I've been kicking around the idea of physical gold ledgered on a blockchain and having a gold backed crypto asset since about 2012. Come full circle now we are in 2017, and we are seeing several gold crypto asset projects pop up. The problem is, none of them actually provide any value to a buyer of their coin or asset.
OneGram essentially charges 10% spread on gold. It seems to me they are focusing on the Shariah compliant market, and charging the exorbitant 10% fee and expecting people not to notice. By the way, I can head down to a coin store and pay a very egregious 5-6% to buy a minted coin! Bullion certified and assayed an investor is probably paying BPS spread (not even a full percentage point)
Digix essentially provides gold priced to LBMA as a ledgered asset. Let me ask something here, why do I need Digix to buy gold at LBMA pricing? Why do I care if it is ledgered on a blockchain or not? They say one gram equals one token. But if their only pricing mechanism is priced to LBMA plus a transaction fee of 0.13% or 13 basis points, then why bother? In addition their FAQ says that storage fees are deducted automatically daily in the blockchain at ACT / 360 daily at 0.60% pa or 60 basis points per annum. It is not clear if the transaction fee applies to buyer, seller, or both. They also have recasting fees if you want to collect 100 gram bar physical gold. To recast dgx tokens into 100g gold bars for redemption will cost 1DGX (so effectively 1% spread to collect your physical gold)
I would like to hear what people think of the concept of crypto gold coin that is not priced to anything. By this I mean folks could let the crypto market decide the value and hence this would create an arbitrage opportunity where the blockchain asset rises compared to LBMA or visa versa. I think we have a business model where this would be possible without a transaction fee, with similar storage fees and assay fees, and a lower than 1% fee remove the gold from secure storage (provided KYC and AML due diligence is passed.
Any ideas or thoughts would be appreciated!
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I believe Gold Token does that. Not sure why you would do that and buy some. better buy the gold itself and store it somewhere. The token just adds an extra player of complication / Risk
I was just thinking about this yesterday - wondering if there would be a case for a crypto backed by gold.. if you could use block chain technology to track the purchase of every ounce so that there is complete transparency and was able to store it somewhere where it could be under constant streaming video surveillance for all to see .. then crytpo could be issued for every new ounce of gold collected - it could be funded with several millions dollars worth of gold to get it started .. and each unit could be worth 1/1000 an ounce of gold. If any gold is redeemed - it is done through the ledger so it transparent to everyone and fraud is eliminated. There would be no question as to its value and it would be more stabilized - unless of course there is secretly less gold than they are letting on and a run on gold suddenly skyrockets the price of gold to a point where it becomes too expensive to obtain...very interesting... I was wondering if anyone was thinking about this too
Yes there are several gold crypto orgs out there:
GOLDMINT which is very unattractive to someone who wants to buy or sell gold. They charge 5% a spread of 5% on sell and 3% on buy transactions. That's very uncompetitive.
ONEGRAM which effectively charges 10% annual fee on the gold under management. Horrible economics for a gold buyer or seller.
DIGIX which I think has the tightest spreads which could attract some types of buyers. The problem is again price is fixed to LBMA + small spread.
The problem I see with all of these is that they are fixed to LBMA and very high spreads to spot. What is the point of buying gold that still has counter party risk, and yet is priced with higher spreads than an ETF?
What we propose is to deliver gold to a secure vault which is then tracked on a blockchain 1 ounce per coin. We envision that there will be no transaction costs incurred to buyers and sellers as the coin will become like any other cryptocurrency, with the ability to buy and sell directly without an exchange or intermediary. The only transaction costs will be:
KYC and AML plus a one time cost to redeem a virtual coin to physical gold (either in person or via normal gold logistics channels if it is an institution). This will be less than 1% (probably on the order of 50 basis points)
We will deliver the physical gold to the block chain at a discount to LBMA, which will attract buyers and provide high liquidity.
Once the gold is in the vault, on the blockchain and represented as a virtual coin 1 ounce = one coin, it will never be "priced" by the foundation or any person other than the buyer and seller in their direct transaction or by market makers who are buying and selling simultaneously to take advantage of arbitrage opportunities.
That would produce a crypto currency coin that is 1:1 backed by physical gold held by a 3rd party, yet priced independently to all other markets with only the buyer and seller involved in buy/sell transaction with no spread paid to anyone. That is a true gold backed currency :)
The whitepaper will be coming out soon!
clearly, you've put a lot of thought into this - I was thinking also the the main issue to being competitive would be to ensure that storage and protection fees are in line with what already exists. If it cost to much to hold it , protect it and distribute it then as you said - there is no reason for it . A one time fee for redeeming it or transferring it might be able to cover to cost of holding. Since the blockchain can track it all with minimal human intervention , the cost of processing should be MUCH lower than it is now with gold. I think there is a good case for it is someone can set up the infrastructure properly.