DigixDAO is basically a “physical gold on the blockchain” ecosystem. It uses two token models, one is the governance token called DGD, and another one is a token that represents ownership of real physical gold called DGX. This article will cover the explanation of both tokens, as they supplement and can’t really co-exist without each other. Let’s begin.
Owning A Physical Gold On The Blockchain
The entire concept of DigixDAO evolves around owning a physical gold on the blockchain. A lot of people said that Bitcoin is digital gold and is used as a store of value. However, many cryptocurrency skeptics often think it’s abysmally absurd to compare Bitcoin with gold as a hedge against fiat currencies. Digix team, on the other hand, believes in “combining” the idea of cryptocurrencies and physical gold.
If you already know stablecoins, basically, the concept of Digix is quite similar. So, stablecoins (which are more popular than gold-based cryptocurrencies) usually peg their valuation 1-to-1 to USD or other fiat currencies. They can do this because they have “Proof of Asset” (PoA) that shows they actually have real US dollars in their real-life bank accounts to support each of the stablecoin they release on the blockchain. Sure, there are some exceptions, like Tether (USDT), that has never been really audited, or DAI, that use algorithms to keep the price stable to USD.
But still, the majority of other stablecoins like TUSD or USDC or GUSD use the same concept. They have real US dollars in their bank accounts, and each dollar represents one stablecoin that they create on the blockchain. And yes, token owners are allowed to exchange their stablecoins to real dollars in their bank account with 1-to-1 valuation.
Now imagine this same concept, but you use physical gold instead of US dollars in your bank account. That’s how DGX token works in the Digix ecosystem. One DGX represents 1 gram of gold instead of one US dollar. And yes, the gold bars are physically stored in the real world where you can exchange your DGX tokens for them. As for the governance system, the Digix team issue another token that is called DGD. When people talk about “DigixDao” token, usually they mean DGD.
Proof of Asset In The Digix Ecosystem
Let’s learn how the Digix ecosystem works. As mentioned earlier, Digix uses what they call as Proof of Asset (PoA). The system works by creating PoA asset cards on the Ethereum blockchain. These PoA asset cards are certified with sequential digital signatures from multiple entities, which are called Auditor, Custodian, and Vendor. And of course, each purchase is validated and will have its own receipt, which later will be transferred to the IPFS (InterPlanetary File System) for a more permanent record of ownership.
So, who are the Auditor, Custodian, and the Vendor? Well, the Auditor is an independent entity called Bureau Veritas Inspectorate, and its job is to verify the truth about all the physical gold stored by the Digix team. Every quarter, BVI releases its inspection report. Meanwhile, the Vendor here is ValueMax Singapore, which distributes the certified gold bullion bars. ValueMax is a publicly listed company in Singapore and has received plenty of trust from its clients.
Last but not least, the Custodian in the Digix ecosystem is called The Safe House. This custodian has a vault in Singapore, and it can support up to 30 tons of physical gold. This is where the Digix team stores its physical golds that are tied to DGX tokens. In the future, the Digix team is planning to cooperate with more vaults outside Singapore.
With all the big participating names as its custodian, auditor, and vendor, Digix team is hoping that people (both crypto skeptics and optimists) will find its project appealing. Digix team does not need anyone to trust them; they just need its clients to trust the big names of its auditor, vendor, and custodian. For everyone who wants to have a crypto token that represents physical gold, DGX is one of the most famous options.
DGX and DGD Tokens
DGX is the center of the Digix ecosystem because its valuation is not decided by crypto demand and supply, but rather by real physical gold price in the real world. DGX tokens are issued with a smart contract that has received PoA cards. Each gram of gold is represented by each DGX token. Using an example, 10 DGX tokens represent a 10-gram PoA card in the smart contract.
There are two layers of fees for issuing and securing gold in the DGX supply. There is a 0.6% annual demurrage fee and then a 0.13% transaction fee whenever you need to transfer your DGX token inside an Ethereum wallet.
How about DGD token? Different from DGX, the price of DGD is mostly affected by demand and supply from the crypto traders. DGD’s function is to vote on how the whole DigixDAO operates. It’s basically a governance token. As you can see from the name itself, the “DAO” here means Decentralized Autonomous Organization, which means the community decides the policies. And to influence the votes, the community needs to hold a certain amount of DGD tokens. Not only that, but DGD token holders are also incentivized with various rewards and rebates in the Digix ecosystem.
