A Free Market Gold or Silver Backed Cryptocurrency System of Lending and Trading through Regional Credit Unions with Independence from the Dollar and the Larger Banking System

THE GENERAL IDEA: in this system the private individual with the metal is the lender, technology is utilized to authenticate and digitize their metal on site to show the initial backing of each unit of credit and each unit is backed at a ratio of 60:40 with physical metal. Once the metal is initially authenticated the process is recorded and 60% is taken to the regional vault to be stored and digitized into the units of credit available via blockchain. The metal is then recorded via video camera on real time and documented onto the publicly accessible server which shows the metal backing each “batch” of 1oz crypto units (whether it is lent or simply traded). Each gold or silver backed crypto unit will have an identifier number which the holder can see in their digital wallet and you simply type in the identifier to see the bar or coin backing it’s particular “batch” including serial number and 3rd party auditing information and history. The lender keeps 40% of their metal with them and 60% of the metal is kept in the vaults of the exchange. As mentioned before each bar or coin that is held with the exchange will have a serial number engrained on it and an invoice showing that the metal bars belong to the backer of the loan. As the borrower pays off their loan to the exchange the lender has the option to have 60% of the payment returned to them in physical metal or they can opt to leave their physical metal to be used as backing for the blockchain and receive extra dividend and interest as profit. IMPORTANT: There must be collective reserves of gold and silver backing the entire cryptocurrency blockchain both for the units that are lent (to avoid fractional reserve scamming and insolvency problems) and the crypto units that are issued to be traded and exchanged (as an oracle or in other words a real world connection tying the digital to the physical word) each unit of crypto will belong to a batch of units that are associated with a particular bar or coin and to recap the holder of each crypto will be able to look up and see the real time location via video feed of each bar or coin backing the crypto. This will foster trust in the currency and each unit will be redeemable for physical gold or silver at a 60/40 ratio giving it a stable value that should correlate with the price of gold and silver over time. CONCLUSION: The end result will be a system of secure crypto backed credit that is as decentralized as possible that profits the individual owners of the metal instead of the banking system. Each crypto unit will be backed and redeemable (by either the lender of the metal or the holder of cryptocurrency) for 60% physical gold or silver and 40% will be redeemable for the paper equivalent of spot price for the remaining portion of each ounce/unit by the holders of the crypto units. SIGNIFICANCE: this means that in environments of long term appreciation of gold and silver this will allow the gold and silver backed crypto exchange to grow its metal reserves as the paper price of metals rises thus backing the creation of new units of the crypto, and in times of depreciating metals prices it will allow the crypto exchange to shrink and decrease the volume (or number of units) in circulation available to be traded thus creating premiums (or extra cost in order to acquire units above its “spot” value) for each crypto unit as volume shrinks but demand for each cryptocurrency remains high. BECAUSE each unit is redeemable and backed by physical metal controlling the volume of total units in this manner should offset some of the volatility caused by negative fluctuations in the spot price that are unjustified by the supply and demand fundamentals of the physical metal thus making the cryptocurrency a more stable source of value over time as compared to gold and silver ETFs or other paper derivatives that can be fractionalized or that track spot price directly without capturing the value of premiums that are reflected in physical metals. UPDATE/REVISION: The borrower of the loan is paid with the gold or silver backed cryptocurrencies. When the monthly payments plus interest are due, the borrower will also return/repay the exchange through making these payments with the same cryptocurrency units it was lent. ALSO as the credit union accumulates more gold and silver from the profits and interest obtained, it will accumulate or sell physical gold and silver according to the gold/silver ratio. Thus, the exchange will be creating new gold tokens through physical accumulation when gold is undervalued compared to silver and will be removing silver tokens through physical selling when silver is overvalued compared to gold and VICE VERSA. Over time this will lead to a greater total amount of silver and gold in the vaults as the exchange buys metal when it is undervalued and sells when it is overvalued. It will also help control the volume of gold or silver backed crypto to match differing demand since there will generally be more demand for an undervalued precious metal compared to an overvalued.