Tokenization isn't enough.

in #bitcoin2 years ago (edited)

Vitalik Buterin addressed the recent Devcon audience by explaining that cryptocurrencies and eased payments are the key utilities of blockchain technology.

However, tokenization is an extremely popular usage of blockchain technology and it has forced many developers to go astray from properly executing the currency-factor of tokens. There's a number of active ICOs aiming to tokenize gold, palladium, a basket of metals, and so on. However, tokenization alone isn't enough as it's already possible to access NYSE-listed ETFS backed by metals. The tokenized form of these simply offers utility within exchanges, and Crypto direly needs to move beyond popularity among just trading.

Kinesis, a protocol to emit gold-backed stablecoins upon the Stellar blockchain, shows how tokenization can be used to create a revolutionary shift in day-to-day currencies. Presently, the world is adjusted to the usage of fiat currencies, which, since their inception, have constantly devalued due to the constant surplus printing of cash required to sustain inflation. Thus, holding cash is actually a means to lose wealth and this factor has had the greatest negative impact on the world’s poor, who are often illiterate in financial knowledge.

A New Monetary System

Kinesis aims to build a new monetary system that liquidates the trust people have in gold.

For long, gold has been the key means with which the masses have beaten inflation. Gold tends to appreciate over decades, and unlike other assets, it faces strong appreciation during times of financial distress. Despite the benefits gold provides as a store of value, its physical state raises many burdens in its utility as a means of value exchange—a currency.

Gold is heavy and difficult to transport; it also cannot be used for small purchases.

The problems associated with gold forced the world to adopt paper currencies that were backed by gold. However, before long, the gold-backing was removed and thus began the deflationary nature of fiat currencies.

What if gold can be easy to transact?

Tokenizing Gold as a Currency

A number of projects have already attempted to tokenize precious metals in the hopes of making it easy to store value in them. However, while such efforts were innovative, they eluded the most important purpose of blockchain technology: facilitating transactions via cryptocurrencies.

Tokenization indeed creates a currency as tokens can be spent. Tokenization of gold innately creates a currency that is backed by gold. Thus, blockchain technology can usher a new era of gold-backed currencies.

Unlike the past attempts to tokenize gold, Kinesis aims to create a new form of money, one backed by gold. Blockchain makes it possible to usher an era where gold-backed currencies can be an important part of the digital era. As a vast portion of transactions, today, happen on a digital platform, Kinesis can fuel the usage of gold-backed, fractional, and low-cost transaction.

The Benefits of a Gold-Backed Currency

As previously mentioned, fiat currencies are constantly depreciating. Meanwhile, gold appreciates on the long-term. There’s a finite supply of gold and, thus, it’s not possible to emit more than a certain amount of gold-backed money. Thus, Kinesis aims to create a currency that is based on something of fixed supply.

Moreover, as gold is already used a store of value that appreciates in the long-term, gold-backed money would not need active investment to sustain one’s wealth; the money itself will match or exceed inflation on the long-term. This is the greatest benefit gold-backed money provides to the masses.

While the wealthy have access to investment support, the masses are left to vet investment choices by themselves. Intimidated by the risks of this challenge, most opt to hold cash and constantly face a depreciating net worth. While a vast portion of blockchain projects are trying to bank the unbanked so that they may have access to financial support and advice, thereby limiting their loss due to global inflation, Kinesis is fighting on a different side.

Through Kinesis, the unbanked would simply have access to a form of money that does not deflate and thus won’t need financial advice to sustain their wealth. Given that internet penetration and smartphone access outnumbers bank usage in the world’s weakest societies, Kinesis’s vision can provide a valuable means to fighting loss of net worth in the world’s weakest societies.

Even in developed nations, many do not possess the knowledge to make sound financial investments and simply opt to place their wealth in savings accounts. There are tens of trillions in bank accounts catching dust-like returns that are far below inflation rates. Kinesis’s gold-backed money can offer an alternative reality to these people as-well.

Based on Stellar

Kinesis is a project by Allocated Bullion Exchange, an established player in the gold market. ABX is essentially creating Kinesis as a protocol to launch gold-backed money. The gold backing the emitted money will be stored in legally-compliant vaults. As ABX has a network of vaults across the world, any legal pushback in one country would not hinder the progress of Kinesis as the gold would be easily transferred to a different vault.

While Kinesis is being created by ABX, the money exists on Stellar, a decentralized blockchain. Beyond providing a decentralized infrastructure to this new era of gold-backed money, Stellar allows Kinesis to access payment flow at incredibly low costs.

