CIP#12 - Which tokens should be included in a gold pool?

I think that may be a problem actually. @angelangel0v ?

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Yah second this honestly only thing I know to vote for is sxau, never heard of anything else and I would just be guessing. I bet alot of people will.

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Here’s my quick take:
With the US printing and printing, and the US Fed easing its stance on inflation, the logic of holding non-dollar stable assets makes more sense. This extends especially to digital gold. So at the highest level, I like the idea.

However, the only two coins that I can tell that have significant transparency and market cap are Tether Gold and Pax Gold. gold stablecoins

Tether: Someone mentioned that Tether might be risky. The $92m market cap is small in the context of the $14B float of USDT. So, I’m not too worried about that.

Perth Mint Gold Token, Cache Gold, and sXAU are each too tiny in terms of market cap to matter. I wouldn’t risk supplying liquidity to a pool that contained them.

Regarding sXAU, I could imagine going along with them at some point, but I’m definitely concerned about any coin that has such a small a market cap. If Kain went along and put some significant depth behind sXAU, it might make some sense.

Regarding UPXAU, I can’t find it listed on CoinGecko, Nomics, or CoinMarketCap. I see it being pushed and possibly incentivized by @danschatt, who seems like a legitimate guy. Seems like he runs Cred, however, not UpHold. However, the lack of normal transparency is an obvious concern.

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According to CoinGecko, PaxGold has the 70% of the 24h Trading Volume. #2 is CGT at 17%. #3 is Tether Gold at around 12%. PMGT and sXAU have almost no volume.

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@charlie_eth I think maybe you are referring to this post: http://test.defillama.com/t/discussion-tokenised-gold-pool/21/23?u=cache.gold

Agree with @Julian’s reply generally. However, large market caps do not make gold-backed tokens track the price of gold any better. Liquid markets do that and redemption provides an alternative if markets become illiquid or otherwise dysfunctional. Although PAX Gold clearly has the most listings and adoption so far, their markets tend to be illiquid and/or have asymmetric liquidity (more buys than sells or more sells than buys) and there is a huge range in price between different markets - currently $1,830 to $2,070. Redemption should provide an arbitrage opportunity but due to the high minimum redemption of 430 troy ounces, however it doesn’t seem possible to purchase 430 PAXG (~$832,000 USD at current gold spot) on any exchange at anywhere near the spot price.

There are also transparency issues with both PAXG and XAUT.

I would add that Tether Gold (XAUT) really doesn’t have good liquidity either except maybe on their own exchange (Bitfinex) in the last 24 hours they had less than $2,000 volume on FTX (the only other exchange they are listed on according to Coin Market Cap). On FTX a lot of the volume is in XAUT derivatives.

With a $96 million market cap and their own exchange at their disposal (and only two exchange listings total) one would expect a rock solid peg to the price of gold. One would also expect much higher trading volumes unless there is simply little demand for this token.

Neither PAXG nor XAUT track the price of gold very well which is why redemption is critical but impractical due to the 430 troy ounce minimum. In the current markets it’s difficult or perhaps impossible to obtain 430 PAXG or 430 XAUT at anywhere near the spot price. It’s also worth noting that 400 troy ounce good delivery bars actually range in weight from 350 troy ounces to 430 troy ounces, and they range in purity from (anything >=0.995 is accepted). Since both PAXG and XAUT require you to have 430 troy ounces to redeem, it would seem that they intend to randomly assign you a bar and that you will then be left with anywhere from 0-80 tokens (up to $154,000 USD worth!) that you will need to dispose of some other way. (We strongly encourage the community to examine the order books closely for all gold tokens and see what type of slippage you can expect on a $150K order!). It is unclear why neither firm takes a similar approach to CACHE and allow users to select the bar they wish to redeem which would allow users to acquire the exact number of tokens they need for the bar they want.

On the other hand CACHE’s redemption system is fully functional and the data regarding the redemptions is completely public. When gold is redeemed the tokens are removed from circulation until new gold is added. We have had 1,462 grams redeemed to date (~47 troy ounces, ~$91,000) - it is not a huge sum but it is totally public and transparent. Does anyone know how many bars have been redeemed from PAXG or XAUT? Or how the circulating supply is managed when redemptions occur and what kind of transparency there is around that process?

