Stable cryptocurrencies 101: Backing tokens with real-world commodities

While cryptocurrencies are gaining steam as a legitimate (and profitable) investment, they still have a perception problem. After all, value is only attributed to an object when everyone can collectively agree that the object is of value. It’s easy to imagine that paper currency ran into this same problem when it was first issued, as well as online banking and electronic transfers.

Public perception is shifting in favor of cryptocurrencies, but many still struggle to grasp its value. It’s intangible, unregulated and hard to exchange for cash or use to purchase real-world items. These factors all make the average person wary of getting involved.

The resulting aura of uncertainty surrounding cryptocurrencies is a significant contributor to their famous volatility, making some fabulously wealthy in an instant and cancelling out other investments just as quickly. Cryptocurrencies can be described as being in their adolescent years, still trying to figure out what they will become and how to get there.

Cryptocurrencies have a few inherent benefits that help build trust among those who understand what they’re looking at. For example, cryptocurrencies are based on blockchain technology, whose decentralized nature greatly increases the security of information — a huge concern in the age of cyber warfare and online identity theft.

But this technology may need to hit back with something even harder if they are to establish its value, safety and security among potential users. The good news is that that are all kinds of ideas and initiatives out there to improve upon crypto tokens and change their persona for the better.

One of these innovative ideas is to back cryptocurrencies by real-world commodities. It’s a simple concept, similar to the now abandoned gold standard that once supported the world’s currencies. The difference is that while the dollar and other currencies needed to be set free from the gold standard in order to expand and evolve in new ways, cryptocurrencies could use a dose of realism to increase stability and draw in new users.

Cannabium, for example, has created a token backed by CBD, a valuable cannabis extract with no psychoactive effects but, many believe, with medicinal qualities. The company aims to create a transparent CBD marketplace and to become the standard for CBD transactions on the blockchain. Tying the Cannabium token to a real product with real value reduces the risks of dramatic ups and downs in its value and has made it a point of interest for many crypto insiders and outsiders who try their best to make safer bets.

The first gold-backed token was launched in early 2018, OilCoin became the first token backed by oil reserves in 2017, and other such ventures have been launched in the last few years as well.

All of these projects highlight the advantages that commodity-backed tokens bring both to the crypto world and the real-world commodity market. Besides greater stability and security, these benefits include increased liquidity for real products and unalterable and undeniable ownership rights over those assets.

The zeal of cryptocurrency fans is pushing the new technology into the future. By implementing unique, sometimes simple ideas like backing a token with a real-world commodity, they are providing the tools needed to take the rest of us with them.

To learn more about Cannabium- the world’s first commodity backed cannabis extracts marketplace built on the blockchain, read our LightPaperand join our Telegram group!