When building a larger and stronger online digital gold economy, which comes first the merchants or the users?

The merchants come first. But, the users are easy to bring. The reason e-gold became the leading digital gold currency is very simple: they had a referral program. Their referral program split the revenues from the payment receive fee between the person referring the spender and the person referring the recipient. It worked. And the leading merchants were the ones who did the most to promote e-gold.

As long as I have been online and touting the benefits of digital gold currency, not too many people have put away their plastic and replaced it with e-gold or Pecunix.

I wouldn’t expect all forms of plastic to go away. Fiat money is actually in circulation rather than gold and silver because of Gresham’s law. So, it is well to have systems that inter-operate between gold and fiat. One of the projects I’ve been asked to consult on is a digital gold card where the balance is held in gold but the payments are in local currencies. Even with all the CC fraud, high rip off interest rates people still use their plastic when shopping online. About 90% of all US online transactions are paid with plastic.

What’s it going to take to get people to change?

The same thing it always takes, Mark. It is going to take a collapse of the world’s reserve currency. Fiat money inflation in France lasted seven years or so. The fiat money in Weimar Germany lasted four years. The experience in Yugoslavia was something like five quadrillion percent inflation in one and a half years. The Republic of China had hyperinflation for sixteen years while they fought the Japanese and then Mao. The United States dollar untied from gold in 1971, or 36 years ago. There have been amazing things in those three dozen years, that have kept the currency alive.

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I know you are familiar with the current legal situation for e-gold Ltd and OmniPay. What can you tell us about what happened between e-gold and the government and why?

Well, I am familiar with the situation. I do not claim to be entirely current. I try to keep up, but all legal cases tend to involve their principal in lots of details and minutia. So, I’m probably not the best source of data on the case. I would suggest you talk direct to Doug Jackson or to the lawyers handling the case.

What happened?

I think the broad outline of the history is important. E-gold was founded in 1996. During its growth from 1996 to 2006, it was often contacted by law enforcement. To my knowledge, e-gold always responded very well, turned over records on subpoena, and followed court orders whenever they were presented. You can read about it in the 2002 article in Wired by Julian Dibbell who describes federal agents being served coffee and donuts in the e-gold conference room while perusing records. At least as early as 2003-2004, Doug Jackson of e-gold was vigorously pursuing the company’s obligations to oppose child pornography. I think e-gold was a founding member of one of the major anti-child-porn groups. Anyway, they began to hunt down the e-gold accounts which were in any way involved in child porn sites or in buying from those sites, and using their own internal financial forensics to identify and shut down those accounts.

Meanwhile, the credit card companies were not, in my opinion, doing anything on this issue. But, they wanted to blame someone for the problem, and they focused on e-gold as a good scapegoat to exploit. At the same time, one of e-gold’s competitors in the industry was also trying to focus law enforcement attention on some of the Ponzi scheme pseudo-investment sites. Quite a few of these high yield income programs (HYIP) or Ponzi schemes were accepting e-gold. Finally, things came to a head in December 2005. BusinessWeek ran a very nasty article fixating on only those few accounts where e-gold was apparently used by alleged credit card frauds and other criminals, asserting, as I read the article, that e-gold was itself part of a vast criminal enterprise. In my view, that was a smear piece which was extremely libelous.

Also in December 2005, the government came to e-gold’s offices and imaged the servers. So, the government had all the data. They also seized a bunch of paper records from e-gold and from OmniPay, the related exchange provider. Up to that point, various government agents had extolled the virtues of e-gold and OmniPay in their cooperation with law enforcement. And, up to that point in time, everyone in government at all levels had consistently said that e-gold was not money, and that OmniPay was not a money service business.

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About a month ago, e-gold Ltd. released an audit report detailing their exact amounts of precious metal stored in London and Dubai.   The important information to note in this report is that every digital unit of e-metal circulating on the Internet including e-silver, e-platinum and e-palladium is 100% backed up by that amount value of precious metal in secure vaults.

