There's no short, elegant way to describe bitcoin, but if you put a gun to our heads, we'd say that it was digital gold. That's because the cryptocurrency is based on a limited quantity of a resource that is then used as a method of exchange. Unfortunately, bitcoin's popularity within the high-minded financial sector has grown to such an extent that honest-to-goodness real gold is getting in on the act. BitGold (yup) is the brainchild of Toronto-based Roy Sebag, who has cooked up a digital payments platform that connects real-world vaults with online customers.
Once you've sunk your cash into the system, you'll be allocated the equivalent weight of gold in one of 10 vaults around the world. Then, when it comes time for you to buy something, you can do so from the BitGold site, your mobile device or with a BitGold MasterCard. The pitch here is that the service isn't a bank, so it won't lose your deposit, it's not a cryptocurrency and there's no securitized assets. Instead, you'll just be able to buy gold and hope that its value increases over time before blowing it on an upgrade to business class.
If you're into meaningless jargon, the company's about page has a reserve so vast it would fill Fort Knox twice over. For instance, BitGold believes that "cooperation under a unit of elemental-measurement promotes a more equitable distribution of wealth and opportunity." The piece goes on to say that by re-examining the "elemental properties of gold, it becomes clear that gold provides a globally neutral, natural unit of account." We're not entirely sure how going back to pre-fiat currency payments will kickstart a quasi-socialist utopia, but hey.
Of course, as we keep saying, students of history, economics and both will have already worked out the key flaw with this system. Like any commodity-based system of exchange, the temptation will be to sit on your stockpile of wealth in the hope that scarcity causes it to increase in value. This, in turn, creates a recession that sends the value through the floor -- and unlike fiat currencies, can't be fixed by creating more liquidity since you can't easily or cheaply make more gold. This is how the US came to wind up in the Great Depression of the 1930s, which was only solved when the gold standard was abandoned.