Blockchain technology is about to come full circle. The technical ideas that allow bitcoin, designed as a form of digital gold, to operate will soon be used by the UK's government-ownedRoyal Mint in a new gold-trading system.

The 1,000-year-old Royal Mint is working with CME Group-the world's largest futures exchange operator-to put $1 billion worth of gold on a blockchain sometime next year. The idea is to allowcustomers to own and trade fractions of gold, stored in the Mint's vaults, using a new digital token called Royal Mint Gold (RMG). Each RMG equates to a gram of gold.

The new scheme cuts out the management fees and storage costs that current spot-trading in gold incurs. The Mint, for instance, charges between 0.5% and 1% of the average value of a customer'sholdings for using its vault.

For the Royal Mint and gold trading, a blockchain is particularly fitting since bitcoin itself is modeled on the precious metal. Like gold, bitcoin has a limited supply. New coins must also be"mined" before they are added to the monetary base. The steady addition of new coins "is analogous to gold miners expending resources to add gold to circulation," wrote bitcoin's creator, thepseudonymous Satoshi Nakamoto, in the cryptocurrency's founding document (pdf).

But, since bitcoin is open-source and anyone can become a miner, the pool of traders of the commodity can't easily be controlled. The bitcoin blockchain is also not cheap to maintain, since theprofessionalization of the bitcoin world means miners now operate gigantic server farms, and develop their own special mining chips, to remain competitive.

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