While current payment cards charge merchants, on average, 3% per transaction, Stellar will allow Kinesis transactions to come at a cost of just 0.5%. This figure can likely drop as adoption grows. Thus, merchants will be able to adjust costs as they will now have a lower cost of fulfilling payments.

Tokenization Works; Time to Extend its Utility

Tokenization is one of the few tried utilities of blockchain technology that works. Word is, many securities would soon be issued in a tokenized form to lower costs and increase access due to eased and trustless fractional ownership.

Kinesis is utilizing tokenization to put blockchain technology to the utility it was meant for: payments. It’s doing so by delivering a currency backed by the most-trusted asset in the world (gold).

The gold-backed money being issued by Kinesis will allow people to innately pay with gold but in a form that has no weight, exists on a decentralized blockchain, has a minimal cost of transaction, and is easily divisible. This form of money will ensure members of the world’s weakest societies and the masses do not face a depreciating net worth due to the forces of inflation.

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Absolutely right thought...
Its so strong but not enough..

Stellar should be enough; it has a high scalability.

You are perfectly correct. What a great write up and you must have really taken much time to get this together. Great work

Thank you :)
I tried to explore the social impact of the development.

This is amazing content ! This could be Big ! Gold in my opinion is Real Money , the only set back is transferring it & Security but this pretty much solves it . Content like this really entertains me and keeps me knowledgeable on such fast growing times of this technology . Keep up the great work I look forward to reading future articles 👍🏼

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Great idea

You wrote earlier about 'stable coin' and now this. Both ideas are linked up and absolutely correct.
Seeing this unstable we can really feel the need of it. A new stable gold based monetary system can save us.
Your time and efforts to deliver this post is much appreciable.
Stay blessed.

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It holds stability in the short-term as it appreciates slowly.

You got me at payment protocol built on Stellar. Low fees, fast transaction time, seems like this can work. Only thing in my opinion, is that gold is no longer seen as a currency, it's purely store or value. This is because of its uses in actual products from technology to ornaments, but most importantly, a perceived notion of it being stronger. Anything that doesn't have tangibly accessible value gains its value from perceived criteria which may or may not exist. Just my 2¢, would love to hear your take on this.

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You're right that it's no longer a currency.
Regardless, it's still globally seen as one of the most trusted means of storing value. This opens a valuable opportunity: a well-trusted global currency. What other material can be globally associated as something valuable?

By tokenizing it, all the problems that removed its existence as a currency no longer serve a hurdle. By giving the tokenized gold a payment network, it becomes digital currency.

I see where you're going. Sound arguement. But then again, value in these spaces is purely perception based. Growing a Stellar, Doge, or Zilliqa to be trusted is just as easy as making a baby boomer trust tokenized Gold.

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The value in the coin is not associated to XLM, but to gold. So, even if XLM (coin) devalues, it won't impact Kinesis and its stabecoins.

But still, everything depends upon internet structure. In real crisis times, precious metals in your hand are the best remedy to survive.

You, not Kinesis, will have ownership of the real gold.

Thanks @hatu. I have to dive deeper into Kinesis.

Every time I read these types of publications I learn a little more about cryptocurrencies. Any currency that is backed by gold, its value will increase steadily. Greetings and a strong hug.


Came across this several time before. But you article makes it all very easy to understand what this is all about! Great piece!

Thanks for sharing.

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Glad to hear so :)

I love the idea of having a gold backed cryptocurrency but one of the big problems cryptocurrencies solve (the "custodian" problem, it doesn't have the need for a custodian) doesn't seem solvable when linking cryptos to gold. This leads to the same problem as all the stablecoins, they are only valuable so long as you can trust the custodian. One of the major benefits of cryptos in general is that they are usually "trustless", but once you add a custodian back into the mix you lose this main benefit.

Here's the difference.

When you buy Tether, you don't own the dollar that backs it, the custodian does. In this case, when you buy the gold-backed coin, you are given legal ownership of the gold that back it.

I agree it's definitely better than any of the fiat backed stable coins, just still has the custodian risk.

Have you heard of Quintric? It's a similar project, was wondering if you had any thoughts on it. I think I might like Kinesis better though since it's Stellar based and seems to be further along development wise than Quintric.

I have not, but I'll definitely look into it.

But where is the real gold then, in a bank? How do I get my hands on it, if I really need it?

hi @hatu

And again ... your knowledge is just mindblowing.

