Wall Street Journal reports that Brock Pierce, child actor turned Bitcoin evangelist, has co-founded a startup called Realcoin. Its currency units, called realcoins, are sought as a means to make the most of Bitcoin-based technology while avoiding its volatility.
Realcoins are said to be dollar-backed. Their value is pegged to one dollar by the company maintaining a real-time record of its dollar-based reserves, which will be stored in conservative investments. The record will be subject to the authentication of the blockchain ledger.
The Mastercoin protocol is being used as the medium for the decentralized exchange of such assets. Mastercoin uses the Bitcoin blockchain to embed asset-specific information into bitcoin transactions. Craig Sellars, one of Realcoin’s co-founders, is also the chief technology officer of Mastercoin Foundation. Another co-founder, entrepreneur Reeve Collins, commented:
“Unfortunately, there has been confusion for people between the currency called bitcoin and the technology called bitcoin, when they are distinctly different things….we are digitizing the dollar and giving that digital dollar access to the bitcoin blockchain.”
Pierce also wants to launch other similar coins backed by euros and yen.
The coin should not be confused with another “Realcoin”, which was apparently launched a year ago but not active today. It appeared to be just another altcoin with no such differentiating features, unrelated to Pierce’s initiative.
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Pierce was asked if his new coin will be at odds with “traditional” Bitcoin and draw the community’s ire. Many promote Bitcoin specifically as a means of breaking away from government-controlled currencies. Pierce replied:
“I’m not selling any of my bitcoins. I’m trying to build a host of businesses that are taking advantage of this new emerging payments protocol as well as the currency.”
So is this p2p fiat?
Not quite. If it would be, it arguably gets the best of both worlds and would rapidly gain widespread acceptance. It would eliminate the middlemen like banks and credit card companies and their associated fees. At the same time, it would maintain a relatively stable value based off a centralized backing, which are indispensable ingredients for currency.
Realcoins, however, are essentially a form of bitcoins whose issuer decides to peg their value at one dollar. It was unclear from the WSJ article if Realcoin will obligate themselves in the redemption of realcoins for dollars in the same way a government backs its local currency. If yes, realcoins are just coupons for dollars entrusted to a centralized third party. And if not, their said dollar-backed value carries no weight. Carrying an unknown value, the exchange rate for such coins will be volatile.
An example of a true p2p fiat currency would have been MintChip. Real dollars are always held and transferred by individuals in electronic form without requiring the intervention of a bank. The project was launched by the Royal Canadian Mint in conjunction with multiple technology partners. It has since been slated for divestiture into the private sector and its future remains uncertain.