Announcing GBT
We are excited to announce the public release of Gold Backed Tokens to the market!
As experienced crypto investors already know, cryptocurrencies go through extreme fluctuations periodically — even the most liquid coin, Bitcoin, is not immune. Investors afraid of losing value in their funds have swarmed to USDT. Today, the market cap of USDT is at USD 450 million.
This proves there is a demand for stablecoins in the market. GBT is an alternative stablecoin that is fully backed by gold instead of USD.
What do I mean by fully backed?
All of the gold is fully allocated and always kept in a secure vault owned by BullionStar International. In fact, HelloGold always ensures that there is more gold in the vault than is held for customers.
The gold is audited by Bureau Veritas, a leading auditor of precious metals. They audit for:
- The physical existence of all customer owned bullion.
- The serial numbers of the physical bullion bars.
- The weight of a sample of randomly selected bars.
The gold is insured by XL Group, a leading insurer of precious metals.
GBT is redeemable for physical gold in increments of 1 gram after the customer goes through a KYC identification process.
HelloGold only keeps 99.99% investment-grade, PAMP Suisse 1 kg gold bars. PAMP are one of the leading gold brands in the world and are on the LBMA Good Delivery List.
Why a gold-backed stablecoin?
A stablecoin allows you to hedge without all the friction described below.
- If you feel the market is too hot and want to hedge your crypto funds, you may convert them to fiat currency. The process to do so is cumbersome and restricted.
- Buying a gold ETF adds even more layers to this process.
For a stablecoin to retain its value it must be fully allocated. With GBT, you can be assured that the asset backing the token (gold) is held securely by reputable entities.
Why buy GBT instead of other gold tokens?
A common sentiment about blockchain is that it is a solution looking for a problem. In HelloGold’s case Robin, HelloGold’s co-founder and CEO, identified the need for democratized gold products for the underserved and unbanked while serving as CFO of the World Gold Council and helping to run the SPDR GLD — the world’s largest gold ETF. The team he has built brings about 200 years of experience covering the gold industry, banking, strategic consulting, branding, regulatory, operations, amongst others. These include Robin bringing in gold asset management experience and Dave, HelloGold’s blockchain developer, bringing expertise in smart contracts development. As with all technology, the rubber hits the road where the tech meets the real world. That is where the operational expertise and gold market experience (including appropriate bullion contacts) comes into play. This enables HelloGold to solve the challenges of working with real assets in the crypto space efficiently and effectively.
There are many ways to tokenize assets on a blockchain. In the case of the HelloGold Foundation, GBT is kept on the public blockchain (click here for the contract). All transactions of GBT are recorded on the public Ethereum network and the total amount minted is transparent.
GBT was one of the first contracts audited by ChainSecurity, a startup with founders from ETH Zurich. Based on the research expertise of its co-founders, ChainSecurity uses in-house verification tools offering scalability, mathematical guarantees, and improved security. The co-founders of ChainSecurity are:
Hubert Ritzdorf: a doctoral student at ETH Zurich. He has been working on blockchain security for 5+ years and his research has influenced the underlying bitcoin protocol. For over a year he has been working on security and efficiency of Ethereum smart contracts.
Petar Tsankov: a postdoctoral researcher at ETH Zurich. He completed his PhD in the area of automated security analysis at ETH Zurich. He has been working on automated security analysis of Ethereum smart contracts.
Arthur Gervais: a Lecturer (equivalent Assistant Professor) at Imperial College London and at the Lucerne University of Applied Sciences and Arts (HSLU). He completed his PhD thesis on the security, performance, and privacy of proof of work blockchains at ETH Zurich.
Martin Vechev: an Associate Professor at ETH Zurich where he leads the Software Reliability Lab. Together with his team, he has invented numerous disruptive systems that have had industry-wide impact: http://jsnice.org, http://apk-deguard.com, http://eventracer.org, https://synet.ethz.ch, and others.
Note: let us know if you’d like an introduction to the team — they’re currently busy presenting at Devcon3 though!
Importantly, the audit involved a thorough check of the logic underpinning the code on top of the code functions itself. HelloGold had iterated the logic behind the code based on ongoing operations since November 2016, but best practices required an independent look at it. The audit passed with flying colours. You may review the audit and the code yourself on Github.