This is enlightening to understand and here is why…

If tomorrow, every e-metal account holder decided to sell his or her digital currency, there is a corresponding amount of actual precious metal available to immediately liquidate and ensure those digital dollars quickly and easily convert into national currency.

A document called the e-gold Bullion Reserve Special Purpose Trust, guarantees at all times that there is physical metal backing the digital units. Here is a slice of that Trust Agreement:

PURPOSES OF THE TRUST

purpose of holding precious metal bullion on behalf of and for the exclusive benefit of all e-metal account holders collectively, pursuant to the e-gold, e-silver, e-platinum, and e-palladium currency contracts, all of which explicitly require 100% physical reserves backing all e-metal in circulation. The physical assets shall be held in allocated storage by secure third party repositories with each individual bullion bar uniquely and explicitly identified and catalogued. All precious metal shall be held free and clear of all liens and encumbrances whatsoever. The safekeeping arrangements with secure repositories shall require dual signature (i.e., authorization by both e-gold Ltd. and by the designated third party contracted to serve as Escrow Agent) before any bullion may be removed for any purpose;

In their report the independent auditing firm also details, over about a dozen pages, the actual precious metal bar numbers, their purity and issuer. If this was not enough, a quick visit to the e-gold web site ‘Examiner‘ page again shows how much precious metal is on hand at any time and their ‘Stats’ page shows all transactions and account balances for the previous 24 hour period!

It no secret how much precious metal e-gold Ltd. has in circulation. Its no mystery as to where its held. The exact weight of all bullion is recorded, audited and displayed at all times along with the entire activity for all accounts. That is pretty amazing for any financial company to openly disclose each day. I’ll give you a buffalo nickel if you can show me any other financial company on the Net that even comes close to this type of disclosure.

This practice is known as ‘being transparent’. Transparency means disclosing to the world all available assets and at all times guaranteeing that the digital currency, which so easily zaps around the globe, never gets issued without 100% backing. This financial transparency is very rare to find on the world today except in publicly traded companies. Virtually no one, volunteers these item and especially take the time and effort to update them daily for users and visitors to view.

e-gold Ltd. offers an extreme level of confidence & security for its account holders and that’s a reason why I consider today’s e-gold Ltd. to be  one of the world’s greatest e-commerce innovations.

Thanks to Compete.com we can see that the visitor traffic for e-gold has been dropping off since December 2006.

At present, e-gold is showing a loss of just about 12% in ‘visitor’ traffic for this last August compared to the month earlier - July. During the past 12 months, e-gold’s traffic hit a high of around 450,000 in December but is now only showing about 180,000 visitors in August. This is less than half the number of happy e-gold visitors that occurred just 6 months earlier. Are you confused yet? Just look at the nice chart, is heading downward.

However, everyone knows that highs and lows are a part of any business.

What are ‘Visits’?

Visits are initiated when a user enters a site. As the user interacts with the site the visit is live. Visits are considered live until the user’s interaction with the site has ceased for a 30-minute period.

Now, when you plot and compare the closest competitors of e-gold, we can easily see that nobody even comes close to e-gold’s current traffic.

This next chart shows web traffic for the past twelve months and includes e-gold, e-bullion, Liberty Reserve, Webmoney and Pecunix. When viewing this chart, just in case you can’t see it, look at the very bottom line (lowest amount), LibertyReserve/Webmoney/Pecunix all occupy the space just surrounding that bottom -(zero)k- line until July when LR makes a nice move up.

Clearly e-gold has been the most active digital gold currency for years now, but may soon be giving up that spot to another…e-bullion might now be emerging in a top position and Liberty Reserve traffic is also on the rise.

It should be no surprise, if there is an exodus by the HYIP Ponzi crowd from e-gold, it now appears they are heading into Liberty Reserve. Of course, that is just my opinion.

