Over the course of the past year we’ve seen cryptocurrencies really take off and it has become quite clear that this sector is here to stay. We as a community have proved time and time again that despite all the FUD and negativity, the industry and movement is not swayed and will continue to develop. To us cryptocurrency represents a vision of a fairer economic system, built with innovation through a naturally decentralized system via the blockchain.
When I first stumbled upon DigixDao, I was quite shocked that the market and community was not bigger as not only does it target a very valid use case but it builds upon something that naturally benefits from the blockchain. Unlike many projects which simply use blockchain as an excuse to create a token and benefit from ridiculous funding, DigixDao uses the system to enforce ownership, in this case ownership of gold.
To learn about DigixDao, lets take a step back and look at the overall gold market. Right now the current overall valuation of gold is 8 trillion USD and for centuries gold has been the stable source of value. If we compare both gold and cryptocurrencies they actually go hand in hand as both have a finite amount of resource or coins in circulation and both can be used as a store of value. Of course since gold has been around for a very long time and we know to a fair degree how much exists, prices of gold have become very stable, a reliable investment. The problem with gold arises in that despite being around for so long, it can be incredibly tedious and risky to buy gold. Not only are there a multitude of avenues and methods for purchasing but there’s also plenty of ways to lose money through fees and third party scammers. Unless you wish to store gold at your house, many vaults will only take investors if they have more than a certain amount to invest, otherwise you can be rejected or pay heavy fees.
What Is DigixDao?
DigixDao is split into two tokens (DGX | DGD) both have completely different use cases and perform various functions. In order to explain the project I’ll focus on DGX first as this is the primary part of the project.
The overall project will allow users to buy gold through owning an ERC20 token called DGX. For every DGX a person owns, they own 1 gram of 99.9% LBMC approved gold which is stored in a Singapore vault. DGX is created on their market place and the team have personally told me that they have plenty of room in the vaults meaning they can cope with an incredibly high demand and from researching the vault itself (linked above) we can see that they are accredited and a key player in the gold . This means that DGX is completely stable and will not move unless the price of gold does therefore 1 DGX is capped to the price of 1 gram of gold!
The beauty of DGX is that thanks to the blockchain and smart contracts, buying gold is simply the process of purchasing a token and then a gram of gold becomes allocated to you on the system, with the ledger then storing a record of your purchase. There is no third party required what so ever, making it easy, safe and secure to purchase gold. Comparing to ETFs, the process with Digix is much safer as there is no need to have a trusted party like you have in the gold ETF process.
The Current Need For DGX
Ok so I’ve addressed what DGX is but let’s delve into why we need it. When we look at the crypto market, we can see that it’s full of volatility. Prices fluctuate daily if not hourly and we can never be certain about prices. We’re in a time when news effects our market more than ever and we’ve seen from the China regulations that we’re still fragile. When DGX launches, it will be the first ever stable token in the sphere that can guarantee a much more stable place to store your funds without the need to divest into FIAT. Whenever a bear market hits, it will be as simple as turning your funds into DGX and waiting till you wish to re-enter. Whenever you want to secure profits, DGX will be there and by having a token which has a stable price, we enter a realm where projects can then use this crypto token in their own marketplaces. For example, Augur is a decentralized prediction market but they rely on prices being stable so that if you make a prediction, you won’t lose money simply from allocating currency into the system. Augur could utilize DGX to guarantee prices and make the system much smoother and simpler without the risk of prices crashing and the prediction outcomes being worthless.
Of course the exceptional thing about this is that not only will it be used for hedging risk inside the crypto-sphere but it will also be a perfect method of purchasing gold, with minimal fees and a much safer process. When we combine these two sectors together, DGX is targeting a market that is absolutely massive and the potential to really propel itself as a key player in both industries is such a great factor. The thing with this is that, how can we as investors profit from this? Well there is a way.
The Investment: DGD
So we’ve gone through DGX and explained it’s intended function but we as investors would like to benefit from the security of DGX and the amount of use that it could receive in the future. Thankfully, DGD allows us to benefit immensely as all the fees collected from buying/selling and storing DGX will be distributed amongst DGD holders.
As it currently stands, there are 2,000,000 DGD tokens in existence and there are no plans for any more being created. When we look at DGD we can see that if the DGX system gets used, the market cap for DGD can really sky rocket as more and more investors look to profit from the DGX capabilities. Not only could the price per DGD increase but on a quarterly basis, the holders of DGD will get rewarded in DGX from the fees collected and it’s not hard to see the sheer demand that DGX could garner. Below shows some potential profit statistics that are taken from the White Paper:
Transaction volume per day: US$2,000,000
Volume of DGX sent per day: $2,000,000 / $1200 per troy ounce * 32.148 conversion to grams = 53580 grams of gold
Number of DGX Tokens allocated to DGD Token holders per day from transaction fees: 53580.00 grams * 0.1300% = 69.654 DGX tokens per day
All 2,000,000 DGD tokens in total will accrue 69.654 tokens (100%) per day in transaction fees. This means that if you own 100 DGD, you will receive 1.2 DGX per year and when we scale the volume with increased demand then we can see that not only will the price of DGD increase but so will dividend payouts.
The Digix Dao
At the present moment, Digix has a DAO of $120 Million USD in Ethereum and this money is used based upon voting carried out by DGD holders, if a consensus is met then the money is allocated to a use case. We can see though that thanks to this money backed in the DAO then Digix is actually a very safe project to invest in at the moment. Since Digix has a $160 Million market cap, the actual project doesn’t have a very high cap at all since if there was ever to be a problem, DGD holders can choose to liquidate the DAO and distribute so there is much less risk involved when investing compared to other projects.
By going to this link, we can see the holdings in the DAO which is controlled through smart contracts. Now that the team and the software is going through a third security audit, it isn’t long until the marketplace and DGX will be released. We can expect a release date for this around October.
To summarize, to me it’s clear that the team behind DigixDao have been slowly chugging away with great progress. It’s now time for the marketplaces release and I truly believe we will see large adoption of the DGX system as the crypto sphere cries out for the option of stability. With the DGX token we will see great benefits for several projects and this will be a great way to get many gold investors into cryptocurrencies. I really look forward to seeing how the release goes and I encourage those interested to take a look at DGD which is available on various exchanges like bittrex at the moment if you wish to capitalize on the adoption of DGX.