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Backing bitcoin with dollars

Bitcoin has had an interesting journey since its whitepaper inception in 2009 as a response to the 2008 financial crisis. The issue of stability and a monetary system to back bitcoin for exchange has been attempted with gold and today Bitcoin entrepreneur Brock Pierce announces on Coin Desk that “realcoin”, a newly established cryptocurrency can be backed by the US dollar.

Las Vegas Casino Installs Bitcoin ATM
Las Vegas Casino Installs Bitcoin ATM
Photo by Ethan Miller/Getty Images

Pierce plans to merge the cost effectiveness of using bitcoin in transactions at low-cost and no third-party banking system with a one-to-one real exchange value to the US dollar. One dollar will simply be worth one realcoin and not the confusion of bitcoin and the dollar with fractions in the translation.

Brock Pierce, ad-industry entrepreneur Reeve Collins and Mastercoin’s CTO Craig Sellars are in this Realcoin venture together to bring the new realcoin into reality. Pierce explains Bitcoin as a cryptocurrency and the Bitcoin blockchain to produce bitcoin for exchange as two separate items. He claims that confusion arises in the technology of producing the blockchain through the mining efforts of the programmers being paid in bitcoin for their work.

According to Pierce, Realcoin is a digitalization of the dollar by allowing the US dollar access to a bitcoin blockchain. This is done through Mastercoin a Bitcoin 2.0 protocol which was established last September. For each bitcoin blockchain the Mastercoin protocol adds an additional layer to apply the USD and place each realcoin with a digital signature to match.

Mastercoin company statement explains that the protocol works as follows: “Realcoin will be completely transparent, safe, secure and insured. Every dollar that is held in our reserve will be represented by one coin in circulation and can be redeemed at any time.”

This type of protocol can be compared to an existing system already in use in Norway where the Krone (NOK) backs Coinaaa (AAA).

Collins told The Wall Street Journal that Realcoin the Santa Monica startup has signed with a major banking partner and continues to establish agreements with other banks, digital-currency exchanges and ATM providers for a system for buying, trading or redeeming realcoins around the world. The objective is to have global network so people can have access to inexpensive and efficient exchange around the world in the various currencies.

It would appear that realcoin is attaching itself to a government currency as the USD and the government oversight that Bitcoin had set out to be a stand alone currency.