Gold on the Blockchain- A Glimpse into Hedge Coin’s Market Value
Recently, the existence and value of stable coins have been the undeniable trending topic within the cryptocurrency market. Coins pegged to centralized assets such as USD at a 1:1 ratio are the public’s new favorite in this bear market. From the controversial USDT issued by Tether to the surprising appearance of GUSD, everyone is hoping to avoid the volatile price swings and poor market conditions. Yet “printing money” without reservations along with the lack of information transparency and liability will inevitably result in problems for centralized companies when consumers look to cash out as float increases, breeding distrust in third-party institutions.
Many will still opt to convert their assets to Bitcoin, the “digital gold.” Unfortunately, the term gold does not simply imply scarcity but also value preservation, the latter of which Bitcoin fails to deliver due to volatile price swings. As blockchain technology matures, over ten different types of “gold tokens” have emerged onto the market, a testimony to the hedging and inflation-proof quality of gold. Traditionally appreciated by investors, gold is now expanding into the Token Economy, signifying the manifestation of universal values.
Smart Contracts Now Includes Gold on the Blockchain. The Concept is there, but is the Market?
Backed by actual gold, gold tokens employ blockchain technology to digitalize gold, carving a unique advantage for themselves in the cryptocurrency market. Gold offers stability and value preservation while cryptocurrency spares issues with transportation and storage thus forming an ecosystem of applications.
But is gold on the blockchain as trustworthy and stable as actual gold? Take DigiX’s DGX as an example, issued in 2016, it is a token backed by the intrinsic value of actual gold. Peer-to-peer transfers of gold tokens are available as long as buyers have a valid Ethereum address. Transaction records of each gold token will leave an unalterable and tamper-proof PoA along with transparent ownership records on the blockchain.
The overall concept and consensus mechanism seems fine in execution, but over the past two and a half years, trading volume has been curiously low except for a rise due to talks of hedging in the beginning of the year when the overall market started plummeting. The dividend token DGD has also taken a nosedive, with DigiX recently converting all the Ethereum coins funded through ICO to GUSD and USDT. The poor performance is ultimately rooted in an immature token economy and ecosystem.
Stable and Hedged Utility Tokens Reliant on Third-Party for Asset Authenticity
Gold tokens are slowly fading away, but maybe now, Q4 of 2018, is the right time to once again turn our attention to a stable hedge token that is looking five years ahead, GGC (Gram Gold Coin).
Thomas Huang, CEO of Gramgold Coin, a veteran with 20 years of experience in UBS and other top-notch investment banks, stated that the credibility of various third-parties is vital when including gold to the mix. GGCC works with BuillionStar, a renowned Singaporean precious metal distributor, and Bureau Veritas, a top-notch third-party audit company, for gold bullions and endorsement, respectively. Sufficient gold to support digital asset is the precondition for long-term development.
In investments, hedging is a safe and stable alternative to navigate a market where high risk equals high yield is the mainstream. In the foreign exchange market, most investors open positions on both USD and non-USD currencies or simply purchase US Treasury Bonds. Similarly, gold is negatively correlated to USD and therefore a suitable hedging product in quid pro quo. It is now apparent that gold is truly the asset for hedging.
Allen Hsu, co-founder of GGCC, FRM license holder, and investment banking and asset management veteran, explained that “GGCC mints GGC tokens with PoA on smart contracts. The ratio of 1 GGC token to 1 gram of gold, helps GGCC provide stability and low volatility. The token holder not only holds a cryptocurrency, but with the consensus mechanism inherent to the blockchain, the token holder also effectively holds the equivalent value in gold. GGCC hopes to create a Hedge Coin that will not face volatile price swings, but rather, provide security to token holders in a volatile market.”
The Road Less Travelled: Building a Token Ecosystem
ICO has plagued the industry in recent years. In 2017, ICO teams were able to rake in an average of 20–80 million RMB before the official launch. As ICO faces tighter regulations worldwide, a few pages of whitepaper is no longer sufficient for a successful ICO. GGC chooses the road less taken, entering the market through ICC (Initial Coin Circulation) instead of ICO. GGCC does not receive funds from the general public through ICC, but rather strategic investors. Investors purchase gold, and store it with certified storage institutions. On September 19, GGCC took the lead and deposited the first pot of gold with BullionStar, signifying the first step to long-term management.
In 2018, everyone’s goal seems to be unified in creating a token ecosystem. The application of DAO (Distributed Autonomous Organization) can be considered as a prototype and spirit of Blockchain 3.0. GGCC will work with major cryptocurrency exchanges in the initial phase to spur the use of tokens. The mid-term goal is to stay innovative and provide more cryptocurrency derivatives. The long term goal must be focused on the autonomous token ecosystem GGCC establishes through its community consensus and participants’ decisions, after all, the long-term goal for consensus is what differentiates GGC from other asset-backed cryptocurrencies.
In the cryptocurrency market, technologies can be emulated, replicated, improved, and even surpassed. Surviving the market requires galvanizing the community’s shared voice, creating autonomous space, and receiving recognition for the token’s value. Partnerships with investment bank veterans, consultants, and professional technical teams gives GGC potential of becoming the google of stable coin.