 mph when he hit a bump, causing his iPhone 14 Pro Max to fly off its handlebar mount. Soon after, his girlfriend and parents received text messages that he had been in a horrible accident, causing several hours of panic. The phone even called the police, all because it fell off the handlebars. All thanks to crash detection.

Riding a motorcycle is very dangerous, and the last thing anyone needs is to think their loved one was in a horrible crash when they weren’t. This is obviously an edge case, but it makes me wonder what other sort of false positives we see as more phones adopt this technology.

External Link
Ford is running out of its own Blue Oval badges.

Running out of semiconductors is one thing, but running out of your own iconic nameplates is just downright brutal. The Wall Street Journal reports badge and nameplate shortages are impacting the automaker's popular F-series pickup lineup, delaying deliveries and causing general chaos.

Some executives are even proposing a 3D printing workaround, but they didn’t feel like the substitutes would clear the bar. All in all, it's been a dreadful summer of supply chain setbacks for Ford, leading the company to reorganize its org chart to bring some sort of relief.