Also I can’t believe that the Webmoney chart is very accurate simply because logging into a Webmoney account does not require a visit to their web site and also the fact they have over 4 million accounts open….that graph seems very low indeed. Take a look at these ‘Visitor’ numbers from Compete.com

While e-gold is down about 46% in the past year, Liberty Reserve is up over almost 2000% in the last twelve months with most of their growth occurred in just the past couple of months. In fact Liberty Reserve has been a real sleeper until just a few months ago.

Finally if we look at search engine saturation we can still see that e-gold is way out in the front with the greatest exposure of any competing digital currency. The numbers will always tell you the true story.

Search Engine Saturation simply refers to the number of pages a given search engine has in its index for your website domain. Not all search engines report this information but enough of them do to create some meaningful benchmarks for your search engine marketing campaigns.*http://www.marketleap.com/siteindex/default.htm

Remember Technorati?

From their web, “Technorati is the recognized authority on what’s happening on the World Live Web, right now. Technorati is currently tracking 107.7 million blogs and over 250 million pieces of tagged social media.”

What do the Technorati numbers from the blogosphere say about DGC social connections and links?

• 1,224,878 blog posts about e-gold
• 11,148 blog posts about e-bullion
• 6,649 blog posts about liberty reserve
• 579 blog posts about webmoney
• 563 blog posts about pecunix

Again, this confirms in a big way e-gold is the smiling 800 lb. gorilla in the room. I’m glad to see it!

Update 10/5

It was advised by a reader to check out Webmoney.ru instead of .com and here is a look below. Its a different measurement, “People Count” but shows a definite trend up for WM.

People Counts are also known as unique visitors - they only count a person once no matter how many times they visit a site in a given month.  People Counts are typically used to determine how popular a site is.

Is This Proactive Move By e-gold Having The Desired Effect?

Yes! ‘Investment web site’ operators and promoters are moving OUT of e-gold and into other offshore digital currencies.

Look around and you will find dozens of posts like these from the HYIP promotional webs, known as monitors. These two posts are from the Talkgold forums:

• “…I can’t operate as a monitor - can’t receive payouts or make reinvestments because of that block. May be it is time for all to stop use Egold and find another stable processor!”
• “How do I run a monitor site if account is blocked. I can’t make payment and get payouts from anyone”

All of these also from the Talkgold forums - “…tg is one of the top hyip forums in this arena.”

• “…its time to use a good alternate! what do you think about c-gold?”*talkgold
• “…Maybe all HYIPs should start using Pecunix or any other stable service?” *talkgold
• “…what do you think about Alertpay!” *talkgold
• “…It’s time for HYIP-admins to adapt their scripts and replace e-gold to other more reliable currencies. I can live without e-gold, e-gold can’t live without us.” *talkgold
• “I think we must use another e-currency”*talkgold - This comment from HYIPs.ir touted as the “Greatest HYIP monitor in Middle east with 14 language”
• “Looks like another e-currency will have to emerge.” *Comment by the Talkgold administrator

After reading the Talkgold forums, I’m reminded of how cockroaches run for cover at night when the kitchen light comes on!

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It now appears that Dr. Jackson and the team over at e-gold Ltd. are making some bold due diligence moves in order to stop their digital gold currency from being used by HYIPs, Ponzi scams and AutoSurf programs.

These preventative measure will certainly not create an easy road ahead for the e-gold administration and their previous ponzi customers and I can’t image the mountain of paperwork now being created, but e-gold’s new actions seem to be exiting the HYIPs and driving them away from e-gold.

Three cheers for e-gold!

The e-gold tool being used in this crack down is termed the ‘value limited account’. Also known as a ‘blocked account’, it is quickly becoming the Ponzi’s worst enemy.

What does it mean when your e-gold account gets a value limit? Here is what might show up in your email:

“Your account has been blocked under our Rights of Association clause in the account user agreement.”

e-gold Account User Agreement: 4.6. Right of Association - Issuer reserves the right to refuse service to particular individuals or entities, at its sole discretion, with or without cause.

Unless the problem is corrected, a value limited account is 100% useless for any future business. Blocked accounts cannot accept any incoming funds. Read more

About a week ago, on September 11, e-gold released their audited ‘gold’ numbers.

