A panel featuring gold advocate Peter Schiff and Binance co-founder Changpeng “CZ” Zhao at Binance Blockchain Week highlighted the challenges of verifying physical gold, after Schiff was unable to confirm whether a gold bar presented to him was genuine.
The debate involved whether tokenized gold or Bitcoin (BTC) is a better store of value asset based on divisibility, portability, verifiability, durability and supply constraints — key factors in assessing an asset’s viability as money.
CZ argued that BTC is a better medium for storing value for several reasons, including the ability for any user to instantly verify the cryptocurrency through a full node or other methods that check a cryptographically secure public ledger.
CZ handed Schiff 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 responded, drawing laughter and applause from the audience of crypto natives. In October, CZ criticized tokenized gold, saying that the holder must trust the issuer, which led to Thursday’s showdown with Schiff.
The debate between gold advocates and Bitcoiners has evolved over the years, with gold advocates, including Schiff, arguing that gold tokenization solves many of gold’s portability, divisibility and verification issues while being useful for decentralized finance (DeFi) applications.
However, Bitcoin advocates say that real-world asset tokenization (RWA), or representing real-world items on a blockchain, does not solve the problems inherent in the physical gold underlying digital gold tokens, including centralization, counterparty risks and expensive audit procedures.
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Fire assaying remains the industry standard for full gold verification
There are several industry-wide accepted methods for assaying, or scientifically verifying the precious metals content of gold, according to the London Bullion Market Association (LBMA), the international gold bullion trade association that sets industry standards for weight, refinement, trading, storage and reputable custodians.
These methods include X-Ray Fluorescent Spectroscopy, Ultrasound, and Eddy Current testing, which are costly, require the use of experts and are limited in scope.
X-Ray Fluorescent Spectroscopy is only effective at determining gold content in metals up to 10 microns in thickness, while the other methods have similar issues, meaning they are not “definitive” testing methods, the LBMA says. Only one method leads to 100% verification certainty, according to the LBMA.
Fire assaying, or the process of melting down gold to verify its integrity and makeup, is the only way to attain 100% certainty. However, the LBMA characterizes this as a “destructive” testing method.
“At present, there does not appear to be a definitive non-destructive testing solution that can be endorsed, and so the best risk mitigation of sub-standard assay remains the Good Delivery eco-system of refineries and chain of custody,” the LBMA says.
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