Let’s look at the most interesting aspect, that of the property. There are two forms of digital gold ownership: allocated accounts and unallocated accounts .
As the name suggests, in the case of the first, the investor is the owner of a certain gold bullion or coin , kept in a safe . Storage of physical gold is a service for which the customer pays. Gold can also be delivered, but can generally be sold to someone else without leaving the vault. Even if the company managing the vault goes bankrupt, the physical gold remains in the holder’s possession.
How Unallocated Gold Accounts Work
With unallocated deposits, the situation is much different. In this case, the investor assumes that he is buying gold, but enters into a business relationship with a financial lending company that is supposed to buy and store the gold on his behalf . In unallocated accounts, the investor may have various different restrictions, such as the right to resell the gold only to the institution from which they bought it. And if he has the opportunity to demand the delivery of a bullion or a coin, he also has to pay high fees.
In the event of the bankruptcy of an institution from which an unallocated gold account was purchased, the depositor will not receive an actual gold bar or coin. As a creditor, you will have to wait for the sale of goods. One of them is gold. Finally, our investor will receive the dollar equivalent (pounds, etc.) of the gold sold during the bankruptcy proceeding, after the secured creditors (if any) have been paid.
Why would anyone enter into such a transaction when they do not become the owner? Unallocated accounts allow for some flexibility, such as the ability to invest very little money. The smallest gold bar for investment is one gram. Unallocated accounts allow investing in a smaller amount because it is not a specific physical product. It also seems to solve the gold storage problem. Last but not least, since the investor does not become the owner of the product, commissions may be slightly lower than in allocated accounts.
Precious metal ownership and cryptocurrency tally
In the case of cryptocurrency, we are talking about a similar mode of operation to unallocated accounts, at least from the user’s point of view. The terms and conditions clearly state:
“When fiat money is sent to a Tally account, it is automatically converted to a number and each unit of account is an electronic record of ownership and title. per milligram value of physical gold… In the unlikely event of a transaction suspension, all gold delivered by record will be sold immediately and its value in fiat currency, minus a 1% fee for legal mechanism and transaction processing, will be transferred in the customer’s bank account.”
Users cannot convert their cryptocurrencies into gold that they can order or pick up from Switzerland. Even in bankruptcy, the company will sell the metal and pay the equivalent in fiat currency into the account of its customers. It is more accurate to say that Tally pays its employees in a gold-backed asset (if indeed it maintains reserves of one milligram for each unit of the cryptocurrency) rather than in the precious metal.
The idea of paying a salary in gold is very good. Thus , our purchasing power would be preserved in the long term, instead of quickly evaporating . When talking about the precious metal, however, it is important to understand very well how the idea of ownership of what we get works.
In this case, we have a gold-backed asset. At least in theory, this has the potential to make it much more stable than any fiat currency such as the euro, dollar, leu, leva, dinar, lira or almost any other cryptocurrency.
But gold collateral does not mean that users own the actual gold. Rather, they have a claim on sterling corresponding to the value of the metal backing the cryptocurrency. And this is very different from actually owning the physical asset in the form of gold bars or coins or which can be purchased from allocated gold accounts.