CACHE redemption data is always available to the public in real-time. You can see redemptions as they occur when tokens are sent to the redemption address. You will then see tokens equivalent to the actual pure weight of the bar(s) redeemed moved and locked up in the unbacked treasury.

Most recently you will see 999.9 CGT being transferred back into circulation which corresponds with this 1 kg bar that was recently added to the system (you can even see the deposit receipt). It is 999.9 because CACHE Gold works on pure weight allowing it to easily support different bars, with different weights and different purities (even 400 oz LBMA bars, although we don’t think they’re very practical). If there were no tokens in the unbacked treasury, new tokens would have been minted.

Happy to answer any questions you have.

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Hi @WormholeOracle,

You can have a look at our whitepaper, our website, our Maker Collateral Onboarding Proposal and our discussion thread here.

If there is anything else you would like to know, please let us know!

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@TwoCell

CACHE Gold redemption fees are 15 basis points (0.15%) regardless of quantity redeemed with the exception of vault pickup at The Safe House which is 15 basis points or 1 CGT minimum. PAXG fees start at 1% and scale down to 15 basis points >=$400,000.

Another thing worth noting which may be relevant for Curve: When testing XAUT on Uniswap, it didn’t work. There was some issue with the transfer function that did not allow it to be withdrawn. According to the Uniswap team, these tokens are stuck there forever unless Tether has the ability to upgrade their contract and they do so.

@Jon,

Our market cap is not $413,162 it’s ~$2,153,000, also see our token supply explanation. Coin Market Cap has made some arbitrary and incorrect deduction to our supply. One can’t help but wonder why they allow 100.00% of PAXG to be considered “in circulation” when over 35% are in what is clearly their treasury and shows 0 ounces of gold backing it according to PAXG’s own “Allocation Report”.

Tether has other issues.

For anyone that has the means, we would strongly encourage you to try to buy 100g worth ($6,250) of each and see how close to spot you can actually purchase it. CACHE Gold will be the only one you can redeem for physical gold. How close to spot can you now sell these tokens back for? Examine the order books on the exchanges more closely, how much can you actually buy and sell close to spot price? We think you may be surprised by what you find.

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I believe a dev did mention internally XAUT is weird token.

The issue with Cache gold is that Curve takes pegged assets. CGT is in gram and all the others are in ounces which makes CGT not suitable for this pool unless you have a solution @cache.gold ?

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After checking it turns out that Cache Gold being priced in grams and not in ounce is not a problem @cache.gold

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Is it not possible to just do the conversion in the smart contract?

Multiply the price by 31.10348? Or alternatively consider 31.10347687 as equal to 1.0 of any token that is denominated in troy ounces.

We felt grams were a better denomination to use because we believe 100g and 1kg bars offer a good balance between premiums and minimum redemption order. The smaller the bar the higher the premium. Common toz bars are 1oz, 10oz, 100oz and 400oz (actually 350-430oz and can have any purity >=o.995). 1oz tends to have a higher premium than 100g and 10oz is more triple the value of 100g.

CACHE is designed to provide support for any gold bar by reducing its value to pure grams. If you are comparing gross weight to pure weight the conversion is similarly easy. A bar with 0.9999 purity is worth its gross weight multiplied by 0.9999 in CGT. In our redemption system we always round down so you never receive less pure grams than the amount of CGT you redeem, even by a tiny fraction.

It’s also worth noting that CACHE and GramChain are designed to accommodate tokenization of other types of physical assets in the future, including those that aren’t commonly measured in troy ounces.

All of that said, whatever issues may arise we are happy to work with Curve any way we can to help solve them.

Also, CACHE would be happy to provide some dedicated liquidity for a guaranteed minimum time period to help bootstrap a new liquidity pool that includes CGT. We are extremely committed to supporting DeFi development and liquidity.

