Digital gold currency (or DGC) is a form of electronic money denominated in gold weight. It is a kind of representative money, like a paper gold certificate at the time that these were exchangeable for gold on demand. The typical unit of account for such currency is the gold gram or the troy ounce, although other units such as the gold dinar are sometimes used. These are backed by gold through unallocated or allocated gold storage. Digital gold currencies are issued by a number of companies, each of which provides a system that enables users to pay each other in units that hold the same value as gold bullion. These competing providers issue independent currency, which normally carries the same name as their company. In terms of the most popular providers, e-gold has the greatest number of users and Gold Money holds the greatest quantity of bullion. As of January 2007, DGC providers held in excess of 9.5 tonnes of gold as disclosed reserves, which is worth approximately $184 million.
FEATURES OF DIGITAL CURRENCIES
Asset protection:
Unlike fractional-reserve banking, Digital gold currencies hold 100% of clients' funds in reserves with a store of value. Proponents of DGC systems contend that deposits are protected against inflation, devaluation and other possible economic risks inherent in fiat currencies. These risks include the monetary policy of countries or territories, which are perceived by proponents to be harmful to the value of paper currency. It is also theoretically much harder for governments and/or creditors to seize or confiscate digital gold currency from someone, as most DGC companies are incorporated in offshore financial centers.
Bullion investing:
Digital currencies backed by gold are the most popular, although e-gold, e-Bullion and e-dinar also provide digital currency backed by silver, while Gold Money and Crowned Gold also provide storage in silver. Other digital silver currencies include the eLibertyDollar and Phoenix Silver. In addition to gold and silver, e-gold supplies digital currency backed by platinum and palladium. Gold, silver, platinum and palladium each have recognized international currency codes under ISO 4217.
Exchanging fiat currency:
Some providers, like e-gold, do not sell DGC directly to clients. In the case of an e-gold account, currency must be bought and sold via a digital currency exchanger (DCE). According to their website the reason they do this is so there can be no debt or contingent liabilities associated with the business, making e-gold Ltd. absolutely free of any financial risk. DGCs are known as private currency as governments do not issue them.
Non-reversible transactions:
Unlike the credit card industry, DGC issuers generally do not bundle services such as repudiation. Thus having transactions reversed, even in case of a legitimate error, unauthorized spend, or failure of a vendor to supply goods is not possible. In this respect, a DGC spend is more akin to a cash transaction while PayPal transfers.
Universal currency:
Proponents claim that DGC offers a truly global and borderless world currency system that is independent of exchange rate variations. Gold, silver, platinum and palladium each have recognized international currency codes under ISO 4217.