Digix, a Singapore smart assets start-up has been in the news last week regarding the DigixDAO (Distributed Autonomous Organization) crowdsale that was a smash hit, raising over $ 5.5 million USD using 200,000 ether within twelve hours of launch.
Digix has followed a structured roadmap before getting to their successful DAO crowdsale. Their value proposition is to become the first smart asset ecosystem on Ethereum by tokenizing physical assets into fungible crypto-tokens that can be managed in a decentralized trustless construct.
Using gold as an underlying asset, Digix has launched a smart asset platform, a digital token DGX and the Digital Autonomous Organization, making use of multiple decentralized platforms such as Bitcoin, Ethereum and IPFS (Inter Planetary File System).
In this two part series, we look at Digix Global’s offerings on the blockchain.
About DigixGlobal
DigixGlobal was founded in Singapore as a self funded firm by TH Chng, former chairman / CEO of Fujitsu Asia Pte Ltd and Kc Chng a currency trader.
In January 2015, months ahead of the Ethereum blockchain going live, co-founder Kc Chng announced on the Ethereum forum that their firm was building the first smart asset company on Ethereum.
By the third quarter of 2015, Digix had announced a partnership with Coinify to create (gold backed) cryptoassets on the Ethereum blockchain using payments made with Bitcoin.
In January this year, Digix released their gold asset smart contracts platform and on the Ethereum blockchain. Digix also released a whitepaper on the solution and public releases on benefits of trading gold using the Digix solution. On April 5, the DigixDAO was launched and Digix have been in news since releasing their roadmap and outcomes of the sale which are expected end of April.
How Digix Works
Digix has described the smart asset platform in detail on their website and whitepaper. The platform consists of digital token, provenance record and smart contract processes to record asset history from acquisition to liquidation.
Proof of Asset
Digix maintains asset provenance on the Ethereum blockchain through a Proof of Asset certificate which is a digitally signed contract records (for more on provenance, see our article on blockchain use cases). The proof of asset card which is maintained on the blockchain is a secure record chain of custody of the underlying physical gold. A proof of asset certificate is a sequential record of digital signed transactions that mark acquisition from a vendor, receipt from custodian of the physical gold and periodic independent audit verification records. Digital certificates are stored on IPFS.
Digix Tokens (DGX)
Digix tokenizes physical assets using the Ethereum blockchain The physical asset be gold or other precious commodities, real estate and so on. The first Digix application tokenizes physical gold.
Digix tokens are tagged to physical gold. Each token represents 1g of physical gold and is further divisible upto 0.001g. This reduces the price volatility of tokens a problem of other cryptocoins.
The Digix client is an Ethereum wallet. Customers can purchase DGX tokens using bitcoins, ether or other currencies via an exchange.
Digix Smart Contracts
Digix tokens are generated on the Ethereum blockchain through Smart Minter smart contract process, whereby POA certificates are generated in exchange for DGX tokens. A recast smart contract process is used to exchange POA certificates in DGX tokens.
A token based user identification process is used to redeem DGX tokens into physical gold.
Digix also provides generic I/O contracts which are intended for third party dapps and other applications to build an ecosystem around Digix, using the DGX tokens (such as a remittance system).
Decentralization
Digix uses the blockchain to remove centralization out of the equation. Instead, using the decentralized app, users can directly purchase gold using Digix GOLD tokens using the wallet apps. Digix facilitates the chain of custody ecosystem vendors, custodians and auditors to individually sign the proof of asset but uses peer to peer file systems and the decentralized blockchain to manage assets. Digix’s proposition is that they have no influence on the user assets. They act as intermediaries with agreements held on the public blockchain.
Digix's Role
Digix is the custodian of the smart asset management platform and receive compensation in the form of fees. Transaction fees include fees Smart Minter, Recast and a storage fee, as well as liquidation into physical gold bars.
Digix has taken a strategic approach which combines regulatory compliance, transparency and safety for customers. Digix requires KYC and AML compliance. They are headquartered in Singapore, known for its stable and investor friendly economic regime especially for gold assets. Their proof of asset partners are established players in the industry. Physical gold is held in the form of London Gold Bullion Market Association bars supplied by Value Max, a Singapore bullion vendor. Bureau Veritas Inspectorate is the auditor participant. Malca-Amit which is located in Singapore is the safe custodian.
Summary
Digix has the potential to become the killer app for Ethereum and smart asset management on the blockchain, testified by the investor interest in the crowdsale. Their strategic and transparent approach and choice of Ethereum as the smart contract platform can be a major competitive advantage (compare with Xaurum, the other gold backed cryptocoin on the Bitcoin blockchain).
In the next article, the DigixDAO.
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