White Paper

Despite vast innovation in financial technology, traditional financial intermediaries remain strong and act as a necessary middleman for all transactions. A traditional financial institution, in acting as a monopoly, is an obstacle for improving safety, increasing efficiency, and bettering the consumer experience.[1] Fintech aims to disrupt traditional intermediaries by making transactions significantly safer and more efficient. Blockchain technology was intended to remove the need for a centralized actor when two people are involved in a simple transaction. The goal was to increase transparency and remove the unnecessary transaction costs traditionally associated with banking. As a result, scholarly articles believed that, after the invention of the bitcoin, blockchain and digital currencies would make fiat currencies obsolete.[2]

Contrary to the articles released in 2011, crypto assets did not replace traditional currencies. Rather than becoming a digital currency, cryptocurrencies were viewed as a volatile and rewarding investment. Despite the failures of early cryptocurrency implementation, developers and fintech entrepreneurs did not stop attempting to reach the initial goals of cryptocurrency. Therefore, to resolve the volatile price of bitcoins, stablecoins emerged as an alternative currency. A stablecoin is created when an issuer receives governmental fiat currency in exchange for a set value of the token. The set value is always tied to the price of a well-known commodity like gold. This unique token can then be kept and used as currency, converted back to fiat currency, or traded for other cryptocurrencies.

Stablecoins function just like traditional currency by meeting the three basic functions of money: medium of exchange, store of value, and unit of account. First, stablecoins are already an increasingly more common medium of exchange in facilitating commerce. With a value that is pegged to gold, GLD Coin would be accepted by merchants who would similarly accept cash or other cryptocurrencies. By ensuring that the value remains stable with gold, retailers can accept GLD coin knowing that it is protected from volatility while benefiting from the efficiency of digital assets.

Second, unlike traditional cryptocurrency, stablecoins are an excellent store of value. For a currency to function properly, it must retain its purchasing power over time so that one could make long-term purchases.[3] With GLD Coin always pegged to the price of gold, users are able to save, spend, and invest using the safe value of gold. Furthermore, in protecting against inflation and other currency devaluation events, GLD Coin, just like physical gold, will withstand negative macroeconomic events by mimicking the gold market. Unlike traditional currency, which is heavily influenced by U.S. government decisions on interest rates and inflation, GLD Coin allows users to transact on the gold standard – providing an alternative to fiat currency with greater independence from regulation and centralized control.

Third, a unit of account is established when users can measure and compare the value of goods and services in a consistent way.[4] By pegging GLD Coin to a well-know, reliable, and inflation-resistant asset, it provides a clear and universally understood currency. This enables people to pay using a unit of account backed by the gold standard rather than relying on government-backed, artificially created fiat currencies. GLD Coin is therefore backed by more accurate pricing and facilitates easier economic transactions and comparisons.

Stablecoins are therefore introduced as an alternative currency without the need to rely on trust. Using blockchain technology introduced by Satoshi Nakamoto, transactions have more security without relying on any central authority to issue them.[5] With the introduction of the first crypto asset, Bitcoins were created to be a “purely peer-to-peer version of electronic cash” that allows for “payments to be sent directly from one party to another without going through a financial institution.”[6] Bitcoins, however, became extremely volatile and were not widely accepted as a medium of exchange. Instead, Bitcoins were largely viewed as an investment.

The issues present in bitcoins were resolved quickly with the introduction of stablecoins. Furthermore, stablecoins maintained the positive attributes that initially came with cryptocurrency like the ability to send payments without the need to rely on a central authority. Using blockchain technology, transactions are verified in a faster and more secure manner. Blockchains use a public, distributed ledger technology (“DLT”) which replaced the need for a central authority like a traditional financial institution. DLT uses a technology characterized by immutable and cryptographic safeguards to ensure trust and authenticity with each transaction.[7] Therefore, since banks and government regulation are no longer necessary, the value of currency will always reflect the gold market. Furthermore, with real-time settlements, cryptocurrencies can be quickly exchanged for either traditional fiat currency or other cryptocurrencies.

Finally, stablecoin users can generally rely on state laws which offer protections from fraud surrounding digital currencies. Thus, if a state has laws surrounding Virtual Token Fraud, users can expect the law to protect them from any crypto-related fraud. With all these considerations, stablecoins became viewed as a very useful innovation. They can provide “faster and cheaper remittances, spur competition in payment services and thereby lower costs, and support greater financial inclusion in many parts of the world” where currencies are not stable.[8]

GLD Coin therefore emerges as the ideal currency of the future. By bringing back the gold standard to currency, GLD Coin combines the benefits and safety of holding gold with the security and efficiency offered by cryptocurrency. GLD Coin is on path to become the currency for anyone with gold investments, for anyone whose government-backed fiat currency is unstable or cannot be trusted, and for anyone who values security and efficiency separate from a centralized governmental authority.