Brock Pierce, Bitcoin entrepreneur and newly elected board member of the Bitcoin Foundation, has unveiled his plans to develop a new crypto-currency. Pierce’s project, Realcoin, aims to build a new payment structure on top of the blockchain that allow for the seamless transfer of dollars.
So, technically, Realcoin is not an entirely independent crypto-currency in itself. It merely brings the blockchain technology to the US dollar. By bringing crypto-currency technology to the dollar, it would allow a decentralized payment system to compete with the traditional banking model without directly challenging the core infrastructure of the banking system or the United States government’s monopoly on the issuance of money and the regulation of its supply.
Since it operates on top of the Bitcoin blockchain, users of Realcoin will get the instant and virtually costless monetary transfers that they enjoy with Bitcoin while still using dollars. Realcoin acts as a token, which represents the ownership of dollars; Pierce hopes that this will make dealing in digital currencies less of a hassle since Realcoin will have a 1:1 exchange ratio, meaning that one Realcoin will be worth one dollar, rather than a small decimal number that is constantly changing. Pierce hopes that tying Realcoin to the dollar will eliminate the volatility that the Bitcoin price experiences, which drives many people away from using Bitcoin as they do not see it as a safe, stable store of wealth.
Realcoin, according to Pierce, will have a real-time record of all of the USD reserves held within the Realcoin payment system. This record will allow users to see not only how much money they have in their possession, but it will also allow anyone to see the amount of dollars being circulated or hoarded in the payment system. There will also be a full record of Realcoin’s USD reserves that will be authenticated by the blockchain, making the Realcoin ledger transparent and reliable.
Pierce plans to extend Realcoin as far across the financial world as he can; Coindesk reports that he has been in contact with several banks and is working with them to integrate Realcoin into their ATM infrastructure. That integration would allow users to transact with Realcoin in any place where they have access to a Realcoin integrated ATM.
But is Realcoin really worth the time and effort? Does it really provide anything substantial to the crypto-currency community?
Realcoin only Solves Temporary Bitcoin Flaws
It is clear that Brock Pierce’s goal with Realcoin is to solve some of the problems that are the source of complaints from the Bitcoin skeptics. By removing volatility and consequently unstable exchange rates, two of the main anti-Bitcoin arguments vanish.
However, those problems that Realcoin solves are not any inherent problems with Bitcoin, they are problems that will solve themselves over time as Bitcoin becomes more widely adopted. The two main selling points of Realcoin—no volatility and stable crypto-USD exchange rates—are hardly cures for major flaws in the Bitcoin protocol. If Pierce really wanted to make a crypto-currency that solved pressing Bitcoin problems, then why didn’t he just work on improving the Bitcoin protocol itself? Is it not his job as a board member of the Bitcoin Foundation to promote the acceptance of Bitcoin and the development of its core coding?
The volatility of the Bitcoin price will flatten out as the digital currency becomes more widely acceptance among the general population. Consequently, as Bitcoin price volatility subsides, BTC-USD exchange rates will stabilize. So Realcoin really is just simply not needed, if all it accomplishes is to solve two temporary “problems” Bitcoin currently faces. Certainly, we would like to see an update to Bitcoin core that solves the Bitcoin mining centralization problem, rather than having a” stable” dollar exchange rate. Why isn’t Pierce working on that? By undertaking such a project, it makes it seem as if Brock Pierce does not care about his position in the Bitcoin Foundation—which has been riddled with scandal relating to Pierce’s shady past—or Bitcoin itself.
Realcoin Attempts to Negate the Potential of Crypto-Currency
There is no need whatsoever for a new coin that will solve these small Bitcoin problems; much less needed is a coin that will solve these problems by inextricably linking itself to a fiat currency. By creating a digital token currency that is backed up by another token currency completely defeats the purpose of crypto-currency altogether.
Crypto-currencies like Bitcoin are designed to operate like gold; Bitcoin and other digital currencies are “naturally” scarce, divisible, fungible, and portable. Those qualities are four of the main qualifiers of money. Those four qualities are a large reason why gold became money. However, gold had a flaw that Bitcoin does not have. The physical nature of gold—namely its size and weight—gave rise to a desire for a way to make gold easier to carry. This desire is how paper money came into existence. And once governments were able to sever the link between gold and its paper certificates, they had access to an infinite supply of money, which has been the source of some of the worst economic disasters in history.
But Bitcoin does not suffer from the fatal flaw that gave rise to paper money; with Bitcoin, there are no storage requirements. Bitcoin does not exist in the physical world, it is weightless and spaceless. The minimum physical storage required for Bitcoin is a USB drive. As a result, there is no need to have paper substitutes for Bitcoin. Therefore, a gold-like commodity can be traded as easily—easier even—as paper money without the economic dangers of paper money. Crypto-currency is gold for the 21st century, and Realcoin completely reverses the benefits of crypto-currency.
Making a crypto-currency’s link to fiat currency its source of value makes it completely worthless in the long-run. Realcoin will depreciate as the dollar depreciates, and Realcoin’s users will suffer all the pain involved in the bust phase of the current Federal Reserve-induced business cycle. Realcoin does not really offer anything new, then. It only makes it easier to transact with a currency that is on a path to disaster. It’s basically a high tech version of the gold exchange standard, which allowed the United States and Great Britain to take the world on a roller-coaster ride of inflation that ended with the Great Depression. And for what reason? Is the idea to make a digital currency that does not anger the government? If that is so, then what is the point? The reason why so many governments are aggressive towards Bitcoin is that it threatens their monopolies over their respective countries’ money supplies, which many in the Bitcoin community think is a good thing! Does Brock Pierce, board member of the Bitcoin Foundation, really not understand that?
Realcoin is nothing more than a new digital payment system that will be completely subjected to the whims of the United States government and the Federal Reserve. It solves none of the truly important problems facing Bitcoin, like Bitcoin mining centralization. Therefore, it does not really make any sense as to why Brock Pierce has decided to focus his attention on creating Realcoin rather than doing his job, which is advocating for Bitcoin.
So, it seems as if the Bitcoin Foundation really won’t be making any progress within the Bitcoin community as far as actually improving the protocol is concerned. Luckily, we will soon have an alternative to the Bitcoin Foundation. Mike Hearn’s Lighthouse will hopefully provide a decentralized crowdsourcing platform where Bitcoin developers can be adequately compensated for their work in improving Bitcoin’s core protocol.