Gold Backed Cryptocurrency Is crypto all that glitters? www.thehutchreport.com Insights, Ideas and Tools for the New Economy THE LURE OF GOLD We take a look at the evolution of gold as a store of value to the advent of digital currencies and the use of gold therein. SWOT ANALYSIS We analyze the current state of gold backed cryptocurrencies by way of a SWOT analysis in order to determine the strengths, weaknesses, opportunities and threats facing them as they move deeper into the consciousness of the financial mainstream. GOLD BACKED CRYPTOS AND EXCHANGES We provide an overview of current, pending and past digital currencies that are backed by gold in addition to new gold blockchain exchanges being introduced. The Hutch Report was founded in 2015. Originally from North America, the founders have lived in Europe for the past 20 years and traveled some of the most amazing places that the world has to offer. In that time, learning some incredible things and living an incredible adventure. Along the way we have met a large number of fascinating people and worked with more than a few technology startups, one which was sold to PayPal and another that was sold to Macrovision. In that time we have compiled an extended network of contacts in the European and North American startup communities as well as the venture capital and private banking sectors. Through research, interviews and analysis we are out to discover next great opportunities, investments and nuggets of knowledge. As we go through this process we thought it would make sense to share our insights, ideas and tools for the new economy so our readers can profit along with us. All of the content posted on our website, in the blog and in our feature reports, is unique and original. Our work has appeared on Zero Hedge, as well as other widely read sites. The Hutch Report is frequently engaged by a variety of organizations including hedge funds for industry insights as well as directly by a broad range of companies for marketing consultancy and competitive analysis. If you would like us to cover something special please feel free to use the contact form or drop us an email as noted on the contact page. Any other feedback, comments and suggestions are also welcome. You can contact us at [email protected]. For more content and exclusive downloads, visit www.thehutchreport.com editor's note Welcome to our fourth report. Keeping in tradition with the Hutch Report, we are providing our insights, ideas and tools for the "New Economy." A chart topping topic in this new economy has been the proliferation of cryptocurrencies. As we look to the future of this new digital payment method, there will always be those that do it with hesitation. In order to ease their minds they look to one of the world's oldest stores of value, gold. This is where the shiny metal meets the digital world. We look into the numerous new cryptocurrency companies who promise digital tokens worth their weight in gold. Although the blockchain may account for the digital tokens, accounting for the gold backing them is another matter. Read on! The Hutch Report Team Insights, Ideas and Tools for the New Economy October 2017 - Report #4 GOLD BACKED CRYPTOCURRENCY The Price of Gold /SWOT Analysis / GBC THE LURE OF GOLD “Put forth thy hand, reach at the glorious gold.” -William Shakespeare We take a look at the evolution of gold as a store of value to the advent of digital currencies and the use of gold therein. SWOT ANALYSIS We analyze the current state of gold backed cryptocurrencies by way of a SWOT analysis in o r d e r t o d e t e r m i n e t h e s t r e n g t h s , w e a k n e s s e s , opportunities and threats facing them as they move deeper into the consciousness of the financial mainstream. GOLD BACKED CRYPTOS AND EXCHANGES “Although gold and silver are not by nature money, money is by nature gold and silver.” - Karl Marx We provide an overview of current, pending and past digital currencies that are backed by gold in addition to n e w g o l d b l o c k c h a i n exchanges being introduced. © The Hutch Report www.thehutchreport.com 1 Insights, Ideas and Tools for the New Economy October 2017 - Report #4 Introduction The Lure of Gold Up until the 20th century most governments used a gold standard as a monetary policy. In other words, each Gold. One of the 92 natural economic unit of currency was based on some fixed elements occurring on earth quantity of gold that governments would hold in reserve. and thought to be produced from the collision of stars as Most governments moved away from a gold standard to fiat the earth was being created. It currency. Fiat currency is legal tender that is not backed by is the most pre-eminent any physical commodity. The principal reason governments precious metal on the planet. moved away from a gold standard was to enable the ability The human fascination with to stimulate their economies through monetary policy. The gold dates almost as far back as primary two levers of monetary policy are the quantity of we can see as evidenced by currency in circulation and interest rates. When currency collected gold bits found in was tied to a gold standard a government would have to Paleolithic era (40’000 BC) procure more gold in order to increase the currency supply. caveman dwellings. In effect, the gold standard was conceptually a precursor to It is currently estimated that digital currencies. Instead of a digital ledger insertion and approximately 185k to 200k public key, people would exchange pieces of paper with metric tons of gold are mined each other that represented a stored value in gold. That and above ground. While no paper become very expensive for governments, not only one seems to know for sure, scientists estimate that there are because of the increasing amount of gold to procure and vast reserves for gold still manage, but also ever increasing costs for special papers buried within the earth, and inks in order to avoid forgery. In hind-sight it looks however, at some point mining quite obvious that the evolution of computer technology it will no longer be economical. would enable more efficient systems than paper for According to the World Gold exchange of value and lead to the development of digital Council as well as the US currencies. Geological Survey, most of the mined gold has ended up as Bitcoin and blockchain technology were not the first such jewelry. Following jewelry, the steps in the evolution of digital currency, albeit they are next wide spread use of gold is major steps. The specs for Bitcoin were only published in as money and stored value in 2008. There were several pre-cursors. One of the most vaults as bullion notable was DigiCash. DigiCash which was founded in 1990. While it was not a gold based digital currency, it was Only about ten percent of gold notable in its use of public and private keys and digital is used in industry. Among the most interesting industrial signatures. It ultimately went bankrupt in 1998. properties of gold are that it is Despite the move away from a gold standard, gold has resistant to corrosion, highly retained an eminent position as a store of value. With the malleable, ductile (eg. it can be evolution of blockchain technology it seems quite natural stretched very thin, for example that developments would be made to deploy gold backed into wires for carrying electrical current or used within cryptocurrencies. Aside from developments such as electronic components, without DigiCash, others had begun experimenting with more losing its toughness), is not efficient ways enabled by computer technology for the toxic to man, and is resistant to buying, selling and spending of gold well before the advent most acids. of the blockchain. © The Hutch Report www.thehutchreport.com 2 Insights, Ideas and Tools for the New Economy October 2017 - Report #4 There are many systems for digital gold currencies that were developed. Some of these are still around today while some have crashed and burned. While the development of cryptocurrencies rages on with all sorts of niches, bubbles and real value yet to emerge we thought it would be worthwhile to take a look at what determines the price of gold, in addition to, the Strengths, Weakness, Opportunities and Threats (SWOT) of digital gold currency systems and evolution in light of blockchain technology. This chart of historical data for real (inflation-adjusted) gold prices per ounce goes back to 1915. The series is deflated using the headline Consumer Price Index (CPI) with the most recent month as the base. The current price of gold as of September 12, 2017 is $1,330.60 per ounce. © The Hutch Report www.thehutchreport.com 3 Insights, Ideas and Tools for the New Economy October 2017 - Report #4 WHAT DETERMINES THE PRICE OF GOLD? The establishment of gold prices is complex. This is just a short introduction to some of the principal actors involved in influencing how much you would actually pay or receive when buying or selling gold. Further complexity is added when these mechanisms are combined with the market forces impacting the trading prices of the cryptocurrency tokens based on gold. Before discussing gold prices a distinction should be made between spot prices and future prices.