Quarterly Investment Guide

Tired of bitcoin? Try marijuana, manure-backed coin

Frustrated by bitcoin's booms and busts but not happy that Nixon took the U.S. off the gold standard? Incensed that central bankers continue to meddle with the macroeconomy?

Good news: There are more concepts in the works to create currency standards backed by physical commodities than ever before, thanks to the creative crypto-thinkers behind the digital currency revolution.

Anthem Vault plans to launch a gold-backed crypto-coin in May. The bet is that the coin—which is redeemable for 1 gram of gold at the market price—will be a big hit with investors who are tired of bitcoin's wild ways.

Getty Images

Bitcoin has been on a roller-coaster ride, losing more than half its value last year.

Anthem Blanchard, CEO and founder of physical gold and silver broker Anthem Vault, thinks that his cryptocurrency, called the Hayek, will bring more stability to the Wild West digital currency marketplace. Matching the ancient currency of gold with a new medium of exchange makes sense, Blanchard said, adding, "Seeing bitcoin combined with gold is exciting. Crypto-gold is more secure and spendable."

Read MoreFinally, a bitcoin ETF!

Anthem Vault is no stranger to gold-backed cryptocurrencies. Last year the firm tested investors' taste for a gold-backed coin with its Independence offering, but that was linked to only a small amount of gold. So far, 700,000 Independence coins have been redeemed.

George Soros' son, Alexander Soros, has even invested in the Canadian start-up BitGold—which lets you redeem bitcoin for gold—through Soros Brothers Investments.

The gold-backed currencies are not the only ones to emerge since bitcoin's fall from grace. Another one is backed by fertilizer and yet another by medical-grade cannabis. Each is a small part of the more than $4 billion cryptocurrency marketplace mostly dominated by bitcoin, according to the website coinmarketcap.

Gold-backed cryptocurrencies look the most promising, according to some experts.

For example, Nofiatcoin, a gold- and silver-backed digital currency launched last year, has managed to be strong—despite the bitcoin crash. Nofiatcoin, which is actively traded, has already risen from its launch price of $1 to near-$18 on April 1.

We may end up with over 2,000 cryptocurrencies. And some will be commodity-backed.
Carol Van Cleef
co-chair of the global payments practice at the law firm Manatt, Phelps & Phillips

Other commodity-backed cryptocurrencies are more esoteric. Consider the Uro Foundation's UroCoin, also launched last year, which is supposedly backed by 1 metric ton of a widely used fertilizer called urea. It's meant to track the rise in energy and food prices.

CannabisCoin, one of the more actively traded commodity-backed currencies on the cryptocurrency exchange Bittrex, has been gaining traction. The coin is backed by 1 gram of pharmaceutical-grade cannabis.

Read MoreProfiting from the booming pot business

There are already 500 different cryptocurrency offerings. Picking winners is, at this point, a difficult proposition.

"We may end up with over 2,000 cryptocurrencies," said Carol Van Cleef, co-chair of the global payments practice at the law firm Manatt, Phelps & Phillips. "And some will be commodity-backed."

How far have the creative crytpo-thinkers taken the idea already? Even beyond physical commodity backing for currency. Van Cleef pointed to a cryptocurrency coin backed by babysitting services issued at a co-op in Israel.

Keeping crypto in the crypt

For now, though, more stable cryptocurrencies, like gold-backed versions, are receiving the most attention.

"Bitcoin is too volatile," said Campbell Harvey, a professor of finance at Duke University. "This is why alternatives are springing up." Redeemable gold-backed cryptocurrencies may help solve that problem by being pegged to volatility of the bullion, which has been used for centuries to back currencies. "That's an advantage," Harvey said. Meanwhile, cryptocurrencies backed by commodities such as fertilizer or rice can be driven by less-predictable events, like blight or famine, and wild swings in commodities, Harvey said.

In theory, anyone can create a cryptocurrency, because it's based on an open-source code that anyone can copy. "It only costs $40," said Carl Mullan, author of "The Digital Currency Challenge." But he added, "People may not even buy them. They're like penny stocks."

Mullan favors redeemable gold cryptocurrencies. "I would buy them first," he said.

Read MoreHow you can make money off hackers

Van Cleef said the redeemable gold concept only works if investors can trust the provider to actually back up their promise—no sure thing in a period of market experimentation. Mullan pointed to the gold-backed cryptocurrency Minacoin, which he said has disappeared. A lot of other digital currencies have come and gone, too, and once they fail, there hasn't been a way for investors to get their money back, Mullan said.

"How do you know the cryptocurrency's value is really there? What happens if something goes wrong? Can it be sold or redeemed?" Van Cleef said. "The value of these cryptocurrencies is only as good as what backs them."

Not all cryptocurrency concepts will be well-structured as market offerings. So the key to buying these crypto-coins is knowing where the gold—or any commodity—is being held.

"Any good company should be audited," Anthem Vault's Blanchard said. "And you should know who the operators are." In Anthem Vault's case, gold bricks are housed in Salt Lake City.