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Cache Gold has no Ethereum transfer fee, right?

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It needs gas like any token transfer but there is no additional fee in ETH.

Can you come for a chat on Telegram?

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@cache.gold Congrats guys - it’s a great approach and am glad for projects that continue to build the tokenised gold ecosystem (in the proper way!)

Wanted to clarify a couple of things mentioned about PAXG so that the community can make an informed decision:

  1. Redemption: PAXG can be redeemed directly for USD at spot price, for unallocated gold or gold bars (430oz). We do also offer smaller physical gold redemptions via partners for denominations as small as 1 gram. Believe partners now deliver to UK, US and Canada.

  2. Regarding lack of details using the “Allocation Report” tool - it’s stated that the tool does not work for custodial exchanges/wallets (tool limitation rather than lack of gold backing). Paxos does publish monthly attestation reports audited by Withum which certifies the requisite backing.

Disclaimer: I work for Paxos but not specifically the PAXG product so really just contributing as a community member. Love what the Curve team is doing!

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I don’t know what your Market Cap is. I’m just reporting what I’m seeing on the major reporting sites. And what I’m seeing right now is this:
Market Cap 24h vol
CoinGecko: 2,067,612 99,359
CoinMktCap: 424,409 106,099
Nomics: unknown 100,689

Also, I don’t know much about gold or tokenized gold. And so it might very well be that market cap doesn’t matter. Maybe trading volume doesn’t matter either. Just curious, what does matter? What should we be looking for?

More importantly, why is it worthwhile to host this tiny market? Let’s say Curve doubles the market, and that 100k/day of trading volume goes to 200k. And at 0.04% fees, that means that even then total trading fees would be $80 dollars a day, or $29k/year.

Does that get anyone excited? Can someone please explain how we make money here?

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(from other topic)

So @cache.gold is OK for its token to be traded through a proxy token representing ownership of an underlying CGT. Isn’t it a risk for @cache.gold that this proxy token becomes the main way to transfer the underlying token (and thus would make you missing out the transfer fees in other contexts) ?
I am wondering the same thing for PAXG (and other physical gold backed tokens). Maybe a common/standard wrapping solution could be found.

It would be interesting to have some opinion about this.

My main concern is decoupling a pool contract from a wrapping contract. I am not very comfortable with making pools “fees-aware” (for historical reasons I guess).

EDIT :

As far as which token to include in the pool, I won’t vote PMGT and UpXau because they both seem related to Perth Mint, which seems a bit shady from the sound of some articles :

Maybe it won’t make their gold less valuable or less backed (yet ?), but not sure I want to take the unethical risk anyways. No-go for me.

I voted for PaxG, sXau and Cache Gold.

Has anyone heard of VeraOne ?

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Hey Jon,

The traditional Gold markets for structural reasons have very tough times ahead and are riddled with price manipulation. If you search the internet for analysis of the Comex and Loco London, even just the GLD, it is not a situation that increases trust in the Gold price as it is set.

Gold is, for much the same reasons that Bitcoin is, bound to be very relevant in case of higher inflation caused by central banks. Gold is the original uninflatable hard money and has been for hundreds of years. We’ll see interest in Gold increasing strongly in the next years as more and more currencies around the world will struggle and people are looking for safety.

A fresh, scalable and sustainable infrastructure to set a trustworthy Gold price is going to be a worth while investment in the next years. The structural benefits of DeFi have to play a key role in this! Personally I’m excited to create a hard-money ratio token that leverages the higher growth potential of BTC with the lower volatility of Gold.

My two cents :slight_smile:

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@charlie_eth

Supply is currently approximately 1,102z. Currently we can ship to US and Singapore. Many more countries will be added soon, COVID has unfortunately disrupted shipping. Almost anyone can redeem for USD, there are just a few countries that are restricted due to sanctions lists. Anyone can take delivery in person in Singapore as long as they are not on a sanctions list.

@syeh

Redemption: PAXG can be redeemed directly for USD at spot price, for unallocated gold or gold bars (430oz). We do also offer smaller physical gold redemptions via partners for denominations as small as 1 gram. Believe partners now deliver to UK, US and Canada.

