Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Blockchain Technology – What Is It and How Will It Change Your Life?

Currencies / BlockChain Dec 01, 2016 - 02:54 PM GMT

By: GoldCore


  • Blockchain technology – What is it?
  • Latest developments – Royal Mint Gold & CME, Goldman Sachs and Santander
  • Why do we need it? It’s about value
  • Blockchain is an extension of economics
  • Blockchain allows us reduce uncertainty and risk
  • How will it change your life?

By ;@Skoylesy . Editor ;@MarkTOByrne

For those of you who follow anything to do with blockchain and blockchain technology,  you will know that the space has had its ups and downs in the last couple of weeks.

The exciting news is that two major players in the gold market, the Royal Mint and CME Group have announced a blockchain-backed gold project, and the surprising news is that the R3CEV consortium is apparently under threat.

Making a mint on the blockchain

The Royal Mint and CME Group have announced that they are working on a blockchain project together. The project will see the creation of Royal Mint Gold (RMG) digital tokens which will each be backed by 1g gold.

We will look at the Royal Mint’s announcement in more detail shortly, particularly at how they expect the implementation of a blockchain-backed platform to mean that they are able to remove storage fees.

But the focus of today’s research note is to look at why blockchain is grabbing everyone’s attention.

The use of blockchain technology in the gold space is nothing new, it is something we discussed recently in regard to changes in the gold market and the risks posed to the London gold market.

However, the move by the world’s oldest gold organisation is an illustration of just how complimentary the technology that was first known for backing ‘digital gold’ (bitcoin) and the longest surviving money, really are.

Goldman Sachs and Santander Drop Out of R3 Consortium

In recent weeks, both Goldman Sachs and Santander have dropped out of the R3CEV consortium, whilst a further five (including Morgan Stanley and National Australia Bank) are also rumoured to be about to leave.

R3 is a blockchain company formed of a consortium of near 70 banks and financial institutions (including those focused on insurance). It leads research and development in distributed ledger technology, and is currently raising $150m.

However the move by those mentioned above is a positive sign, and one that shows the blockchain (or distributed ledger technology) industry is maturing. Shake-outs are inevitable in new technology industries as institutions, governments and regulators negotiate their way through new developments and working out what it means for them.

Those companies that are set to leave the consortium are still committed to the ground-breaking technology. Goldman Sachs and Santander are both, for example, still shareholders in Blythe Masters’ Digital Asset Holdings. The former co-led a $60 million investment into the business alongside IBM.

Even CME Group, as mentioned earlier, are involved in multiple blockchain projects, as a member of the industry body Post Trade Distributed Ledger Group (PTDL) (fellow members include the London Stock Exchange, Euroclear and HSBC) and the Hyperledger project.

But what is it about this technology that is so groundbreaking and has the likes of Goldman Sachs investing millions and ex-senior JP Morgan banker, Blythe Masters breaking rank and joining a (well-funded) start-up?

Why are established gold-market participants deciding this is the technology they need to bring the space into the 21st century?

Uncertain about blockchain?

Bettina Warburg, presented a TED Talk over the summer in one of the best explanations we have seen for a long-time, that will help you to understand the power of blockchain technology.

Ultimately blockchain’s genius comes down to its ability to reduce uncertainty in the transfer of value – whether that value is information, a digital asset, a contract note, an agreement or a deed – you name something that is effectively information and it has value.

The exchange of value is something we have sought for millennia to reduce the uncertainty of, and it has resulted in the formal and informal institutions and systems we have today.

Ranging from regulators, to oversized banks like Goldman Sachs, to lawyers, to barter systems.

What is blockchain?

“So what is the blockchain?” Warburg explains it well:

“Blockchain technology is a decentralized database that stores a registry of assets and transactions across a peer-to-peer network. It’s basically a public registry of who owns what and who transacts what. The transactions are secured through cryptography, and over time, that transaction history gets locked in blocks of data that are then cryptographically linked together and secured. This creates an immutable, unforgettable record of all of the transactions across this network. This record is replicated on every computer that uses the network.”

Never seen before

The concept of blockchain, something that can be decentralised, can operate autonomously, is auditable and apparently immutable is something that is difficult to get our heads around. The closest description Warburg can provide is Wikipedia.

“We can see everything on Wikipedia. It’s a composite view that’s constantly changing and being updated. We can also track those changes over time on Wikipedia, and we can create our own wikis, because at their core, they’re just a data infrastructure. On Wikipedia, it’s an open platform that stores words and images and the changes to that data over time.”

There are of course further technical details to blockchain, but at its core it is a very similar concept.

“On the blockchain, you can think of it as an open infrastructure that stores many kinds of assets. It stores the history of custodianship, ownership and location for assets like the digital currency Bitcoin, other digital assets like a title of ownership of IP. It could be a certificate, a contract, real world objects, even personal identifiable information….It’s this public registry that stores transactions in a network and is replicated so that it’s very secure and hard to tamper with.”

