Bitcoin and Ethereum Backed by Gold - Industry’s Game Changer?
This month DinarDirham, a decentralized gold trading platform based in Hong Kong, is launching its own wallet.
This month DinarDirham, a decentralized gold trading platform based in Hong Kong, is launching its own wallet with an in-built exchange supporting not only popular digital currencies such as Bitcoin and Ether, but also the company’s own digital assets.
What is DinarDirham
In 2015, DinarDirham decided to distance itself from a simple ‘gold trading platform’ format, and its field of operation has expanded since then.
According to the company whitepaper, DinarDirham is “a company attempting to address the problem of volatility and price discovery by using the existing spot gold market as the underlying pricing mechanism for its digital currency”.
Arai Ezzra, CTO and co-founder of DinarDirham, says:
“If you have an asset that follows real-time gold price, which can be redeemed or claimed for physical gold and if you combine the benefits of digital currencies with benefits of gold as a store of value, in a transparent way, you get a match made in heaven. This is a cheap way to store, trade and use gold globally. Our unique and innovative trading technology based on blockchain makes this possible.”
Why gold and Blockchain?
Stelian Balta, CEO and co-founder of DinarDirham, explained to Cointelegraph why gold and Blockchain should work together.
“Gold is not practical to deal with in today’s global markets, because it’s really cumbersome. Using blockchain, major problems associated with trading and storing gold are being fixed. Blockchain enables transactions to be highly secure, whilst dealing costs virtually disappear.”
Ismail Malik, CEO at Blockchain Lab, agrees that gold-asset management on-the-blockchain holds great potential in reducing friction and enabling trusted transfer of digital gold tokens, transactions and settlements. He believes that Blockchain as a public distributed ledger technology allows for immutability and transparent accounting of all transactions as a forgery-proof record of transactions is stored on thousands of nodes across the world so that it is practically impossible to manipulate or more importantly fraudulently change ownership records.
He says to Cointelegraph:
“My personal belief is that blockchain tech will usher in a new level of transparency and security which will add significant value to the gold industry whilst increasing the number of participants leveraging gold as an asset.”
Manie Eagar, Founder and CEO at DIGFIN - The Future Of Money, notes that with digital tokens linked to an immutable distributed ledger (the blockchain) offering the capacity to register, store and transfer assets, it was only logical for goldbugs to start looking at the ‘digitization’ of their assets.
Bitcoin and Ethereum in gold industry
DinarDirham’s spectrum of services goes beyond the simple trading and exchange of digital (BTC, ETH) and fiat (USD, EUR) money; in addition to that, every client has an option to invest their money by buying physical gold.
Fresh gold price data is tracked by DinarDirham in real time, which allows the users to make the most conscious and informed investment decisions.
Right now, most of the company’s solutions are built based on Bitcoin 2.0 and its principal structures - Bitcoin’s Blockchain and Ethereum’s Blockchain.
But that list is to be continued: the company is closely considering a further blockchain-based system for further development and is currently being researched by DinarDirham.
Innovative digital assets
Two key developments of DinarDirham are the smart contract system GoldSmartContracts, and DinarCoin - a crypto token and a digital currency, built on top of the Ethereum Blockchain.
In addition to all the basic qualities of a digital currency: anonymity, decentralization, open-source availability, and liquidity, DinarCoin has one unique and innovative feature: its value is pegged to and backed by real physical gold, and is comparable to a gold spot contract (XAU).
Thus, being tied to the precious metal, the currency is maximally protected from inflation. Using MT4 trading platform custom-built solutions, DinarDirham is capable of hedging and bridges the liquidity “realtime” on every DinarCoin and GoldSmartContract created.
With this technology, indirectly we can make sure each token is pegged at the current world price of gold and recorded on the Ethereum public blockchain in a transparent way and as a proof of purchase.
Stelian Balta says:
“DinarCoin is not just another digital currency or Altcoin. It's backed by gold price from liquidity providers, bridged automatically to regulated financial institutions and also stored in real vaults around the world. We are building an entire ecosystem around DinarCoin - exchange, DinarCoin ATM, merchant gateway and debit cards to allow our users to use their digital assets anywhere in the world. Also, physical Dinar Gold Coin(4.25 grams) is already available to order in South East Asia. With DinarCoin, our mission is to bring stability and transparency to the financial system, especially in payments and as a medium of storing wealth in a trustworthy way. Using Ethereum blockchain, I think we are on the right path”.
Gold Smart Contract or GSC is another digital asset created and utilized by DinarDirham.
GSC is a system of smart contracts. Each contract represents the ownership right of a particular customer to a particular physical gold bar stored in vaults around the world (Zurich, London, Dubai, Hong Kong, Singapore, Bangkok, Australia and New York) in partnership with ABX.com as “Associate Member” to offer physical gold to customers.
Each contract is issued by the gold supplier after a client conducts a purchase of a certain amount of metal; that contract can consequently be used to collect gold from one of many available vaults. Just as DinarCoin, GSC are registered on public Ethereum blockchain, so that the existence of each contract can be confirmed by looking at those.
“I think DinarCoin and Gold Smart Contract are game changers in the industry. We bring an innovative concept to our customers to store or move their wealth easily and secure. Digital assets are backed by real gold liquidity and assets from regulated financial institutions, which have the reliability, inherent value of gold, convenience and security of a digital currency.”
Cryptocurrency backed by gold
Assigning a “game changer” status to any development is quite a bold and responsible claim. However, the recent trend shows that today there are many who truly believe in the concept of a cryptocurrency backed by gold. This becomes especially obvious if you pay attention to the number of similar projects which are being unveiled right now.
Manie Eagar supports such an outlook, saying that the potential application of a variety of blockchain platforms currently under development provides for a range of applications leveraging cryptographically-secure shared ledger and smart contract features.
“Security and trust is paramount when storing and trading digital assets and value exchange and and the 'consensus engine' enables a whole new dimension of digital asset registration (think identity, verification and validation), storage, distribution (think supply chain management), value exchange and settlement. Obviously governance, risk, auditing and compliance are foremost in international traders minds and the blockchain provides the a 21st century solution to these challenges.”
Ismail Malik agrees that a gold-backed digital currency could bring stability to the industry and allow for new types of derivatives to be designed and traded.
“For thousands of years citizens have desired the ability to trade, own and gift gold in a manageable way and now we have the technology to enable this. It will surely change how gold is stored and distributed with a new type of custodian relationship being created and enabled by the blockchain. This will also reintroduce gold-backed currencies into global circulation over time around the world.”