Bitcoin has often been described as “digital gold” and is tipped to replace the precious metal as a global store of value within a decade. However, Bitcoin’s underlying technology – known as blockchain – is going to be used to track the global supply of gold in a bid to stamp out stolen and smuggled gold.
Gold is held in vast quantities by banks around the world, and most larger banks accept it as a form of currency. Yet an increasing amount of stolen and smuggled gold is entering the US. In a bid to stop the flow of illicit gold, 144 London Bullion Market Association (LBMA) members agreed on using blockchain technology to solve the issue.
Recognizing Blockchain as the Solution
Members of the LBMA – most large banks, refineries, and dealers – all agreed upon using blockchain to solve these core issues, but they came up with a novel approach. Rather than backing one individual project, the group will create a set of rules and regulations that a blockchain solution must adhere to in order to track the world’s gold supplies. This is most likely due to the fact that a public record of every gold storage center in the world – plus how much is stored in each one – could lead to a few burglaries.
De Beers Leading the Way
Richemont – a subsidiary of global diamond giant De Beers – is leading the way when it comes to tracking valuable products using blockchain technology. Richemont has put all of its diamonds on a blockchain in a bid to make sure none get lost during transport and to remove forgeries from the shelves of shops. Customers who buy a Richemont diamond will be able to verify the diamond using a unique address that will be laser etched into the diamond. If things don’t match up then the customer can raise a complaint immediately.
Keeping Gold in Order
Gold is a little different to diamonds, in the sense that you can melt it down into many smaller pieces than re-forge it into a bullion bar with the right tools. This could make tracking gold and ensuring that it’s not stolen rather difficult. But, the LBMA has been doing this for decades using existing systems and managing quite well. Now that blockchain technology has progressed sufficiently, the LBMA is looking to use it to make things smoother.
The LBMA is looking to implement this new blockchain solution before the end of 2019, meaning that blockchain will rule the gold industry much sooner than we expected. It’s likely to be a few decades before Bitcoin overtakes gold as a store of value, but it would certainly make the LBMA’s job of tracking it so much simpler.