Agreed, however the fees to redeem to USD start at 1% and only scale down to 0.15% at redemptions >= $400K. You are also limited to a single, centralized bidder and you cannot take delivery of your gold and go elsewhere if you don’t like the bid unless you hold >=430 troy ounces and in that case you will almost certainly be left with extra tokens to dispose of.

The smaller redemptions through Alpha Bullion have huge fees - 25% for gold eagles, 8.2% for 1 oz bars and 4.4% for a 1 kg bars. You can redeem a 100g or 1 kg bar with CGT for 0.15% or less than 0.50% shipped to a US or Singapore address (many more countries will be added after COVID restrictions are lifted).

Regarding lack of details using the “Allocation Report” tool - it’s stated that the tool does not work for custodial exchanges/wallets (tool limitation rather than lack of gold backing). Paxos does publish monthly attestation reports audited by Withum which certifies the requisite backing.

Where is that stated? What possible reason could there be to not provide full list of bars? Without such a list, how could anyone determine if all the tokens are actually fully backed? Why is the circulating supply reported as 100.00%?

The linked attestation report is already more than one month outdated. It also doesn’t provide a full list bars with weights and purity and it only attests to 25,889.153 troy ounces while the current supply is apparently 30,691 troy ounces. An audit or “attestation report” only attests to the existence of bars as of a specific point in time while the CACHE Explorer provides near real-time data on all of the bars backing CACHE. We respectfully disagree that this “Attestation Report” provides appropriate transparency for an asset-backed token. Furthermore, we also believe that Coin Market Cap doesn’t compare “apples to apples” by reporting 100.00% of total PAXG tokens as “circulating supply” but significantly less for XAUT, CGT and PMGT (DGX is reported as slightly less) and wonder if this is due to the fact that Coin Market Cap is owned by Binance and PAXG was recently listed on Binance.

Furthermore, it sounds like the attestation report gives no guarantees as to whether or not the gold is otherwise encumbered (in addition to the tokens) “In addition, we have not performed any procedures or provided any level of assurance on the financial or non-financial activity of the Gold Reserve on dates or times other than the Report Date and Time noted within this report.” but perhaps we’ve misread that. What is clear is that that attestation report is only valid as of the date and time of the report.

@Jon

Current circulating supply of CACHE Gold is always reported on our home page, token supply page and in the CACHE Explorer. We also have a supply API available upon request. Anyone can audit the supply of CACHE Gold and its backing at any time with publicly available data.

Also, I don’t know much about gold or tokenized gold. And so it might very well be that market cap doesn’t matter. Maybe trading volume doesn’t matter either. Just curious, what does matter? What should we be looking for?

We’d argue that redeemability and transparency are the most important factors. There is no question that currently gold tokens in general lack liquidity and demand, however we believe that Curve (and other DeFi platforms) can help change this. Gold is a key asset for digital asset investors looking for a less volatile safe haven asset that is not inflationary. CACHE Gold can expand its supply to meet demand very easily because of its partnerships with vaults and liquidity providers which currently add billions of dollars in liquidity annually to precious metals markets.

More importantly, why is it worthwhile to host this tiny market? Let’s say Curve doubles the market, and that 100k/day of trading volume goes to 200k. And at 0.04% fees, that means that even then total trading fees would be $80 dollars a day, or $29k/year.

Does that get anyone excited? Can someone please explain how we make money here?

The gold market is much bigger than all the assets listed on Coin Market Cap combined. Above ground gold has a current value of approximately $12.3 trillion vs. $325 billion (according to Coin Market Cap). The potential for asset backed tokens, including but not limited to gold, is huge. Gold is a good place to start.

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@Neozaru

It isn’t up to us what token holders choose to do with their tokens. CACHE Gold tokens are open, public tokens and cannot be blacklisted, frozen or confiscated. If a token holder wants to create a proxy token that is their choice and their right. This is the reason we have a storage fee and we wonder what will happen to other asset-backed tokens if token holders circumvent transfer fees.

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