Over the past year, the cryptocurrency market has grown into a $15 billion industry. Due to the immense popularity and acceptance of bitcoin, numerous alternative digital currencies are popping up, such as the RonPaulCoin, NameCoin, PeerCoin, with the hope that they will become widely accepted too.
Many goldbug libertarians have expressed their reservations with bitcoin. Some of their concerns consist of the paucity of security, digital currencies not being backed by gold and/or silver, a government shutdown, a bubble replicating Tulipmania and the overall hype.
One cryptocurrency is hoping to draw in these critics with a commodity-backed digital currency.
In a press release issued this week, NoFiatCoin (XNF) announced that it is the first alternative currency to be backed by gold and silver. It prides itself in combining the features of cryptocurrencies with precious metals. XNF Coins can essentially be redeemed for gold and silver at future XNF Exchanges.
It was launched on Jan. 6 and has already nearly doubled in value to $2.10. Through word-of-mouth and conversations between goldbugs and students of the Austrian School of Economics, the new digital currency hopes to win over those who maintain drawbacks. For instance, it claims that even if merchants don’t accept it through rules, regulations and perhaps prohibitions by government and financial institutions, it can still be utilized in the “precious metal ecosystem.”
The current number of XNF Coins that have been released is 50,000: around 38,000 have been exchanged and close to 12,000 are on reserve. The total number of XNF Coins is exactly 25 million.
“NoFiatCoin wants to avoid problems associated with mining: waste of computing power, energy and the possibility of a mining pool taking control of the market by acquiring 51 percent of all available mining capacity,” the news release states.
“Therefore XNF, like XRP (currency of the Ripple Network) are pre-mined and can be directly obtained on the Ripple Network or through XNF Exchanges. These exchanges also provide unique services that will enhance the Ripple Community’s ability to move funds in and out of the network, by means of exchanging XNF, bullion, gold and silver coins.”
According to the website, it works like this: establish an active Ripple Wallet, use a provided Ripple address and buy XNF (all transactions will be performed on the Ripple Network). To redeem, the minimum amount depends on the value of bullion coins in stock at the time as well as shipping costs. At the present time, the minimum is $825.
Is it really backed by gold?
Although the NoFiatCoin idea could prompt goldbugs, some libertarians are not entirely convinced, including Michael Suede of Libertarian News, who notes that there are numerous “trust issues.”
“If XNFs were actually a “gold backed” currency, each XNF would have to represent a fixed unit of weight. For example, they could set an XNF to be worth .001 ounces of gold, and if you saved up 1000 XNFs, then you could always exchange them with NoFiatCoin for an ounce of bullion. Of course, under this system, it would be impossible to have a fixed limit of currency creation, and there would have to be a way to take XNFs out of circulation once they were redeemed for physical specie,” wrote Suede.
“Further, if XNFs were a real gold backed currency, we would have to trust NoFiatCoin to maintain an accurate accounting of its gold reserves vs. its issuance of XNFs. There’s nothing that would physically prevent NoFiatCoin from issuing XNFs without actually having the gold to back them for redemption. This is how fractional reserve banking first came about. We can see that there are multiple trust issues that come into play when trying to tie a digital currency to physical bullion.”
Suede does note, though, that it could very well work in the future because it operates similar to bitcoin in that the supply is limited and it maintains the properties of bitcoin.
With 2014 possibly being the rise (or fall) of the cryptocurrency marketplace, we will just have to wait and see if XNF Coins can catch on with libertarians, gold enthusiasts and bitcoiners everywhere and compete with the more established digital currencies.
Who knows? Maybe goldbugs may just want to hold onto their American Eagles, Chinese Pandsas and Vienna Philharmonics