I've never hard about Kinesis before. Going to read more about them before bedtime.

Word is, many securities would soon be issued in a tokenized form to lower costs and increase access due to eased and trustless fractional ownership.

I've heard that "word" already :)

Have a great sunday buddy,

Thanks bud.
It's definitely a very interesting development.

Love this. bookmarking it actually. And the fact its on Stellar's chain is suuuch good news! thanks for your work.

You're welcome :)

Excellent post and subject and yea, I agree holding FIAT is probably the most tried and tested way to lose wealth through inflation. I think 2019 will be the big year of "smart usage & smart thinking" when it comes to using blockchain technology.


Gold on a blockchain is great and all but you can't use it as money - you have to pay capital gains on every transaction, even if you're just buying a cup of coffee... You have to use legal tender coinage. Quintric is the only company doing this, and Stan Larimer is on their board of directors. They're going to be live-streaming their vault too so I'm pretty excited about it.

Your reviews and projects post always so unique and helpful that's really cool💖

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Glad you like it :)

Çok güzel bir yazı yazmışsınız, elinize sağlık. Çok doğru bilgiler taşıyor.

Absolutely right thought...
Its so strong but not enough..

Very interesting post. Congratulations. Thanks

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What's crypto projects I like ? I'm sure it's #Nexty (NTY),
this is a great project, it's in the top 200 on Coinmarketcap. Join nexty_io to update the information. #blockchain #eth

you are great friend congratulations

Excelente publicación, me ayudo a incrementar mis conocimientos sobre el mundo de la criptomonedas, ademas de la utilidades de los pagos simplificados que se realizan a través de la tecnología blockchain.

Estas tendencias como sistemas permiten a personas de bajo recursos participar en alternativas reales de inversión, siendo una opción diferente al dejar el capital depositado en un sistema bancario que ofrece un rendimiento muy bajo en comparación con la tasa de inflación, dando como resultado la perdida de interés de las personas en el ahorro, llevándolas a gastar o mal gastar el dinero en cosas que luego se convertirán en basura.

Gracias a este estilo de publicación, los lectores podemos incrementar sus capacidades intelectuales y financieras, generando herramientas que pueden utilizar en su vida, logrando más eficiencia con lo recursos.

A small Q: What is Tokenization ?
Thanks bro for this

great article!

hi i would like you to participate and contribute:

Realmente es otra clase magistral sobre las monedas virtuales... En esta era donde, como explicas, las devaluaciones financieras son constantes, es necesario crear un sistema de pago que tenga valor, durabilidad y que sea seguro y confiable. Es un tema tan profundo, pero apasionante, y para aquellos que como yo, no somos expertos en el tema, esta información es realmente exquisita al paladar del conocimiento. Me fascino la explicación. Leeré más sobre el sistema blockchain, la sustentabilidad monetaria en oro y ese sistema nuevo que pareciera que reforzará positivamente todo este método financiero que empieza a abrazarnos en nuestra sociedad moderna. Gracias por la información.

I like that

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Hello, very interesting explanation, thanks for sharing. Greetings

What are you thinking about steemit?
Should steemit need any changes in future?

Steemit changes regularly; we just had HF-20. Yes, twenty.

Excellent article, thanks to the same I just understand a little better this topic

Hmmmm... Blockchain life

Fantastic article. Wonderful articulation of many of my own thoughts regarding tokenization. We're only scratching the surface of what's possible.

You got my follow, sir.

how is this different from DGD ?

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DGD is just tokenized gold. This can be expensed at any PoS system across the world. Moreover, this rewards velocity.

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The world of cryptocurrencies is complex and to understand it it is good to read this type of post ... thank you for sharing this information I will expand it and investigate thank you in truth. Greetings and my regards.

You can get additional information through the whitepaper.

This post is great, perfect I would say. This type of information and this move is incrible, I really liked it! Congratulations! Successes! REGARDS!!

It's okay with a great work. I told you its so strong its can not be down. Now its not more.

+/- 1%.

its a good idea, but to gain people trust, its take quite some works.

Every time I read these types of post I learn a little more about cryptocurrencies. By the way, Before I read this post I saw this news XRP is now listed on KuCoin and they have a promotion where we can save trading fees.

Fact is by now... it already is kind of backed by gold since the value is also backed by paper (or coins) money already which is backed by gold (at least it should be in reality there is more paper money printed as is backed by gold). Everything is. If I want to buy I need to pay with euro... it all would be different if banks would not exist and a new monetary system would start at zero.

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