History of DigixDAO
Digix was first introduced in Singapore back in December 2014. The team involves various corporate names such as Teo Hye Chng (former chairman and CEO of Fujitsu Asia), Kai C. Chng (former Wall Street trader), and Shaun Dije (lead coordinator of largest Ethereum meetup group in Asia). Kai C. Chng acts as the CEO, while Anthony Eufemio is the CTO. To fund its operation, Digix team issued DGD tokens and sold them to the Initial Coin Offering participants. DGD ICO was finished on March 30th, 2016, and it successfully collected $5.5 million USD.
2 years later, finally Digix achieved its first huge milestone, with the public release of DGX token. While other companies are competing against each other to issue the “best” stablecoin, Digix believes that physical gold on the blockchain is what people actually need. As of today, DGX remains one of the most popular gold-backed crypto tokens.
The Purpose of DigixDAO
Now that you are already aware of how DigixDAO works from our explanation above, but you might still be wondering, “why we actually need to use DigixDAO?” You might be wondering what the point of having a gold-based crypto token is? Why not just store the gold directly in your own house or warehouse?
Well, there are multiple benefits. First of all, if you are a frequent traveler, you don’t need to be paranoid about not seeing your gold with your own eyes (because they are stored safely in a well-known Singaporean-based vault). Second of all, the gold quality is taken care of regularly, while in your house, you might not have the time or manpower to make sure the gold stays at its highest quality for a long period of time. Thirdly, if you want to sell your gold but you are somewhere outside the country, you can just sell your DGX token to the buyer. He/she does not need to see your physical gold as long as he/she trusts the Digix ecosystem.
And the “bigger purpose” of them all is to bring the concept of digitized or tokenized assets into the blockchain. Before DigixDAO, there weren’t many talks regarding the tokenization of assets. Most cryptocurrencies at the time (apart of Tether and several other crypto projects) were based on supply and demand. DigixDAO was one of the first groups that introduced such tokenization concept, and they went directly with gold. Fast forward to today, there are already different kinds of assets such as real estate or business ownership or other precious metals.
How To Buy DGD and DGX
The easiest way to find DGD and DGX marketplace is to go to CoinMarketCap and see which exchanges list them. You can buy DGX directly on the Digix website with ETH or DAI, or you can go to ProBit Exchange, Hotbit, Bitfinex, and Kyber Network. DGD, on the other hand, has much more liquidity in the open market. You can easily find DGD on Binance, CoinBene, Bitrue, Huobi, and many others.
Other gold-backed cryptocurrencies typically don’t have big names and have a smaller community base. Digix competitors include AurumCoin, BlockNote, Cash Telex, Darico, Egold, GlobCoin, Goldfund, and several other smaller coins. Perhaps, above them all, Digix’s biggest competitor is PAX Gold (PAXG). PAXG is issued by the same company that issued the famous stablecoin Paxos Standard (PAX). And yes, just like DGX, PAXG is also pegged to the real price of physical gold.
There’s no major controversy around the Digix project. The most obvious problem is the regulation in some major countries. For example, the US has banned its citizens in DigixDAO participation. At the time, the DGD price dropped significantly because they saw it as bad news. However, of course, it’s not exactly the Digix team’s fault. Many other cryptocurrency projects also never saw a green light when it comes to strict regulation. Apart from some regulatory issues, there’s no other big problem around Digix.
DGD In The Crypto Market
At the time this post was written, DGD was ranked 135th in the crypto rankings by market cap. Its market cap was $24,740,462 USD, with more than $450,000 daily trading volume. And as we mentioned above, you can find DGD in many decent crypto exchanges, including Binance itself. Unfortunately, the trading volume has dropped a little bit compared to 2018. You might find it a bit hard to buy a large amount of DGD tokens from the crypto market.
DGD and DGX are interesting tokens from the Digix team that tries to bring physical gold to the blockchain world. It is a legit project with real vault, trustworthy auditor, and strong team background. Its success will be determined by how strong the demand is. The demand from those who believe in gold-backed crypto assets. For now it does not look like they have high demand level as most gold believers still choose to trade outside the blockchain. But, who knows what will happen in the future. It’s interesting to see what will happen in the next few years.