According to Economic Times, gold was one of the most sought after asset classes in 2020, with gold funds offering an average return of 26.8%. The price of gold is expected to move up in 2021 as well, due to various factors including the global outbreak of COVID pandemic, world economic situation, US-China-reset of the world relations, inflation/interest rates, etc.
Many investors have demonstrated interest in gold allocation to diversify their investment portfolio. GOLDx may be a smart choice for investors to earn a decent savings yield, on top of the price appreciation of underlying gold. Meanwhile, users can also use the supplied GOLDx as collateral to secure a stablecoin loan at an attractive rate (because your pledged GOLDx is also interest-generating, there is a good chance for users to borrow fund at negative interest rates). Then you can re-supply the borrowed stablecoins to dForce Yield Markets at a higher savings APY to maximize your investment return.
The compound investment return from above example is around 22.8% (subject to floating rates based on market supply and demand), which is independent from the appreciation of gold (GOLDx always tracks the price of gold from LME).
What is GOLDx?
GOLDx is a digital gold token launched by dForce and a wrapper of PAXG denominated in gram. GOLDx is backed by physical gold through PAXG, with 100% on-chain reserve verifiable through Etherscan. GOLDx tracks the gold spot price from London Metal Exchange.
GOLDx is the world’s first gold token being introduced to DeFi. Users can double your profit on gold investment by depositing GOLDx into dForce Lending (16.60% APY at the time of writing on), without the need for an intermediary in attribution. Interests are paid by users who borrow GOLDx to short sell gold and arbitrage from the price volatility, or to yield a much higher return from DeFi liquidity mining.
GOLDx is currently deployed on Ethereum through dForce governance proposal DIP007, with scheduled expansion to Binance Smart Chain (BSC) according to dForce governance proposal DIP008. Smart contract audit of GOLDx performed by SlowMist can be viewed here.
dForce team will continuously evaluate gold tokens with trustworthy custodian, regular audit and financial reporting of gold reserves, accessibility and liquidity, and will add more gold tokens to the constituent basket of GOLDx.
Why GOLDx?
GOLDx is the first gold token with a decentralized lending market, cutting out the middlemen in connection with lending facilitation. Notwithstanding the fact that PAXG (Pax Gold) dominates the digital gold conversation with a total market capitalization of $141 million and 24h trading volume of $7 million, transacting PAXG is subject to 0.02% fee charged by Paxos, deducting directly from the transacted amount. It introduces considerable friction for DeFi protocols to integrate with assets of depreciation model, increasing the complexity of algorithm dramatically in calculating the asset balances. The launch of GOLDx serves as a better solution which is anticipated to bring greater liquidity to decentralized finance.
As a wrapper of PAXG, GOLDx is 100% backed by on-chain reserve of PAXG (verifiable through Etherscan) and is featuring all advantages of PAXG, including:
- As a wrapped version of PAXG in smaller unit (gram instead of ounce), GOLDx represents the ownership of London Good Delivery gold certified by the London Bullion Market Association (through PAXG).
- Tracks the spot price of gold from LME (London Metal Exchange).
- Redeemable for physical gold through designated brokers world-wide (also through PAXG).
Additionally, GOLDx serves as an upgraded version of PAXG, which is 100% compatible and user-friendly to DeFi protocols. It features a number of advancements from PAXG, including:
- On-chain transaction of GOLDx is free of charge, making it easier for DeFi protocols to integrate with GOLDx and leverage the potential of gold. However, please note this excludes minting and destroy of GOLDx as there will be fee levied by PAXG issuer for on-chain transactions of PAXG (for conversions from PAXG to GOLDx, and vice versa).
- Decentralization. PAXG holders can mint/destroy GOLDx through the protocol at any time at zero cost. The conversion from GOLDx to PAXG will trigger the automatic return of pledged PAXG and destroy GOLDx of the corresponding amount.
- Easy accessibility. GOLDx is also tradable against almost all ERC-20 tokens on dForce Trade, which aggregates liquidity across different DEXes to offer the best available trading price. Trading of GOLDx is also supported by several centralized exchanges, including SENBit and DigiFinex. Users can also buy PAXG from Binance, FTX, Kraken, etc, and use the protocol to mint GOLDx.
How to get GOLDx?
Users can choose to mint GOLDx from PAXG or trade on secondary market directly. Let’s walk though how a user would do this.
- Mint GOLDx from PAXG
Make sure you have sufficient PAXG to support the minting. PAXG is tradable on a number of centralized exchanges including Binance, FTX, Kraken, etc.
1. Access the GOLDx protocol through https://goldx.dforce.network/dapp/#/
2. Make sure your Ethereum wallet is connected.
3. Enter the amount of PAXG you wish to convert to GOLDx.
4. Click on ‘Mint’ to continue.
5. Confirm from your wallet and pay gas fee to facilitate the transaction.
6. Transaction completed.
- Buy GOLDx on Secondary Market
1. Access dForce Trade through https://trade.dforce.network/
2. Make sure your Ethereum wallet is connected.
3. Enter the amount of ERC-20 tokens you wish to convert to GOLDx.
4. Click on ‘Swap’ to continue.
5. Confirm from your wallet and pay gas fee to facilitate the transaction.
6. Transaction completed.
How to earn with GOLDx?
Let’s walk through an example of how you would execute this on dForce’s protocol.
1. Get yourself some GOLDx as instructed above.
2. Deposit into dForce Lending to earn a decent yield (current saving APY is 16.6%).
3. Borrow USDT against supplied GOLDx at borrowing APR of 1.03%. Taking into account the saving yield on your collateralized GOLDx, you are borrowing USDT at a negative ‘net’ rate of -15.57% (1.03–16.6%)!
4. Supply borrowed USDT to dForce Yield Markets for a higher APY of 8.87%.
5. Now your compound return on GOLDx investment is above 20%! Please note this does not include the profit from appreciation of gold, as GOLDx always tracks the spot price of gold!
Users should note that the actual rate of return one can expect from above example is subject to floating interest rates (for both lending and borrowing), which changes subject to the supply and demand of the underlying asset.
Also, investors should carefully manage your collateral position. In the event it becomes under-collateralized, your loan will be automatically liquidated and sold on the open market to bring your remaining borrowings back to the level of satisfaction. GOLDx’ current loan-to-value ratio is 80%, which means you can borrow stablecoins (or other crypto-assets) up to $80 worth of value against collateralized GOLDx of $100 worth of value. More risk parameters of GOLDx can be found in the Documents of dForce.
Reference Links:
· GOLDx smart contract address
· GOLDx official website
· GOLDx whitepaper
· GOLDx protocol (minting & destroy)
· GOLDx audit report
