Asset Backed Digital Tokens
The most significant impact on the investing industry in 2019 and beyond
By Mark Furmanek
Asset Backed Digital Tokens — The most significant impact on the investing industry in 2019 and beyond
The rise of asset-backed digital tokens, specifically gold-backed tokens, are forming one of the most exciting asset classes in decades.
What is an asset-backed token?
Asset-backed tokens (or security tokens) are investment contracts that represent a whole or a fraction of legal ownership in real-world, tradeable assets like precious metals, real estate, or art. Each token’s value is directly tied to the underlying asset — so the more valuable the asset, the more its token is worth. Asset-backed tokens lie at the perfect intersection of fintech and traditional finance — opening doors to a new universe of assets that were previously out of reach for investors all over the world.
What are gold-backed tokens?
Gold-backed tokens are a specific class of asset-backed tokens. Unlike gold Exchange-Traded Funds (ETFs), in which each share represents ownership in a gold-related fund, gold-backed digital tokens represent 100% direct ownership of physical gold that is stored in a vault or depository. The investor, not the fund, enjoys full legal ownership and title of the gold, which is tracked on a cryptographically-secure blockchain database. And if desired, the investor can exchange their tokens for physical delivery of metal at any time.
What makes asset-backed tokens, like tokenized gold, so exciting for investors?
Asset-backed tokens democratize the ownership of tangible assets and allow their value (and potential investment gains) to be distributed among several investors.
A gold bar or valuable piece of artwork may be out of reach for an investor’s budget or disrupt the diversity balance in a portfolio. But tokenization revolutionizes the concept of “ownership” of these types of investments, making it possible for investors all over the world to own fractions of that same asset and benefit from its potential gains.
For example, gold-backed tokens can represent fractions of a gold bar at price points suitable for even a beginner investor. A million-dollar painting at auction can be divided among several investors, uncovering a new world of buyers (and liquidity) like never before. Here are some other ways that asset-backed tokens, particularly gold tokenization, is an exciting development for investors:
· Asset-backed tokens could provide unprecedented access to any illiquid asset in markets such as real estate, debt and equity, fine art and collectibles, or commodities like wheat, cotton and corn.
· Gold-backed tokens can be traded 24/7, 365 days a year on the blockchain through decentralized transactions, eliminating the need for an intermediary. This allows people all over the world to invest at any time, not just during market hours as with assets like stocks and ETFs.
· For the precious metal investor, gold tokenization is a more efficient, secure, and affordable way to buy and sell bullion. Investors no longer need to worry about shipping, storage, manually tracking its value, or a cumbersome selling process. But they retain the peace of mind that comes with knowing that they can take delivery of their physical metal at any time.
· For the cryptocurrency buyer, tokenized gold provides access to tokens that are backed by a real-world asset that could be used to hedge their portfolio.
How could gold tokenization change the investment landscape in the future?
Here are a few ways that tokenized gold, in a perfect world, could transform the investment landscape in 2019 and beyond:
· As tokenization allows investors to own physical gold on the blockchain in a way that is fungible, portable, and liquid, it could supplant the traditional, centuries-old method of bullion investing and revolutionize the entire precious metals industry.
· If asset-backed tokens in general become mainstream and traditional markets adopt tokenization at a global scale, they could slowly but steadily replace many traditional trade operations.
· Because of gold-backed tokens’ irrefutable value, tokenized gold could potentially replace Bitcoin as the primary store of digital value, ushering in a digital “gold standard” for the modern age.
· As more and more people shift to online investing, demand for the transparency, convenience, and accuracy afforded by a cryptographically-secure blockchain will make gold-backed tokens an attractive option. It’s not too far of a stretch to imagine a future financial system based on this new “gold standard” — one that is just as mainstream as online banking is today.
In 2018, Dillon Gage debuted DGGold , a gold-backed digital asset offered to the retail investor through our precious metals dealer network. And as one of the leading precious metal suppliers we’ve been selected as an industry partner of choice to supply investment-grade, pure physical gold bullion for gold-backed tokens all over the world. With cutting-edge automation, real-time competitive pricing, daily audits, lightning-fast execution, accurate reporting, quick redemption, and customer asset protection, Dillon Gage will lead tokenized gold into the future and deliver this exciting new asset class to investors worldwide.
We invite you to join us as we blaze new trails in the precious metals industry and break down the barriers of traditional bullion investing.
About Mark Furmanek
Mark Furmanek is the chief operating officer for Dillon Gage, one of the world’s largest precious metals wholesale firms and leading technology innovator in the industry.
Furmanek imparts his leadership and vision to streamline the company’s operations, drive growth and consistently push the boundaries of traditional precious metals offerings. His development of innovative, technology-driven trading tools has helped clients succeed in business and propelled Dillon Gage to the forefront of the precious metals marketplace. He leads a high-performance management team responsible for all of Dillon Gage’s business lines, including trade execution, fulfillment, operations and IT.
Furmanek joined Dillon Gage in 2017, bringing more than 20 years of industry leadership and executive management experience to his role. Prior to joining the company, he was an executive vice president and chief operating officer for the self-directed IRA firm New Direction IRA, where his innovation and operational efficiency led to significant company growth. Furmanek graduated with a degree in economics and a minor in finance from Eastern Illinois University.