This is where much of the attraction comes for the gold market. In itself gold is an immutable form of money, it cannot be edited, multiplied and in many ways it is an autonomous currency.

However the market that drives the prices is none of these things. By placing gold on a blockchain, we may get the first steps to a truly autonomous gold market that is about price discovery rather than price creation.

Why do we need it? It’s about value

Bettina points out that much of human behaviour comes down to how we exchange value. This has lead to a huge number of industries developing that are, at their core, about value.

They are about how we attribute value to items, how we exchange value and how we maintain value.

Blockchain will “fundamentally change how we exchange value”.

Why is this? Because the blockchain has a capability that no human-managed organisation has yet managed to master – the removal of uncertainty through technology.

Blockchain is an extension of economics

It still surprises me the number of people who haven’t heard of bitcoin, and even those who have heard of bitcoin are unaware of blockchain. Blockchain is the technology that underpins bitcoin, but it is so much more than the ledger of a cryptocurrency.

Blockchain means that we may no longer have to use the layers of bureaucracy in order to reduce uncertainty. Warburg sees the potential of blockchain as an extension of Nobel Prize winning economist Douglass North’s ‘New Institutional Economics’.

Institutions, in this context, are just the rules (and organisations, whether informal or formal) that implement them e.g. the law or just bribery.

“As Douglass North saw it, institutions are a tool to lower uncertainty so that we can connect and exchange all kinds of value in society. And I believe we are now entering a further and radical evolution of how we interact and trade, because for the first time, we can lower uncertainty not just with political and economic institutions, like our banks, our corporations, our governments, but we can do it with technology alone.”

Knowing that these organisations exist form the rail on which we operate our lives, our businesses and our economies. In the future blockchain will act as the rails that reduce uncertainty, on top of which we will exchange value through digital assets.

The uncertainties of life

“Blockchains give us the technological capability of creating a record of human exchange, of exchange of currency, of all kinds of digital and physical assets, even of our own personal attributes, in a totally new way. So in some ways, they become a technological institution that has a lot of the benefits of the traditional institutions we’re used to using in society, but it does this in a decentralized way. It does this by converting a lot of our uncertainties into certainties.”

For Warburg there are three uncertainties when it comes to transferring value:

1) Not knowing who you are dealing with
2) Degrees of transparency in complex transactions and supply chains
3) Reneging on an agreement – no recourse if it goes wrong

The uncertainty of the unknown party

Today, with many of the transactions we are able to take part in, the uncertainty is reduced thanks to verification. Whether this be by receiving a bank transfer from someone who has been verified by their own (also verified bank) or if it is booking AirBnb which you trust thanks to social verification, GoldCore customer reviews on Ekomi, personal reviews and links to Facebook profiles.

Warburg points out this is a very fragmented system. I have bank accounts in the UK, but if I want to open an additional one in the same country I have to be verified all over again. One verification does not determine the next. “Think about how many profiles you have,” says Warburg.

“Blockchains allow for us to create an open, global platform on which to store any attestation about any individual from any source. This allows us to create a user-controlled portable identity. More than a profile, it means you can selectively reveal the different attributes about you that help facilitate trade or interaction, for instance that a government issued you an ID, or that you’re over 21, by revealing the cryptographic proof that these details exist and are signed off on. Having this kind of portable identity around the physical world and the digital world means we can do all kinds of human trade in a totally new way.”

In the project announced by the Royal Mint and CME Group there is expected to be transparency over the ownership records – to those who have access to the ‘permissioned’ ledger.

Degree of transparency

At the moment there is very little transparency and accountability when it comes to the London Gold Market and it’s over-the-counter (OTC) trading. This can be difficult to contend with given so much physical gold demand is, in its simplest from, based on transparency and trust. Yet as gold product providers such as ETFs and digital gold providers grow in power we appear to forget why we trust gold in the first place.

For many one of the key issues with the way gold products are traded is a lack of transparency over the underlying asset or currency – physical gold.

However, blockchain can potentially be used to bring some of the much-missed transparency to the gold market. This is when we start to use the phrase ‘trustless’ which is a bit of a mind-upset for those who are new to bitcoin and blockchain.

A trustless transaction is where the participants do not need to trust one another, as instead a blockchain (which is verified, immutable and decentralised) is used to monitor and validate the information in a supply chain. Imagine what this could mean in a network of goods and data that currently can be tampered with – medicines, technology, designer items.

This means that in theory it should not matter when you are dealing with a multi-party horizontal supply chain, which each have different infrastructures, about whether you can trust them or not as there is ‘one single truth’.

This is something we have not had before – we have an unbelievable lack of transparency, which currently we rely on layers of verification agents (lawyers, compliance, personal trust) to provide visibility.