E-gold has always been 100% transparent. Its an amazing way to do business. Kudos to Dr. Jackson and team.

One thing is for certain….you’ll never find disclosures like this on the PayPal web site.

“An audit report corroborating the Gold, Silver, Palladium, and Platinum held by the e-gold Bullion Reserve Special Purpose Trust stored in London and Dubai.”

For more detailed information check out their new e-gold blog.

Have you ever received an email which seemed like it was from e-gold Ltd., Bank of America or PayPal….but it was sent from a hacker phishing for your info?

It would have read like this, “….we are making changes to our security, or there has been unauthorized activity on your account….you need to sign on and validate your PW, click here“.  Does that seem familiar.

Or the other nice looking ‘official’ web site asking you to log in at www.e-golg.com or www.e-gold5.com ‘click here‘. I get them almost everyday for e-gold, PayPal, NatWest, Bank of America and many more.

Different from online banking, digital gold currency and some other digital currencies like Liberty Reserve and e-bullion’s e-currency are built around the strict rule of non-reversible transactions. Consequently, if your digital currency account gets raided by hackers and instantly cleaned out….you are out of luck in getting a refund!

Digital currency offers, no chargebacks and no chance of fraud. Immediate worldwide settlement and finality of payment provide Internet merchants the ability to accept payments without any end of the month chargeback worry or surprises. This translates to NO loss of revenue from fraudulent payments.

Digital currency delivers payment confidence to its users.

However, because of this non-refundable policy, digital currency accounts are a special target for online thieves.

There are hundreds of phishing emails and fake web sites on the Internet trying to gather your personal information and log on credentials with the intent of stealing your online funds.  In hopes of helping consumers avoid these traps there are many software products devoted to blocking the scams.  Items such as anti-phishing toolbars, popular browsers with built in phishing filters and even virus protection software all attempt to block the bad web sites.

e-gold’s Dr. Douglas Jackson discusses some of these important issues over on the new e-gold blog, with this post - Example of how fake sites target users of e-gold, E-Bullion, Pecunix, and Liberty Reserve

The e-gold web site has always shown excellent tips on how to avoid being a victim of these hackers and the Security Recommendations on their web shows important information which will help to protect you from ‘unsafe surfing’.

The safe keeping of my online financial accounts is very important to me and each day I put my trust in Dr. Jackson.  With his decade of e-gold online payment experience, I know the e-gold blog advice is going to be current and very helpful.

Better Money

The trademarked slogan “Better Money” is displayed on the homepage of the e-gold site. As best I recall, I came up with that one myself. In making this claim my intent was (and is) to stimulate thinking and discourse along the lines of “In what way(s) can one brand of money be better than another?” read more….

So how can one brand of money be better than another?

Money that does not lose its exchange value over time - relative to goods and services, relative to other brands of money - would generally be better than money that did. I say generally because, as with most propositions, there are exceptions -circumstances where some participants in a money economy stand to gain from a decline in exchange value. There are also circumstances where an increase in exchange value can be disruptive, creating winners and losers. At some point I hope to expand on this. It ties into (among other topics) discussions on balance of payments, an area where e-gold or any globally oriented and designed currency can alter or invalidate existing paradigms in an interesting way.

e-gold’s performance as a store of value perfectly mirrors physical gold since it is backed at all times by a 100% reserve. read more….

The e-gold web site has finally added a blog and with this humble sentence a new era in communication has just begun….

“Hi, I’m Douglas Jackson and this is the first entry of the e-gold blog.”

Most readers will know what I am talking about because over the last decade getting casual comments out of the e-gold organization has been darn near impossible. Perhaps this silence was for a good reason. This blog is truly a new and warm addition to the community. Its a well needed social add-on and I urge all readers to visit and comment.

The inevitable question I have….is it too little too late? I hope not. You can grab the feed here.

One of the first entries is a Q & A radio interview Dr. Jackson recently recorded. Its very good. If you have a few minutes, its well worth the time.