Entrepreneurs Melvin Ng and David Gallo have created a Bitcon-like crypto-currency whose value is backed by physical gold. Minacoin relies on a vast network of programmers who use a Bitcoin-like protocol to create Minacoins and authenticate transactions. Ng and Gallo back their digital currency with gold. In fact, they bought two 400-ounce gold bullion bars to back the initial Minacoin release.
The surge in the popularity of Minacoin has not come without unwanted attention. Money launderers and financial regulatory agencies are two examples of such unwanted attention, and in the past other gold-backed “currencies” have struggled to find acceptance of such a rare, novel asset.
E-Gold’s creators stored physical gold in London and Dubai but soon became popular for credit card thieves and money launderers. E-Gold quickly found out that its business model was not conducive to complying with financial market regulations. Minacoin could run into some of the same problems because it’s difficult to determine if the “currency” should be classified as an IOU or as a way to buy and sell physical gold. Ng and Gallo are getting warm but they have a long way to go before this becomes viable and reasonable. George Mason University research fellow Eli Dourado took the words right out of my mouth:
“If you want a store of value, why not just buy gold,” he asks. “And if you want a currency, why not just use bitcoin?”