“We can create a decentralized database that has the same efficiency of a monopoly without actually creating that central authority. So all of these vendors, all sorts of companies, can interact using the same database without trusting one another. It means for consumers, we can have a lot more transparency. As a real-world object travels along, we can see its digital certificate or token move on the blockchain, adding value as it goes. This is a whole new world in terms of our visibility.”

Reneging – no going back with blockchain

The ability to solve this uncertainty is the application of blockchain that really put it on the map. Smart-contracts are where we are seeing some serious innovation. Currently we rely on legal entities and processes to guarantee our transactions.

Supply finance is one particularly complicated area that is built on layers of organisations and timings in order to facilitate deals. A more familiar example is the process of buying a house – something that is inordinately lengthy, time-consuming and expensive for what is basically the exchange of a good (too often) financed with debt.

Both of these examples rely on third parties to create trust within a transaction, to enforce it because of the checks that are put in place. But blockchain now enables us to do away with the bureaucracy and red tape, as the code acts as the enforcer.

Warburg uses the example of purchasing a smart-phone online:

“Blockchains allow us to write code, binding contracts, between individuals and then guarantee that those contracts will bear out without a third party enforcer. So if we look at the smartphone example, you could think about escrow. You are financing that phone, but you don’t need to release the funds until you can verify that all the conditions have been met. You got the phone.”

And this, I agree with Warburg, is one of the most exciting things about blockchain’s ability to lower our uncertainties:

“…because it means to some degree we can collapse institutions and their enforcement. It means a lot of human economic activity can get collateralized and automated, and push a lot of human intervention to the edges, the places where information moves from the real world to the blockchain.”

Will it change my life?

The reason blockchain is so groundbreaking is because it is both a technological disruption and economic evolution. It has combined the human need to reduce uncertainty with mathematics and technology. Its end result is a system free of layers.

“…the very thing that keeps the blockchain secure and verified, is our mutual distrust. So rather than all of our uncertainties slowing us down and requiring institutions like banks, our governments, our corporations, we can actually harness all of that collective uncertainty and use it to collaborate and exchange more and faster and more open.”

It is difficult to see how it won’t change our lives.

The implications for a world that is affected from the top to the bottom by institutions that are required to manage our mutual distrust, is unfathomable.

But this is where many will take issue. Why would an institution be it government, bank, legal entity, regulator or compliance company decide to invest in and implement a system that is, at its core, designed to do their job?

Why embrace a blockchain that could expose unethical, illegal practices?

Why operate on a blockchain that removes the need for expensive lawyers, compliance officers etc.

In truth the concept of blockchain in practice is far more complex than it initially appears. There can be multiple blockchains. Some operate privately between a select network, some are public (such as the bitcoin blockchain) and others a hybrid of the two.

Blockchains can be implemented to do an inordinate number of processes that we are hardly aware of, the whole time keeping the current status-quo just more efficient. And this is why everyone is looking into using the technology.

That may seem depressing but it will lead to many, many positive developments in terms of ethical behaviours, regulated activities, efficiencies in deal-making and even reducing payment costs.

For many the discussion is beyond this, it’s not will or how but when?

The short-answer is not for a while. Unless you are an avid bitcoin user, trader or enjoy taking part in initial coin offerings. In the long-term it probably will affect your life, but the masses may barely know about it.

At the moment there are few applications (other than bitcoin) that are up and running in the real world. But the possibilities really do appear to be infinite and it is with this in mind that regulators are launching incubators, insurance companies are hosting hackathons, banks are investing in blockchain tech projects and venture capitalists (VCs) are snapping up anything that merely mentions the phrase ‘decentralised ledger’.

For Warburg, we will soon see a world where blockchain technology and distributed, autonomous organisations will “have quite a significant role.”

We concur.

Watch Warburg Blockchain Ted Talk
Read Blockchain Promises To Be As Disruptive A Technology As Internet

This update can be found on the GoldCore blog here.




IRL +353 (0)1 632 5010
UK +44 (0)203 086 9200
US +1 (302)635 1160


WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

GoldCore is committed to complying with the requirements of the Data Protection Act. This means that in the provision of our services, appropriate personal information is processed and kept securely. It also means that we will never sell your details to a third party. The information you provide will remain confidential and may be used for the provision of related services. Such information may be disclosed in confidence to agents or service providers, regulatory bodies and group companies. You have the right to ask for a copy of certain information held by us in our records in return for payment of a small fee. You also have the right to require us to correct any inaccuracies in your information. The details you are being asked to supply may be used to provide you with information about other products and services either from GoldCore or other group companies or to provide services which any member of the group has arranged for you with a third party. If you do not wish to receive such contact, please write to the Marketing Manager GoldCore, 63 Fitzwilliam Square, Dublin 2 marking the envelope 'data protection'

GoldCore Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules