Despite their promise, cryptocurrencies are notoriously difficult to value.
Since man first began trading goods, currency has been used to represent physical things. Whether it was tokens in ancient Mesopotamia that could be redeemed for food or the US dollar that is backed by the goods and services it can buy, the value of the coin was backed by something else. Cryptocurrencies like Bitcoin are also designed to act as stores of value, and some tout them as even being capable of replacing existing monetary systems.
The problem with cryptocurrency is that it’s difficult to evaluate how much they are worth. The US dollar might not be backed by anything, but you know you can trade it for goods and services — whereas Bitcoin is mostly backed by whatever value speculators have given to it. Over the last year, people have sought to solve the instability of Bitcoin using the the idea of cryptocurrencies that are backed by some kind of physical asset, rather than just perceived value.
Asset-backed cryptocurrencies could provide more stability than traditional cryptocurrencies
This uncertainty surrounding how to actually value Bitcoin has arguably played a part in the dramatic price swings experienced by many cryptocurrencies. The inherent instability of Bitcoin has led to questions surrounding its viability as a payment method and could hamper attempts to encourage further adoption.
One of the potential solutions to this problem is to simply back cryptocurrencies with real-world assets. One of the most high-profile examples of this is the Petro token planned by the Venezuelan government. Despite the ethical and moral concerns surrounding the Venezuelan authorities’ attempts to shore up their failing economy, the concept does have merit. Each “Petro” would be backed by Venezuela’s copious oil, gas, and diamond reserves. This theoretically means that each token is worth at least as much as the assets that back it.
Some companies have seen the potential in this approach and have opted to create a cryptocurrency with a physical backing. One interesting example is Qu Ltd.’s Silverback ICO. This is a cryptocurrency that is redeemable for silver. The plan is to back each token with 1 oz. of .999 silver so that the value can never dip below the value of the silver asset that backs the token up.
Silver for the Silverback token will be acquired in partnership with Mansfield-Martin Exploration Mining Inc (OTCMKTS: MCPI). Every single Silverback token will be backed by 1 oz. of silver. MCPI have agreed to provide up to 5 million oz. (14,174.76 KG) of silver to Qu Ltd. to act as the backing for their new cryptocurrency. In return, MCPI will receive the option to be paid in Silverback tokens or USD.
This partnership has proved enormously beneficial for Mansfield-Martin. They have been setting up mining operations in their holdings in Tombstone, Arizona. Tombstone is a historic silver mining area and has historically proven to be a profitable area for gold and silver production. The deal has allowed MCPI to jumpstart their production cycle. Their historical mining sites are estimated to hold over $65 million in silver, gold and other metals, and the company has other properties that they can commit to the project in later periods.
The Silverback coin has potential because stability could help see more payment providers view cryptocurrency as a viable option. As things stand, paying in Bitcoin is not necessarily desirable. Price fluctuations could lead to your payment being worth significantly more or less than your initial purchase. By pegging the price to silver, Silverback helps to mitigate many of the problems.