The concept of stablecoins is critical to decentralized finance (DeFi). Most stablecoins are pegged to the US dollar with coins such as USDC being backed by fiat currency or cash equivalents and others like DAI use other crypto as collateral. However, DGLD is part of the contingency of stablecoins backed by commodities like precious metals.
Like Paxos’ PAXG stablecoin, DGLD is a commodity-backed stablecoin that is pegged (maintains equal value) to the price of gold. DGLD tokens are backed by real, physical gold that is held in reserves in secure Swiss vaults with each token being backed by 1 troy oz of gold, equivalent to approximately 31.1 grams.
How was DGLD developed?
In October 2019, CoinShares, blockchain.com and MKS PAMP announced their combined efforts to launch the DGLD token after two years of development. At the outset, they reported that $20 million in gold had been digitized.
CoinShares, was founded in 2015 and functions in multiple capacities in the digital asset space. It provides asset management services, venture capital investing, and manages exchange-traded products (ETPs) that gives traders access to the digital asset space in traditional markets. Blockchain.com, founded in 2011, is a crypto financial service company famous for its wallet and crypto trading app, while MKS PAMP, founded in 1979, is a Swiss company focused on sourcing, supplying, refining, and trading precious metals.
CoinShares and MKS PAMP then joined to comprise a consortium backing the company that formally issues DGLD, aptly called Gold Token S.A. (GTSA). Based in Geneva, Switzerland, GTSA is led by CEO James Bennett. It also has a hand in The Spaceminers Club, a Web3 studio focused on integrating physical gold into online games.
How does DGLD work?
On the most basic level, DGLD is a commodity-backed stablecoin that is pegged to the price of gold. However, there are a few aspects that ensure its value and utility on the blockchain:
- Proof of ownership – According to Swiss law, DGLD represents the title to gold. In other words, it is a digital proof of ownership, similar to the paperwork that proves you own your car or house. This theoretically sets DGLD apart from other crypto assets on a regulatory basis.
- Custody fees – Whereas exchange-traded products might incur management or custody fees, holding DGLD does not. This reduces the friction of owning and trading gold via the token.
- Redemption – Gold Token S.A. partners with GOLD AVENUE to allow holders of DGLD to redeem their digital assets and take delivery of physical gold.
- Storage – The gold that assures the value of the totality of DGLD tokens is stored in the MKS PAMP Group’s secure facility in Switzerland. It is insured, and DGLD holders can map their tokens to specific bars through the “bar mapper” on the DGLD website.
Note, however, that if the price of gold were to decrease, the value of the coin would also likely experience a corresponding drop.
How is the DGLD token used?
DGLD is available on the Ethereum blockchain as an ERC-20 token. Along with its availability on centralized exchanges, it can also be used in DeFi applications such as Uniswap (as of January 2023). DGLD can be traded, used for peer-to-peer payments, and held as a store of value just like any other crypto asset.
DGLD essentials
- DGLD is a commodity-backed stablecoin pegged to the price of gold.
- The token is issued by a Swiss joint venture comprised of digital asset manager CoinShares and precious metals company MKS PAMP SA.
- The DGLD token represents the right to ownership of the gold stored in secure Swiss vaults; each token can be mapped to specific bars in storage and redeemed for physical gold.
How to buy DGLD
You can buy the DGLD coin on Bitstamp. Sign up for a Bitstamp account and start trading DGLD today!
Note: DGLD is not available for trading in the US.
This webpage has been approved as a financial promotion by Bitstamp UK Limited which is registered with the UK’s Financial Conduct Authority. Please read the Risk Warning Statement before investing. Cryptoassets and cryptoasset services are not regulated by the Financial Conduct Authority. You are unlikely to be protected if something goes wrong. Your investment may go down as well as up. You may be liable to pay Capital Gains Tax on any profits you earn.