One understandable critique of lack of popular cryptocurrencies today is that they lack intrinsic value. Faith in the federal government keeps our fiat currency valued though gold no longer backs up the USD, and investments for the hope of the digital future endows the value of the most popular cryptocurrencies. A cryptocurrency that stands up to this critique is asset-based crypto which holds many differences against the standards.
What is Asset-Based Crypto?
Asset-based cryptocurrency, reductively, is digital ownership records of tangible assets and information in place of legal paperwork and receipts. For example, one can buy a new car and the ownership history, proof of insurance, and title will all be stored in the blockchain for transaction accountability.
This is advantageous for the paperless direction of our financial activity, and this asset-based approach stands out for it’s liquidity, security, and stability when the assets are valuable itself besides the crypto in traditional fiat currency as well as other value standards. Examples of tangible assets that can back this cryptocurrency is fiat currency, gold, and real estate.
Benefits of Asset-Backed Crypto
What investors may appreciate of asset-based crypto is the greater stability of its prices. The tangible asset backing clarifies the influence of crypto pricing where it’s not so swayed by subjective market volatility. Moreover, the acceptability of this crypto likelier as people can see the association of the coins to real-world valuables. That mentioned, any asset is able to be tokenized from homes to data and information. Lastly, the investments on these assets can be sub-divided that even the small-pocket investors may set a fraction of the most expensive shares and earn from whatever they may be able to contribute. This is like how CashApp allows low-budget lay-investors to buy in the thousandths of one share of Bitcoin for a few single dollars though the price of one is near $40,000 USD.
Some Popular Asset-Backed Cryptocurrencies by Category
- Stable Coins
- Gold-backed cryptocurrency
- Oil-based cryptocurrency
- Security-Backed cryptocurrency
Challenges of Asset-Based Crypto
The weaknesses of this type of crypto, not unlike many of them, is the weak regulation. Investors have need for stronger technical assurances as there are many holes in the legal enforceability and property rights of people who transfer ownership of assets digitally. Someone may purchase the rights and ownership of a certain amount of gold, but that doesn’t immediately include shipping and handling to one’s home. It’s like buying product from Amazon but just having your name-tag on it while it’s stored in the warehouse. With more clarity in time on how consumers may honor transactions and ownership, we can see this asset-based crypto being much more trustworthy and reliable than it’s competitors.