Sofiko is a freelance fintech copywriter at Coinspeaker. With a Bachelor degree in International Business and Economics, Sofiko has been deepening her knowledge of an agile innovative industry primary focusing on the robust blockchain technology and cryptocurrencies. As a bank employee, Sofiko particularly keens on crypto and blockchain integration into the established banking systems.
Digix and GoldMint, similar in purpose, but still qualitatively different projects for tokenization of gold, are designed to hedge cryptocurrency volatility and simplify the process of trading commodities.
A vast majority of cryptocurrency investors has recently encountered to protracted decline in the total value of their digital assets. Since March, Bitcoin has dropped nearly 30%, and Ethereum has fallen almost 50% that leads to a significant outflow of funds from the cryptocurrency market. Lack of a reliable tool for profit-taking increasingly forces traders to sell cryptocurrency and buy fiat, which inevitably results into an even greater depreciation. Therefore, there is the perfect time for the implementation of a reliable tool for securing the profits of traders on the cryptocurrency market.
Two Singapore-based blockchain companies Digix and GoldMint went on the warpath with crypto-market volatility and announced the launch of new stable gold-secured crypto assets that aimed to mitigate the risks generally associated with digital coins.
For much of the past two years Digix has been developing gold coins. According to Digix’s white paper, a medium-sized pawnshop chain called ValueMax is securing the token with gold and MalcaAmit is the provider of physical storage. The company may well have merit, however closer examination reveals several pitfalls that raise a few red flags.
According to statistics, Value Max turnover has been falling rapidly since 2014. Thus, the actual security of gold DGX remains the subject of discussions and disputes. In addition to this, the company uses only one depository for its assets, which adversely affects the confidence of investors and it is hard to say what will happen if the partnership with MalcaAmit is ever broken.
GoldMint, in turn, brought GOLD’s digital asset to the market four months after the successful completion of a $7 million-worth ICO. Collected funds has been used to maintain project’s development, at the moment GOLD is purchased on the Chicago (CME) and London (LME) exchanges under delivery futures while the storage of delivered gold Chicago-based CME carries out in the two nearby banks of the US Federal Reserve – New York (FRBNY) and Chicago (FRBC).
Seeking to reduce the risks related to cryptocurrency trading, has chosen SGPMX (Singapore) as the subject of the over-the-counter currency market as unlike “paper” futures, the delivery futures and over-the-counter market behaves quite stable.
The choice of well-known depositories and suppliers by GoldMint, as well as their diversification, is a logical step that will certainly influence the confidence of traders and investors. Currently, GOLD assets are traded on the Bancor, Idex and Simex exchange markets.
The company is also actively working to launch the personal account, where investors can buy and sell gold assets using a multi-currency purse that will allow users to buy tokens with fiat money, or if they prefer, choose to perform bank transfer, or make a purchase using their credit cards.
In comparing Digix and GoldMint, the different purposes of the company’s domestic currencies deserve to be mentioned. Digix offers its currency as a DAO tool that provides its holders with the right to vote and receive passive income from commissions on operations with gold assets, which was deemed illegal from the of SEC’s side on the example of THEDAO in 2017.
Meanwhile, the GoldMint MNTP token acts as a tool for confirming transactions in its custom blockchain and provides holders with preferential terms for transactions with gold, such as reduced markup and the small commissions on transactions.
Another key difference is in the technological implementation: Digix uses the Ethereum blockchain, while GoldMint has two blockchains: Ethereum and the custom, based on Sumus blockchain, which will be launched in the second quarter of 2018. Although two projects are pursuing the common goal, their features widely differ and only time will tell who wins the gold race for users’ confidence.
Nevertheless the appearance of gold-secured assets on the cryptocurrency market marks a milestone in the fight with price volatility. Hardly one could argue that it will positively affect the overall capitalization of the market by attracting traditional investors in the securities and precious metals markets. The presence of gold in the crypto industry, which for hundreds of years was considered a universal investment tool, is an important step in its development.