Keynote Speech by Goldlinks CEO Ouyang Yun: ‘Anchoring the Crypto World’
On 11 April, the 2019 Chain Plus Asia Pacific Blockchain New Finance Summit took place in Singapore. Organized by the Singapore FinTech Association and The Blockchainer, the event was attended by leading figures from the worlds of blockchain and traditional finance, including Dr. Tissa Jayaweera, advisor to Japan Asia Investment Company Ltd, Da Hongfei, founder of NEO, and Zhang Yihao, vice president of Huobi Global.
Goldlinks CEO Ouyang Yun also occupied a prime slot in the speaking lineup. In his keynote speech, entitled ‘Anchoring the Crypto World’, Ouyang offered interesting insights on topics ranging from tokenization and asset digitization, to how blockchain can revolutionize the world of finance. Mr. Ouyang argued that in the future, blockchain could become a General Purpose Technology that radically transforms society. He also made a strong case for gold to be used as an underlying asset, or ‘anchor’ for stablecoins.
According to Ouyang, Goldlinks is using blockchain technology to disrupt the gold industry and create a global platform for the exchange of value. Goldlinks is not just offering a product; it’s delivering a comprehensive solution for the entire blockchain industry.
Main takeaways from the keynote speech:
1. Gold is an effective peg for digital assets
Discussion at the Singapore summit centered on combining blockchain technology with financial innovation. Asset-backed tokens (ABT) are one example of this approach. ABTs are similar in conception to asset-backed securities (ABS), which are used in traditional finance to make assets more liquid. Asset tokenization works by converting physical assets into digital assets and placing them on a blockchain. This process makes it easier to trade or transfer assets, generating more liquidity. Put simply, asset tokenization allows physical assets to be mirrored in the digital world through the use of an anchor or peg.
However, for the above to be possible, a stable digital token is needed as a unit of account to ascribe a value to blockchain-based assets. This type of token is known as a ‘stablecoin’.
Stablecoins are subject to a ‘trilemma’, wherein it is impossible to achieve the desired traits of stability, credibility, and liquidity all at once. Stability and credibility in particular are fundamental to token adoption. Many people see bitcoin as valuable, but the value of bitcoin is unlikely to stabilize until all available bitcoins have been mined. Bitcoin’s wild price springs and speculative nature mean that for the foreseeable future, it will be unsuitable for use as a unit of account.
Having a stable value is a basic requirement of a stablecoin. This stability is achieved by anchoring a token to an asset whose value is widely accepted. With thousands of years of history as a store of value, gold is perhaps the best candidate for use as a stablecoin anchor, both now and in the future.
2. Digitizing gold will unleash a flood of liquidity
The digitization of assets on a blockchain is an inevitable trend, and the resulting boost to liquidity could transform and disrupt certain industries.
For example, gold is a highly stable and trusted asset, but it is not highly portable, divisible, or easy to transport, which reduces its liquidity and utility as a currency.
However, blockchain technology makes it possible to improve gold in a number of ways. Firstly, Goldlinks has divided gold into smaller units on a blockchain, where the smallest unit is equal to 10mg (0.01g) of gold. Ten milligrams of gold is roughly equivalent to three yuan (≈$0.45), making it a suitably small amount for a unit of account. By breaking gold down into smaller units, more liquidity is created.
Secondly, Goldlinks has tokenized gold. Each 0.01g unit of gold is represented by a token on the blockchain. These gold-backed tokens can be used to measure the value of other digital assets, or as a payment tool.
However, during this process of tokenization, Goldlinks has also encountered some challenges. For example, how does it build a network with huge transaction processing capacity? How can it secure an adequate supply of gold? How can it achieve mainstream adoption? And equally importantly, what are the use cases for this new technology?
It’s clear that companies that offer a standalone digital asset won’t meet the needs of the market. That’s why Goldlinks seeks to deliver an integrated solution through the creation of a commercial ecosystem. The ecosystem will be underpinned by basic infrastructure, including the underlying physical gold, a high-performance network (federated or public blockchain), a wallet, exchanges, and other on-ramps. On top of this, Goldlinks will build an application layer: At the consumer level, this could facilitate payments for online games and payment in physical stores; at the wholesale level, gold-backed tokens have potential applications in trade settlement, or in corporate credit markets. Goldlinks is actively exploring these and other such use cases.
3. Drawing inspiration from Chinese and Western history
History can provide us with lessons on how blockchain technology might be used innovatively to disrupt traditional finance.
For example, silver bills, which were introduced during the Qing dynasty, are an example of early financial innovation. This system allowed customers to deposit funds at a bank in exchange for a certificate of deposit. These ‘bills’ could then be used as a unit of account and means of payment in commerce. Moreover, if the holder needed hard cash, they could redeem their bills for physical silver at a bank.
Goldlinks has applied the principles of this ancient Chinese system to physical gold, while combining it with cutting-edge blockchain technology, itself based on Western double-entry bookkeeping practices, which were first observed in 13th-century Florence. Through this marriage of East and West, Goldlinks aims to create a universal store of value that can serve as an ‘anchor’ of stability in the digital asset space.