Although gold prices have been volatile of late, people’s trust in the yellow metal has not slipped much. Gold is still the standard form of investment in the world, especially in developing countries.
A new ‘form’ of gold has been gaining currency of late — digital gold. However, the problem with digital gold is trust, hacking and loss of assets.
A group of Singapore-based entrepreneurs have come together to eliminate this trust deficit with Digix, a digital gold asset platform.
“Digix is a next-generation digital asset tokenisation platform. We turn physical assets (say gold) into tokens, and make them fungible online through the Ethereum protocol. The ownership of these tokenised assets are transparent for all to see, without susceptibility to fraud, hack or tampering. We allow ownership of assets — otherwise difficult through financial institution bureaucracy — possible, in a fuss-free manner and representing them in your Ethereum wallet,” says Co-founder Shaun Djie.
The startup was incorporated in 2014 by Djie (Marketing Director), along with Teo Hye Chng (Chairman), Kai Cheng (CEO), and Anthony Eufemio (CTO). Digix makes it easy for you to send the ownership of your assets on the Ethereum blockchain. The platform provides a transparent, auditable, and secure protocol that leverages the full potential of Ethereum’s peer-to-peer decentralised consensus system and a permanent document storage to facilitate the creation of transferable crypto assets on the Blockchain.
In simple terms, Digix is an asset issuance service on the Blockchain.
“Digix works by putting assets on the Ethereum blockchain using its Proof of Asset Protocol. The first product they started with is LBMA LBMA (London Bullion Market Association)-approved gold bars,” adds Djie.
What is Ethereum?
Ethereum is frequently compared to Bitcoin, however, they are different in functions and vision. Both are similar in the aspect that they have cryptographic properties built on a Blockchain, with programmable features.
“Bitcoin aims to replace the notes and coins in your physical wallet. It aims to be a transfer medium of value. On the other hand, Ethereum aims to be a programmable platform to build, enforce and deploy smart contracts, the underlying principle of how Blockchain works. Ether is utilised as a ‘crypto fuel’ to pay for the computational power of deploying these Smart Contracts. Think of ‘crypto fuel’ as fees you need to pay the network miners for confirming your transactions. The ‘crypto fuel’ paid are the rewards the miner gets from participating on the platform, akin to Bitcoin miners and rewards,” he explains further.
A growing need for stable coin
According to Djie, asset tokenisation will be one of the key developments on the Blockchain. “We saw the gap in the market to fill – where a good store of value can be married with Blockchain technology to create asset tokens on the Blockchain.” He continues: “There are currently no such services to help users store assets in their Ethereum Wallets. We are the first, and aim to cement this position as the first company to put assets on the Ethereum Blockchain.”
As a user, one can use virtual currencies to purchase an LBMA approved gold bar. The Proof of Asset (PoA) registration consists of two receipts that Digix uploads onto a public web file server called IPFS. The receipt of purchase from Digix’s gold vendor and receipt of storage to its Custodian Vault. Then the owner will be issued a Ownership Certificate, which allows the user to change his/her gold bars into DGX tokens, denominated as 1.000g per DGX token. A user who bought a 100g bar has 100.000 DGX tokens. The DGX tokens can be transferred to anyone who accepts DGX tokens as payments in any denomination.
For instance, you can send 0.50 DGX tokens and you will be left with a balance of 99.500 DGX tokens in your wallet balance. The receiver on the other hand, once received 100.000 of DGX tokens from various payees, can convert this 100.000 DGX tokens back into an Ownership card, where he can redeem the gold bar in physical form at Digix’s custodian vault. Conversion from DGX tokens to Ownership Cards can only be done in denominations of 100g or 1000g like the physical bar.
For this, Digix works with ValueMax, a publicly-listed company in Singapore, which supplies the gold to it. Malca Amit is Digix’s choice of custodian vault, a provider of securitised vaulting facilities globally. Once every quarter, Digix also hires an independent asset auditor, Bureau Veritas, to verify each and every one of its gold bar in the vault. They certify the authenticity of each gold bar’s existence in the vault
“These three partners have independent business interests, hence they are in no way, a colluding act to ascertain the business at Digix. It is a way for our end users to trust us,” says Djie.
For Digix, the main revenue model is the transaction activities on the Digix marketplace. It sells four types of products, the minted DGX token, 1,000g PAMP Suisse Cast Bar, 100g PAMP Suisse Cast Bar and 100g PAMP Suisse Ingot Bar (a nice packaging of a bar).
“We generate revenue from the transaction volume, where we earn 0.13 per cent of the transacted gold value, capped up to 1g,” Djie says.
“With the prototype of the platform we rolled out, we are attracting clients who wish to create their own physical asset backed tokens on the Blockchain. We thus provide consulting services. We are in works with a Japanese listed gaming company to co-write their blockchain programme,” he adds.
Facilitating gold-bar couriering
Digix currently operates its vaulting service in Singapore only, as redemption of Gold bars is also only allowed in this island country. It, however, provides arrangement for couriers of gold bars on an international scale on a case-by-case basis.
The company’s target audience includes merchants who want to accept DGX tokens as a medium of transfer of value for products and services sold. It also includes miners of virtual currencies who want to buy into something physical in the real-world, and gold lovers.
“We allow people to participate in gold on a small scale basis with incredibly low storage fees of these gold. 0.39 per cent storage fee is levied upon the storage of gold, where Digix take no cut from, instead they are used to paying to the custodian vault for the storage,” he notes.
Djie claims that his company is seeing a growing 5-digit US dollar sales revenue in the company since it went live on 15 January 2016.