Discussion at Binance Blockchain Week
During the recent Binance Blockchain Week, a discussion panel featuring Peter Schiff, a prominent gold proponent, and Changpeng “CZ” Zhao, co-founder of Binance, brought to light the difficulties associated with verifying the authenticity of physical gold. Schiff found himself in the hot seat when he was presented with a gold bar claimed to be genuine but could not affirm its authenticity. This moment generated both laughter and applause from an audience familiar with cryptocurrency.
Bitcoin vs. Tokenized Gold
The discourse between the two industry figures centered on the merits of Bitcoin versus tokenized gold as viable stores of value, examining aspects such as divisibility, portability, verifiability, durability, and supply constraints — all critical when determining the efficacy of an asset as money. CZ championed Bitcoin as the superior option, citing that users can swiftly confirm its existence and legitimacy through full nodes or other techniques that utilize a secure public ledger.
Gold Verification Challenges
In a notable exchange, CZ handed Schiff a gold bar, prompting the question:
“It says Kyrgyzstan, 1,000 grams, fine gold, 999.9, and a serial number. Is it real gold?”
Schiff’s uncertain response underscores the complexities inherent in gold verification, further igniting the debate between proponents of gold and Bitcoin enthusiasts. The current discussion reflects the historical contention that has evolved over time, with Schiff and other gold advocates positing that the process of tokenizing gold can address issues related to portability, divisibility, and verification, which are crucial for applications in decentralized finance (DeFi).
Counterarguments from Bitcoin Supporters
Conversely, Bitcoin supporters argue that tokenizing real-world assets (RWA) does not resolve significant challenges posed by the physical gold backing these digital tokens, such as counterparty risk, centralization, and the costs associated with auditing. Amid these arguments, WWBA and other experts note that verifying gold purity is a nuanced process.
Methods of Gold Assaying
As outlined by the London Bullion Market Association (LBMA), which sets quality standards in the gold bullion market, various widely recognized methods exist for assaying gold. These include X-Ray Fluorescent Spectroscopy, Ultrasound, and Eddy Current testing, all of which come with limitations, such as being costly, requiring specialized knowledge, and lacking complete accuracy. X-Ray Fluorescent Spectroscopy, for instance, only assesses gold in metals less than 10 microns thick, while no definitive non-destructive testing method guaranteeing total verification exists. The LBMA states that only the fire assaying method — which melts gold to confirm its makeup — provides absolute certainty. However, this is considered a destructive process.
Conclusion
Currently, there does not appear to be a non-invasive solution that holds universal endorsement for gold verification. As the LBMA implies, the most reliable method to mitigate risks of substandard assays is through a recognized ecosystem of reputable refineries and chains of custody.
