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An Overview of Metal Cryptos


This article was originally published in the Newsroom at www.UPMA.org (view original)

‘Tis the season for backing your cryptocurrency with gold!

…Or so the market would indicate. Within just the past few months, around 50 fresh ICO’s claiming to have total or partial gold (or silver) backing to their tokens have jumped into the public eye. At this point, with so many promising start-ups on the table, investors and consumers will find themselves asking; Which one is safest to invest in? Where are they headquartered? How easily can I redeem my tokens for metal?

Indeed, gold-backed cryptos (GBC’s) seem to be a dime a dozen nowadays, and the average prospector would be forgiven for any indecision they experience in quantifying the legitimacy of these businesses. It’s true that all cryptos have the obvious advantage of transparency due to the nature of open ledgers, and there is a general consensus in the precious metals community that blockchain technology has the potential to revolutionize and re-legitimize the market: gold needs accountability and cryptos need stability, but both need to be legal and convenient in order to become widely adopted as money. Even if you’re not trying to kill the dollar (which many GBC’s hope to do), it seems only a matter of time before this convergence of ancient wealth and modern tech was destined to be orchestrated.

Unfortunately, many of the same issues which have plagued repositories for centuries now hinder the progress of GBC’s: unaccountability, secrecy, and ambiguity to name a few. In addition, new challenges in the cryptosphere will likely prove major hurdles for many of these blossoming enterprises; namely the fact that no cryptocurrency is considered legal tender by the US government. It’s almost baffling that, up to this point, no one has been able to drum up solutions for these seemingly fundamental problems.

That is, until the advent of Quintric.

Almost all GBC’s claim to be “the first crypto backed by gold,” but the hallmark of the Quintric program is Legal Tender Status. Whereas all other GBC’s are backed by bullion, bars or grains, Quint tokens represent government-minted gold coinage. This exempts them from the dreaded capital gains tax whenever they circulate. It also means that the tokens are essentially double-stable: not only does the price of gold fluctuate far less frequently or erratically than certain cryptocurrencies, but the retail rate of specie coinage is more stable than even the daily swings in gold spot price. Other GBC’s might maintain value by virtue of their physical metal backing, but the Quint is a league all its own: it signifies ownership of real, literal money.

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The first feature to look for in a “gold-backed” crypto is obvious: Are they really backed by gold? If so, do they have total, or only partial backing? How much gold backs each token? A surprising number of ICO’s are not actually backed by gold at all, but merely simulate the properties of gold, or borrow their value from some random amalgam of assets (gold, silver, platinum, real estate, oil, etc.). Another questionable practice involves launching an ICO whose tokens are backed by gold yet to be excavated. These mine-backed cryptos often include disclaimers regarding the speculative nature of the endeavor, and are basically crowd-funding pages disguised as ground-breaking monetary reform (pun intended). Simply put, until they actually produce the metal which lends value to the tokens, projects like GoldCrypto, GoldMineCoin, KaratCoin and Gold Royalty Tokens are essentially backed by dirt.

Quintric pulls no punches in this fight: their tokens are backed entirely by Gold Eagle and Buffalo coins, minted by the US government. In fact, it would be more accurate to classify the Quint not as a crypto backed by gold, but as gold represented by a "crypto-certificate." The company vows to maintain 100% reserve ratios on said gold, which allows easy, on-demand redemption of tokens in exchange for the physical metal. This can be done in coordination with their office staff in Alpine, Utah. If there are any doubts that Quintric will honor these promises, the 24-hour livestream of the gold vault, which begins July 4th, will cast aside all speculation.

By comparison, few of the competing GBC’s offer truly attention-grabbing proof that the gold backing their tokens really exists, let alone where it is vaulted and by whom. Fewer still provide a means by which you can conveniently redeem their tokens while some, like GoldCrypto, KaratCoin, XGold, Unity Ingot and OZcoinGold admit that it will take 1-5 years for a buyback option to be established. While many of these ICO’s do appear trustworthy (some even have well-respected names behind their vaulting operations, like Brinks or the Royal Mint), Quintric has removed the need for trust by decentralizing their security and audits.

