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Stablecoin is still an evolving concept, and there have been several approaches to it. Dai has algorithmic methods to keep it tied to the US dollar, while the multitude of stablecoins – USDT, PAX, GUSD, TUSD and USDC – all simply offer an exchange ratio 1: 1. The Ampleforth, recently renamed, offers a reserve elastic so that the holder always obtains the same value from his investment, while he may have a different number of tokens depending on the market value of the token.
Digix has a different approach, linking the value of its DGX to 1 gram of gold. A small equipment short of Singapore, Digix Global says it will redeem the tokens for the gold bars they keep in their vault. The reimbursement must be made in person, mainly for security reasons, but also because of the high cost of the international shipping of gold safely. We talked to Kai C. Chng, Digix's co-founder, about how it works.
For one thing, even if the exchange in itself was lurking and never took off, Digix developed an interesting method to track its gold bars on the exchange. Chng told us that each bar is scrupulously scanned into the system, its receipt information is stored, and is therefore associated with the token issued for sale. That is, essentially when you trade or hold DGX tokens, you are actually keeping property certificates on gold. There is a minimum reimbursement requirement, but these tokens can still play a key role in the trader's strategy.
"We have what we call a demurrage tax, it is almost equivalent to deposit, insurance, coded in the smart contract of each bar".
Thus, this is how the exchange gains money – by storing the tokens and bars associated with Digix, a small part of the token is eroded to pay for the storage of gold.
At a given moment, the exchange transparently lists its goods. Users are free to ask if they have further questions about storage and tracking. The DGX token is currently listed in a series of reliable exchanges including Ethfinex. Most of its operations appear to be on decentralized markets.
At the time of the interview they only had about 1400 grams available, but the CEO stated that they would acquire another 5,000 units from their supplier, London Bullion Market Association. As they wrote, they bought these and sold some, with a supply of just over 4,600.
For those interested in trying Digix, there is a sale going on with the exchange. They are selling under the cost it costs them to acquire gold until the end of the year, in an effort to stimulate user activity. Chng explained that in a normal situation, foreign exchange and transaction fees absorb approximately 0.05% of the value of gold, putting a premium on the token compared to actual gold bars at spot price. But until the end of 2018, Digix will eat these taxes. "Right now we are absorbing taxes," said Chng.
The operation may seem small when compared to trades that make digital gold transactions like Bitcoin, but it has been founded and financed with private equity and has a valid business model, if nothing else. Chng said that three people came to Singapore and made some repayments, one of them in the thousands of units, and heard that at least one of these people was just testing to see if the process really worked as advertised. They were not disappointed.
Shutterstock foreground image. TradingView Charts.
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