A discussion featuring gold advocate Peter Schiff and Binance co-founder Changpeng “CZ” Zhao at Binance Blockchain Week underscored the difficulties in authenticating physical gold when Schiff couldn’t verify the authenticity of a gold bar shown to him.
The conversation revolved around whether tokenized gold or Bitcoin (BTC) serves better as a store of value, evaluating factors such as divisibility, portability, verifiability, durability, and supply constraints—fundamental aspects in determining an asset’s effectiveness as currency.
CZ contended that BTC is superior for value storage, citing its instant verification capabilities for users through full nodes or other mechanisms that access a secure public ledger.
CZ presented Schiff with a gold bar and asked: “It says Kyrgyzstan, 1,000 grams, fine gold, 999.9, and a serial number. Is it real gold?”
“I don’t know,” Schiff replied, eliciting laughter and applause from the crypto-savvy audience. In October, CZ criticized tokenized gold, arguing that it required trust in the issuer, which set the stage for Thursday’s altercation with Schiff.
The dialogue between gold proponents and Bitcoin supporters has progressed over time, with Schiff and others claiming that gold tokenization resolves many issues regarding portability, divisibility, and verification while proving beneficial for decentralized finance (DeFi).
Nevertheless, Bitcoin advocates argue that real-world asset tokenization (RWA), which represents tangible items on a blockchain, fails to address the fundamental issues associated with the physical gold that backs digital gold tokens, including centralization, counterparty risks, and costly audit processes.
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Fire assaying remains the industry benchmark for complete gold verification
Numerous methods are widely acknowledged within the industry for assaying, or scientifically validating the precious metals content of gold, according to the London Bullion Market Association (LBMA), which sets the standards for weight, refinement, trading, storage, and reputable custodians in the international gold bullion market.
These methods include X-Ray Fluorescent Spectroscopy, Ultrasound, and Eddy Current testing, all of which are costly, demand expertise, and have limitations.
X-Ray Fluorescent Spectroscopy can only establish gold content in metals up to 10 microns thick, while the other methods exhibit similar constraints, leading the LBMA to conclude they are not “definitive” testing techniques. Only one method achieves 100% certainty of verification, according to the LBMA.
Fire assaying, the process of melting gold to confirm its integrity and composition, is the sole method that guarantees 100% certainty. The LBMA, however, classifies this as a “destructive” testing approach.
“Currently, there seems to be no definitive non-destructive testing solution that can be endorsed, and therefore, the best way to mitigate risks associated with sub-standard assaying remains through the Good Delivery ecosystem of refineries and chains of custody,” states the LBMA.
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