Monday, March 20, 2006

Introduction and History of E-Gold

Many small businesses in the U.S., Europe and Asia, each with full-time staff now operate as "digital gold currency exchange providers," doing nothing other than buying and selling digital gold currency for "fiat currencies," as gold bugs term the Euro, Pound, Yen and US Dollar.

e-gold transactions — a "spend" — are completed electronically, usually using the web interface, and they always settle by weight of the metal even if denominated in some other way. A user may send (or "spend") a tiny amount of gold (a fraction of a gram, ounce or kilogram) to another user account instantly, anywhere in the world.

Even though e-gold is careful to not advocate any particular political agenda, as the Liberty Dollar does for example, e-gold could be viewed as a libertarian system of money.Asset protection

Unlike fractional-reserve banking, e-gold holds 100% of clients' funds in reserves with a store of value. Proponents of the e-gold system contend that e-gold deposits are protected against inflation, devaluation and other possible economic risks inherent in fiat currencies. These risks include the monetary policy of countries or territories, which are perceived by proponents to be harmful to the value of paper currency.

The repository of the actual bullion bars with serial numbers and other data can be seen using the live "Examiner" function on the e-gold web site. Bullion is held in allocated storage with Brink's Global Services (part of The Brink's Company), Transguard Security Services (part of the Emirates Group) or MAT Securitas Express AG (part of the VIA MAT Group) [5].

The user may take physical delivery of the precious metal upon payment of an additional fee. In practice, most users permit the company to store the metal for them.Bullion investing

As well as digital gold, e-gold also offers e-silver, e-palladium and e-platinum. Funds can be switched between e-metals using their sister company OmniPay. Metal-to-metal (or "M2M") exchanges are completed at spot price with no bid/offer spread. e-metal provides an easy way to gain access to bullion investing, without the hassles of delivery and storage.


digital gold currency operated by Gold & Silver Reserve Inc. under e-gold Ltd., and is a system which allows the instant transfer of gold ownership between users. There are over two million e-gold accounts. About one quarter of those are active [1].

As of January 2006, e-gold had 3,376,279 grams of gold in storage, which is worth approximately $61 million. There are typically 50,000 e-gold spends each day, with a total value each day of about $6 million (that is, about 350 kilograms of gold). In comparison, PayPal handles transfers of approximately $60 million per day [2].


History

The e-gold corporation was founded in 1996 by Dr. Douglas Jackson and Barry K. Downey [3]. Transactions using e-gold have grown dramatically since 2005. The total amount of gold bars (over three tonnes) in the e-gold system is approaching the size of the national reserves of smaller countries. Secondly, e-gold itself is now generating a substantial income from spend and storage fees: it costs a few cents to make each e-gold "spend" and e-gold itself now earns well over a million USD per annum from spend fees. Thirdly, the use of e-gold as a currency is no longer a novelty, as indicated by the 50,000 spends a day figure.

The number of e-gold accounts (as claimed by e-gold) grew from 1 million in November 2003 to just under 2.5 million in November 2005. That growth rate represents a compound growth rate of 58% per annum. This high growth rate has been sustained by e-gold almost since inception.

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