Disclaimer: I am a holder of DGX tokens mentioned below, and stand to profit the more they are used.

It wasn’t too long ago that major currencies in the world were backed by a tangible asset: usually gold, but sometimes silver. The US dollar was backed by a certain amount of gold until as recently as 1971 when gold flowed out of the US. This is not necessarily well known, however, as a friend recently revealed his own ignorance on the matter. When I told him the dollar was backed by the “full faith and credit of the United States Government”, his response was terse: “we’re screwed.”

While all fiat currencies are only as good as the government (or in our case, the private monopoly) that manages them, the trust in gold as a store of value has continued. The price of an ounce of gold has risen against the dollar the past fifteen years, to around $1215 as of this writing.

The problem with gold, however, is that it really isn’t money anymore. While it is easy enough to buy, it is generally found in coins that are $150 or more. Buying things with gold coins is a novelty, not an everyday thing for the masses.

This is all about to change, however. Gold is about to become money again.

What is money? Money is a medium of exchange, that which all other goods are exchanged for. In the US, the dollar is money. In prison, cigarettes might be money. Gold is a great asset, but it’s not generally used for money.

Until now.

Singapore based startup Digix is using the security of the blockchain to bring gold to Ethereum. It is now possible for me to send $1 worth of gold (about 1/39th of a gram) to anyone with an Ethereum address. This works similarly to bitcoin, although it is much faster.

Physical storage is handled by Digix in a vault in Singapore. One can purchase gold bars through Digix, after which Digix will provide the purchaser with a DGX token per gram of gold. So, if I buy a 1000 gram gold bar, it is stored in Singapore, while I will hold 1000 tradable DGX tokens. These tokens are divisible, so if I want to send $1 worth of gold to a friend I just send them about .025 DGX and they’ll receive it in their Ethereum wallet in under a minute.

Why Gold?

A lot of bitcoin (and cryptocurrency in general) enthusiasts don’t see why gold should be backing assets on the blockchain, but I would argue it is a perfect fit match. The integrity and availability of the blockchain give a layer of transparency to gold money that has never been seen. Every DGX token that is created has a proof of asset certificate behind it, and 3rd party auditing will ensure the gold is kept securely.

In essence, we have the return of the gold dollar, not by a central government, but a private corporation. The new free market in currency is creating what governments have been refusing to do: back their money with gold. Imagine if Venezuelans had access to DGX as their currency tanked. They would have been able to safeguard their wealth and protect the purchasing power of their money.

Gold as money has long been a dream of libertarians and hard money enthusiasts. The blockchain gives us the chance to test that theory in the real world.

Find out more about Digix:

https://digix.io/

Get started with Ethereum:

www.ethereum.org