An example of a logic test — even though the stated management fee is 2.00% per annum, because the gold is deducted on a daily basis the actual rate across a whole year is approximately 1.98% (rounded to 2 decimal places). The team’s prior gold asset management knowledge helped to ensure that this nuance was baked into the code early on.
Currently, users can audit GBT balance by comparing balances at HelloGold and the vaulting partner, BullionStar International. At any point in time, the total amount of GBT is equivalent to the amount held by HelloGold Foundation (Customer №45800010474 here). The total amount of gold held by HelloGold is then lower than or equal to the amount kept in the vault (№7647, column P1KG here).
The HelloGold management decided on this method of tracking gold based on prior experience running operations of SPDR GLD. Some background on the GLD:
- It has been operating since 2004
- Has USD 30 billion in AUM (peaked at USD 75 billion in 2011)
- Customers include hedge funds, high net worths, and private equity funds
- Listed on NYSE and regulated by the SEC
- Audited by both KPMG (external) and Ernst & Young (internal)
- Updates gold balance daily
The strongest point proving the model of GLD is that in 2011 when the price of gold dropped from its record peak and the GLD AUM dropped from ~USD 75 billion to ~USD 20 billion, all of the customers were able to liquidate their positions without any issue. The same methods have been applied by HelloGold to ensure it provides all stakeholders with the gold standard in transparency and auditability.
The HelloGold roadmap describes moving the tracking of the entire gold balance and all transactions on the (mass market-facing) mobile app to a private blockchain on the Ethereum network. To be more technically accurate it is a permissioned blockchain shared by HelloGold and its partners. HelloGold does not fall into the camp of those who believe public blockchains are the only ‘true’ solutions. There are use cases for permissioned blockchains as well. For HelloGold, some of the reasons for building one were:
- Cost: an ethereum transaction might cost about US$ 0.50. If your transaction carries a value of, say, US$ 5,000 the fee may be trivial but when you allow a customer to buy as little as RM1 ($0.23) the value transfer would be swamped by the transaction fees.
Note: this currently doesn’t apply post-Byzantium fork — we have had a transaction using 0.1 Gwei mined in 30 seconds! - Speed: transactions on the Ethereum network may take several minutes to complete (worse if a big ICO is happening!), but the retail consumer is not prepared to wait for transactions to complete on their mobile app.
- Privacy: tokens and crypto currencies are, by the nature of the blockchain, traceable. Once you can trace them you can find out the amount sitting in somebody’s account. If all someone had to do was to gift (a core feature of the app), say, 0.1g of gold to somebody in order to find out their balance, it would not go down well with data protection laws to start with and the consumer community in general.
- Validation by external partners: Permissioned blockchains allow HelloGold to benefit from the points above while requiring all partners to be active in validating the transactions, ensuring the integrity of the blockchain.
We recognize that there are many ways to launch a product and that there is no right way. HelloGold’s approach is to ensure that the product works operationally before adding on further tech capabilities. It has certainly helped to iterate and create a better product since the beginning of beta operations in 2016! The stablecoin space is huge — and just like the ETF space, there is room for many players with many variations in their product offering, targeting different customers who are looking for different requirements. Currently there are no standards — the pioneers in the market are able to help set them.
Who should buy GBT?
Other than crypto investors who want to hedge their funds in times of extreme volatility, other users for which the GBT is suited for are ICO projects. A good practice in managing large funds is to diversify the holdings across multiple assets. By holding a part of their raised funds in GBT, these projects are able to store their funds in a stable currency without taking them out of crypto.
To get the ball rolling, we are glad to announce an agreement with FundYourselfNow (FYN), where token issuers using their platform are able to hedge part of their raise into GBT at a discounted rate. They may also receive rebates on their fees for keeping the GBT over a fixed duration of time, depending how long the funds are held as GBT. FYN themselves will also diversify part of their raised funds into GBT.
This product is the first of many to come from HelloGold Foundation. We have been in talks with global organisations to launch other asset backed tokens using the same infrastructure as the GBT. There is much more to come!
For interest or enquiries on GBT, please contact us at foundation@hellogold.org.
