Gold, for a long time, has been the currency of choice. Being used in Lydia, currently known as Turkey, the country with the most gold was known as the most wealthy. Then, paper money was invented, because carrying vast amounts of metal for trade, was not only dangerous, but completely inefficient. The papers that were issued was based on the amount of gold/precious metals that the government held, and could therefore be redeemed people who had the papers in possession. This meant that governments could only issue as much money as they had gold. But this was not the case for long.
After the gold standard was globally abandoned, inflation was on the high, and therefore resulted in the loss of value for our paper money. This meant that gold, was and still is a good store of value against the loss of paper money value.
Digix realised this, and had deemed that Gold, would be a good store of value, not just against the financial market, but against crypto markets.
For those that do want to own gold, but do not trust the banks to handle and store the gold that they buy, or are even afraid to buy and store their own gold, for security reasons, Digix is a great platform to utilise. As mentioned briefly in the previous article, Digix utilises their own protocol, known as Proof of Provenance (PoP), to digitise the ownership of gold, into the blockchain. How this works is illustrated below:
Their PoP unifies all parties involved in the supply chain. DGX tokens can only be issued upon respective actions taken and corresponding documentation supplied by all parties. The public blockchain guarantees that records are unalterable and tamper-proof.
This essentially makes their protocol a supply chain management solution.
This also ensures that there will only be as much DGX tokens, as they have gold, in weight, stored in their vault. With their protocol, users can also claim their DGX tokens for actual physical gold. And since the DGX token in circulation corresponds with how much gold they have, holders are ensured that their gold is always available for claim.
How this works is that holders need a minimum of 100DGX tokens, to claim a 100g of 99.99% LBMA Standard Gold, with fee of 1DGX token. This also means that holders are only able to claim their gold in multiples of 100 tokens. This redeemed gold can then be picked up by the holders.
Because the gold is on the blockchain, users can also easily swap it between BTC, USDT, ETH, etc.
"If I can't trust the banks, why should I trust Digix?"
Users can always verify that for every 1DGX token minted, there is 1g of physical gold stored in their vault. On their website, under the proof of provenance page users are able to see all documentation regarding the gold, from Custodian, Vendor, and events that took place.
They also have a 3rd Party auditing firm Bereau Veritas Inspectorate, that would carry out quarterly checks on the quality and quantity at their custodian vault to ensure accounting is upheld. Every gold bullion is rigorously tested with precision instruments during Audit. These industry-standard tests are done to prevent bullion fraud at Digix.
Digix also utilises a multi-party trust mechanism to ensure upheld integrity. That means the asset vendor, the auditor, and the participating custodian vault are all separate entities and independent from each other.
These entities with which Digix is working, are are either public listed, or very well known in the industry for providing their niche services. The interest in the services has to be independent from one another. Although the risk of collusion is possible, it is at the cost of severe reputational and legal damages to the colluding participants. A fair assumption would be that these entities act in a rational manner, as such actions will create huge reputational and legal damages that would detriment their business.
All in all, the marriage between gold, blockchain tech, and the internet, combined with transparency and safety of the assets being managed by Digix, make owning DGX a real asset for possible investors in gold. The use of Digix brings in many possibilities in the world of today. These possibilities / use cases will be addressed in the next article!
DISCLAIMER: This is not investment advice, simply a promotional write up based on information made available, be it scarce or in abundance. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice.