Digix crowd sale sold out within a day, raising a capped $5,500,000 only hours after the opening of “the first decentralized crowdsale on the Ethereum Blockchain” according to Anthony Eufemio, CTO at DigixGlobal, with almost half a million ether coins used in the process.
The crowd sale is to fund the creation of one of the first Decentralised Autonomous Organizations (DAO) by DigixGlobal Ltd. which will employ a proof of asset (PoA) protocol to back Digix tokens (DGX) with “99.99% London Bullion Market Association (LBMA) approved Gold.” DGX tokens are created through a “Minter Smart Contract” by using Ethereum’s smart contract platform with each token representing 1g of gold and divisible up to 0.001g.
A PoA Asset Card is further created by uploading through a smart contract onto Ethereum such information as the time stamp of the card creation, the gold bar serial number, purchase receipt and audit documentation, allowing for full transparency and verification as well as allowing a DGX token holder to redeem the token for actual gold.
According to Digix’s whitepaper, a further triparty system is used to secure the gold with ValueMax Singapore, a publicly listed company, supplying the gold, Bureau Veritas Inspectorate carrying out quarterly checks on the quality and quantity of gold in the vault and MalcaAmit providing secure physical storage.
The crowd sale will create two million DigixDAO Tokens (DGD) which are different from the gold backed DGX tokens as Anthony Eufemio, CTO at DigixGlobal, explained in an email to CCN:
DGD tokens are created for the crowdsale. They represent a share of the transaction fees from the DGX gold token system. The DGX tokens (1 gram gold tokens) are created through the Proof of Asset process where someone purchases a physical gold bar for storage at the participating custodian vaults.
The users receive an Ethereum contract that represents the ownership of that physical gold bar that are signed by the Vendor, Custodian, and quarterly by the Auditor (documents are referenced by their IPFS file hash).
Users can convert their gold bar contracts into fungible gold tokens through the “Minting” function which turns them into an equivalent amount of DGX gold tokens. For example, if a 100g gold bar asset card is sent to the minter, it is converted into 100 DGX tokens. There are no limits to DGX as they represent the demand for gold bars at DigixGlobal.
The contracts are fully on chain and autonomous. Our proof of asset protocol mitigates the risk of fraud. Deposit and withdrawal processes have to go through authorization procedures. We host quarterly independent audits, as well as allowing individuals to do a private audit of their bars.”
The main benefit of DGD tokens is that the token holders may be rewarded DGX tokens through transaction fees with one DGX token created for every 1 gram of gold, thus maintaining a stable value.
The volatility of digital currencies like Bitcoin and Ethereum has been identified as one of the main barriers to wider adoption due to its wild fluctuations of, at times, 50% or more in either direction. Digix is one of the first attempts to address this problem by backing the token with the much more stable gold. It aims to do so in a decentralized way through the creation of a decentralized autonomous organization.
The DGD token holders, if they invested more than $15,000 in the crowd sale, will be able to make proposals and vet proposals. All DGD token holders will be able to vote on how the funds should be allocated, on whether further funds should be raised and on general strategy and direction for the DAO.
The Digix crowdsale is one of three better-known crowdsales to come out of ethereum’s ecosystem which, due to its smart contracts platform, allows for new decentralized business models.
Augur, a decentralized prediction market, raised more than $5 million in October 2015 for the creation of DAO tokens which reward the token holders with transaction fees. Slock.it, a DAO crowdsale which is to fund the creation and deployment of smart locks as well as an Ethereum computer, comparable to 21inc’s bitcoin computer, is to hold a much expected crowdsale shortly with the same model of rewarding token holders from transaction fees in unlocking smart locks or from the Ethereum computer transactions.
Some, however, urge caution, comparing the numerous crowdsales to the altcoin craze of 2013. These business models are very new, fully untested, with no one able to predict the outcome. All the crowdsale providers emphasize that they give no guarantees and your investment could be fully lost.
However, one cannot help but feel the energy and enthusiasm coming out of ethereum’s ecosystem which has made possible new inventions such as smart locks or, if Digix works, non-volatile, decentralized, digital currency.
The author is not currently invested in any of the DAOs, companies or brands mentioned above (except for bitcoin and ethereum) and has no relation whatever with any of the companies, DAOs or brands (except for bitcoin and ethereum). No guarantee whatever is provided that any of the information above is accurate (although the author has attempted to verify facts). None of the above constitutes investment advice and the reader bears full risk in relying on any of the above statements.
Images from Shutterstock and Ethereum.