“Gold supplies have increased somewhere between 1-2% annually for decades, if not for centuries. Now, this may not seem like a lot, but it leads inevitably to gold supplies doubling every 47 years.”
The steadily increasing supply of gold can be exacerbated by sudden discoveries of large, untapped gold deposits, which exist within the earth’s crust and in space, he said.
The influx of new gold into Europe from the Americas during the 16th century destroyed the Spanish and Portuguese empires due to the inflation from massive quantities of gold hitting the market suddenly, Kratter added.
Gold suffers from ancient problems and cannot be the monetary base in a digital world
“It’s very expensive to ship and ensure large amounts of gold, so it is a very poor way of settling trade imbalances,” Kratter said.
Moving even small quantities of gold through an airport or other “heavily surveilled” environments is a difficult task, and moving meaningful quantities of gold is “almost impossible,” according to Kratter.
Gold’s physical properties make it particularly unfit for online finance and sending value through the digital world, he added.
These risks include the issuer minting more gold tokens than physical gold in reserve, refusing to redeem the digital tokens for physical gold, or potential government confiscation of physical reserves, he said.
