E-gold was the brilliant idea of former oncologist Doug Jackson.
From Wired, back in 2009:
As Jackson envisioned it, E-Gold was a private, international currency that would circulate independent of government controls, and stand impervious to the market’s highs and lows. Brimming with evangelical enthusiasm, Jackson proclaimed it a cure for the modern monetary system’s ills and described it at one point as “an epochal change in human destiny” and “probably the greatest benefit to humanity that’s ever been thought of.”
At its peak in 2006, E-gold processed more than $2 billion per year and held $71 million of gold.
It handled 3.5 million accounts in 165 countries, with 1,000 new accounts opening up every day. It was second only to PayPal in the world of online payment.
Then it all came crashing down.
The hammer dropped on E-Gold around 5 p.m. on a mild day in mid-December 2005. A herd of Chevy Suburbans wheeled up to Jackson’s house and expelled more than a dozen FBI and Secret Service agents. Simultaneously across town, the Justice Department’s “Operation Goldwire” unfolded with more agents raiding the offices of Gold and Silver Reserve, the company that operates E-Gold. A third group descended on a co-location facility in Orlando where E-Gold Limited, a holding company for E-Gold’s assets, racked its database servers.
Although Jackson never intended it, E-gold had become the favourite transfer method of the most notorious “carders” around the globe.
Carders are hackers that steal and sell on credit and debit card data. Instead of dealing in cash, they used E-gold. This meant they could sell their wares around the world.
In the end Jackson pleaded guilty to conspiracy to operate an unlicensed money transmitting service and conspiracy to commit money laundering.
In November 2008, he was sentenced to 300 hours’ community service, a $200 fine and three years of supervision, including six months’ house arrest.
His brother Reid Jackson and E-gold director Barry Downey were each sentenced to three years’ probation, 300 hours’ community service and ordered to pay a $2,500 fine and $100 assessment.
That might seem like a light sentence, for such a high-profile crime, involving millions of dollars of stolen credit cards. Especially when you consider Rudy, the wine forger I wrote about on Monday, who was sentenced to ten years.
But Jackson never set out to help criminals, and the information he gave the FBI was “instrumental” in them cracking the biggest carding ring in the world.
Either way, the tern “E-gold” has now been forever tainted. But that doesn’t mean gold isn’t still a wise investment.
The thing is, gold is fairly difficult for the average person to obtain and store.
And if you want to use it like a savings account and buy a little at a time, it’s almost impossible.
Digital gold, accessible to anyone, in any amount, backed 100% by real gold is already here
E-gold was an idea ahead of its time. And for Doug Jackson it didn’t end so well.
But E-gold inspired better version of online money, which eventually led to bitcoin.
As Matt Peoples said on Quora back in 2015:
E-gold was a central company, with central servers that held your money (and could be attacked by hackers, or taken down by governments). With bitcoin, you own the keys to your coins, and with proper security, no one can take them away from you, not even governments or elite hackers (outside of doing so by force).
One of the main criticisms of bitcoin is that it isn’t backed by anything other than maths.
What if you created decentralised currency, with all bitcoin’s benefits, but that was backed 1:1 with gold?
Well, then you would have Digix Gold Token (DGX).
Basically DGX is a cryptocurrency built on Ethereum, where each token represents 1 gram of physical gold, kept in a vault in Singapore.
From Digix’s website:
Using blockchain technology, we represent physical gold with DGX tokens, where 1 DGX represents 1 gram of gold on Ethereum.
The transparency, security, traceability of the blockchain ensures that DGX tokens can be transacted and transferred with full visibility and auditability. Not only does the immutable ledger heighten security, the smart contract platform eliminates possible human error and risk of fraud that would otherwise be present in the supply chain of gold.
We democratise access to gold.
The gold stores are all regularly audited, and you can redeem DGX tokens for real, physical gold if you feel so inclined.
We spoke to Shaun Djie, a co-founder of Digix, about how it works.
First things first, even if the exchange itself were to flounder and never take off, Digix has developed an interesting method for tracking its gold bars on the exchange.
Djie told us that every bar is scrupulously scanned into the system, its receipt information stored, and it is then associated with the token issued for sale. That is, essentially when you trade or hold DGX tokens, you are actually holding certificates of ownership to gold. There is a minimum redemption requirement, but such tokens can play a key part in trader strategy nevertheless.
“We have what we call a demurrage fee, it’s almost equivalent to storage, insurance, coded in the smart contract of each bar.”
Thus, this is how the exchange makes money – by storing tokens and their associated bars with Digix, a small amount of the token is eroded to pay for the gold’s storage.
Eoin Treacy: something shocking could be about to happen to the gold price
Now, you may be wondering why I’ve taken such an interest in gold. That’s because I recently got early access to research my colleague Eoin Treacy has been working on.
In his own words:
“My research tells me that something very interesting and shocking could be about to happen to the gold price. I’ve seen similar conditions in the gold market before, and I made my clients a small fortune from it.
“But what’s happening now is on a much bigger scale…”
If you want to find out what Eoin has been working on, you can find out more here.
After seeing Eoin’s research I got to thinking, how could someone take advantage of this rare situation in the gold markets if they don’t have access to a billion dealer?
And that’s what led me to today’s article.
But, to be fair, Eoin has found an even simpler, and likely much more lucrative way in. You can find out all about it for yourself here.
If you have any interest in preserving your wealth for the long term, it is well worth hearing what Eoin has to say.
Until next time,
Editor, Exponential Investor