There’s a flood of new stablecoins hitting the cryptocurrency space in the last few months. A stablecoin is basically a digital token, backed by a fiat currency. Thus the value of stablecoin at any given time is equal to the value of the fiat currency supporting it.
Taking a New Approach of Gold-Pegged Stablecoin
While most stablecoins get the support of fiat tokens, Digix takes a different approach. Digix has tied its DGX stablecoin token value to the value of 1gm of Gold.
Singapore-based Digix Global says that it will redeem tokens against the physical bars of gold stored in their vaults. Also, due to security reasons, the redemption of these tokens should take place in personal.
CCN had a word with Digix co-founder Kai C. Chng who explained its working. Digix has employed an interesting method to track its gold bars on the exchange. Chng says that every gold bar is meticulously scanned in the system.
Furthermore, the system stores essential details like the receipt information. Digix then links this receipt information to the token issued for sale. Thus holding a DGX token is as good as having the certificate of ownership to gold.
However, there’s a minimum redemption requirement. But the company finds that DGX tokens can play a crucial role in influencing trader strategies. Chng said,
“We have what we call a demurrage fee, it’s almost equivalent to storage, insurance, coded in the smart contract of each bar.”
Additional Details on DGX Token Trading
Thus DGX tokens are available for trading on a number of exchanges with popular ones like Ethfinex. The majority of trade takes place on decentralized markets. The exchange makes money by storing DGX tokens and the associated gold bars with Digix. A small portion of the token erosion
The exchange also lists all its stock in a transparent manner. At any given time, the users can initiate an inquiry about token storage and tracking. Currently, Digix has 1400 grams of gold at hands, which means 1400 DGX tokens. However, Chng said that it will soon acquire 5000 more units from its supplier.
To promote the DGX token utility, the exchange has put a sale by the year-end. It is currently selling the tokens at the same price it paid for gold acquisitions, It means that the exchange is not charging any trading fees for the moment. “We’re sort of just absorbing the fees right now,” said Chng.
However, under normal circumstances, the DGX trade would attract a transaction fee of around 0.05%. The CEO says that so far three people came to Singapore and made a redemption.
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