 Once the façade of gold imagery is peeled back, it is discovered that many other “metal” cryptos are actually backed by Bitcoin, fiat money or some other asset.

Once the façade of gold imagery is peeled back, it is discovered that many other “metal” cryptos are actually backed by Bitcoin, fiat money or some other asset.

Admittedly, any token which is backed by a tangible asset is better poised to maintain stable value than one backed only by speculation. Therefore, perhaps the most disturbing trend among GBC’s is the claim that their tokens will soar in value after the initial launch, solely as a result of demand and popularity. This is optimistic at best, considering the hundreds of coins which have flopped before raising even nominal capital during their ICO. At worst, this claim contradicts the benefit of having a stable asset backing your currency: if 1 token = 1 gram of gold, but the perceived value of that token rises 1,000%, one is forced to admit that, either they are now only backed 10% by gold, or that they have 100% backing on a volatile security certificate.

However, supposing a given GBC does experience exponential growth, there is not always a plan to actually acquire more metal to back up an ever-increasing token supply. A more common procedure, it seems, is to work with a static volume of gold while "burning" or "melting" the circulating tokens in transaction fees. Thus, each token has the potential to increase in relative value as the gold supply dwindles (unless the company decides to inject a new surplus of tokens into the market). Quintric has sidestepped this issue by pledging to immediately procure specie coins whenever new tokens are created - perhaps even maintain a light surplus of gold in order to achieve immediate availability. Every new shipment of gold will accordingly be livestreamed as it is counted and placed in the vault, so there can be no discrepancy between the blockchain and the physical storehouse.

Another major benefit Quintric has over the competition concerns the market caps. While most cryptos have a hard cap, after which no new tokens can be created, all GBC’s are technically limited by the total volume of gold on earth. That being said, the majority have an arbitrary cap: some convenient, round number which establishes artificial scarcity. However, Quint tokens are naturally limited by the total number of American Gold Eagle and Buffalo in circulation, which in turn can only be minted at a finite rate. This cap currently sits just above 25 Billion Quint (about $43 Billion USD), with a steady trickle of new coins entering circulation every year. In an extreme scenario, with every single Eagle and Buffalo having been vaulted with Quintric, the value of the tokens would likely increase due to the sheer demand for new coins.

Bearing in mind the shortcomings of some of these projects, it is important to remember that the movement in general is a step in the right direction towards financial reform. In the context of a market quickly becoming saturated with garden variety GBC’s, the ones that stand out as sounder investments are the ones who refrain from making grandiose value projections, and who are up-front about the nature of their product. These are are groups like DinarDirham, GoldenCurrency and Curensee, who provide greater disclosure as to the specifics of their programs. A few others look promising; AnthemGold is the only other notable operation looking to vault domestically; on the other hand, Orocrypt isn’t even available to US residents. It’s quite the spectrum, and placing anywhere in this lineup is a respectable achievement in and of itself.

All in all, while any crypto truly backed by gold is far ahead of the competition, Quintric goes above and beyond by every metric. The program is being run by heavy-hitters in the crypto space (the likes of Stan Larimer and Michael Taggart). Meanwhile, the vaulting branch of the company (UPMA) is in its seventh year of operation and has the support of several State Legislators. Between its notable figureheads and revolutionary policies, any organization looking to emulate Quintric’s business model will have a lot of catching up to do. With a livestreamed vault on American soil, where you can redeem your tokens for gold at any time, or circulate them as legal tender, Quintric is positioned not only to place #1 amongst metal cryptos, but also to outpace other mainstream tokens as the government continues to bring down the hammer of securities law onto the cryptosphere. The Quint truly is the Gold Standard reborn.

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Lawrence Hilton