When Bitgold was first conceived earlier this year, it was believed that the company was creating a platform that would mimic the BItcoin system, and provide a decentralized gold currency, as opposed to the Bitcoin “token” denominated system. While information on the system was fuzzy at first, many cryptocurrency enthusiasts were excited to see how the Bitcoin blockchain technology could be applied to a more traditional store of value, in this case gold.
Over the past few weeks, Bitgold has launched, and has embarked on both an expensive and active marketing effort. Unfortunately, despite the hype, a closer look at Bitgold reveals that it has absolutely nothing to do with Bitcoin, Blockchain technology, or any similar concept. In fact, the only part of Bitgold that involves the blockchain is that a hash of past transactions is stored on the blockchain, creating an immutable audit trail in the future. Aside from this minor detail, Bitgold is nothing but a centralized gold based digital currency/payment processor and is in fact no different than the ill-fated e-Gold from the start of the millennium.
For those who are not familiar with the fate of e-Gold, the company was raided and shut down by the United States Government following an investigation that revealed that the company was operating as an unlicensed payment processor and money transmitter. While the laws at the time surrounding this sort of activity were substantially less stringent than they are today, the government felt that a crack-down was necessary, particularly due to the copious amount of fraud and other illegal activities that were taking place using the system.
This leads to the question of whether or not Bitgold is in compliance with Canadian and American laws, and whether or not they will be doomed to the same fate as so many other unlicensed payment processors and money transmitters of the past. Meanwhile, the company’s stock, which is listed on Toronto’s TSX Venture Exchange has soared to a high of $6 CAD, one of the most rapid capital markets gains in the Fintech industry in recent history. Whether or not the investors who are grabbing their piece of the pie are aware that Bitgold fails to meet even the most basic expectations operationally is another question all-together.
Here at TCF, we like to call out companies that attempt to piggy back on the success of Bitcoin and other crypto currencies while failing to innovate or even incorporate some of the most basic fundamentals of the Bitcoin industry. Based on our analysis, Bitgold is nothing more than e-Gold 2.0.
Jul 21, 2015