[Discussion]Tokenised Gold Pool

Without a storage fee and a transfer there are significant questions as to how a gold-backed token would be scalable and sustainable. Insured, audited storage will always have a cost. If gold-backed tokens don’t charge fees it raises questions about how they will pay these costs and what incentives they have to provide full backing. A transfer fee alone does not solve this problem because there would be no revenue if investors hold tokens for long periods of time without transferring them. A transfer fee could also be avoided by locking up the tokens inside a smart contract and then trading the ownership of the smart contract instead of transferring the tokens.

If Curve and other similar platforms want to deal with tokenized physicals assets, this is an important issue to consider.

@TwoCell, We may be willing to bootstrap a pool.

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@Jon,

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.

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IMO, sXAU should definitely be added to this hypothetical gold pool, even if the total market cap of sXAU is much smaller than the other gold-backed tokens. I suspect the reason why there is so few sXAU in circulation is because of the trouble in minting it (i.e.: one must acquire SNX, stake that SNX on the Synthetix platform to mint sUSD and finally exchange that sUSD for sXAU) and not because of the stability of the Synthetix platform.

Moreover, I’m personally inclined to trust in the value of sXAU more than others like XAUT, as the redemption process is on-chain (i.e.: one can exchange sXAU for sUSD on Synthetix with 0 slippage at the IRL rate) and the collateral backing sXAU is verifiable and transparent.

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I really like the idea of combining of those types of digital gold (backed, synthetics, …). Even the output goldCRV token would be valuable as something you can put as collateral on other platforms (instead of under a mattress).

I also like the idea of a “WPaxG” although I don’t know if it solves all the fees-related issues nor if consulting Paxos first wouldn’t be better.

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Formalisation of process starts now: CIP#12 - Which tokens should be included in a gold pool?

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I think it’s a fair point that:

I would ask the audience here if Curve’s algorithm is likely to work better and earn more on:

  • a large deep liquid market or
  • a small shallow chunky one.
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How about including Cache Gold? They seem to be the only one that has a real connection to the physical market, nice to know you can take delivery of your gold when fiat currencies/synthetics go to pieces

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Any movement on this? I now there were concerns about the tiny market caps of each different type of gold token, but i was looking today and the market cap for paxg for example has increased markedly since this topic initially came up - I presume the others have seen similar growth. It would be nice to have more on chain liquidity in these tokens and be able to swap between them with no slippage since some are convertible to physical and some are not.

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Hi Twocell,

You can read about the progress of CACHE Gold here: https://cache.gold/assets/docs/CACHE-Growth-Report-2021.pdf

We definitely have a working and efficient redemption system for bars as small as 100 grams.

Please let us know if you have any questions.

Yes, but only use PGMT and sAUX to begin with, then add others who prove to redeemable/liquid in the future.

sAUX is by definition not redeemable because it’s synthetic. PMGT is redeemable by almost nobody. Have you tried? Their app (required to redeem) is not supported in the vast majority of jurisdictions. The redemption process is complicated requiring redemption of tokens for a certificate and then redemption of the certificate for gold.

Do you know anyone that has redeemed it? How much did they redeem? How much did it cost? How did they do it and where are they located?

PMGT is only listed on two exchanges and only one of them has volume (very little) also.

There is a more in depth discussion on the same topic here: CIP#12 - Which tokens should be included in a gold pool?

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CGT is proven to be redeemable. It is the only gold token that provides full onchain transparency for all redemptions.

When tokens are redeemed they are removed from circulation and locked up in a smart contract address we call the “Unbacked Treasury”. After tokens have been removed from circulation the corresponding bar(s) are unlocked and released to the redeemer. After redemption bars no longer appear in the CACHE Gold Explorer as CACHE Locked Gold backing tokens but the full history of each bar is available up to the point of redemption and removal from the vault. Here is an example bar redeemed on June 3, 2020: https://explorer.cache.gold/r/E2801105200076C59AA10A28

Bars can never be unlocked unless tokens are removed from circulation first and unbacked tokens locked in the smart contract cannot re-enter circulation unless an equivalent amount of gold is deposited and locked first.

You can see by inspecting the CACHE Unbacked Treasury address how many redemptions have occurred to date and for how much gold. You can also audit the supply to ensure full backing quickly and easily with publicly available, real-time data.

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I don’t know enough about cryptocurrency-based gold tokens to say which ones should be included and based the two tokens on previous posts in the thread. Don’t see those two as fact but my opinion which is easily changed since I still have much to learn about this topic. :slight_smile:

I do however see it as important that gold tokens either be redeemable or in the case of synthetic ones; liquid and pegged harder than my gimp.

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I like it. It has transparency.

The redemption page says:

The Redemption Process

To redeem your tokens, you must have an approved CACHE account and provide an Ethereum address that holds CACHE tokens you wish to redeem.

You can select any parcel for redemption as long as the pure gram total of the parcel is equal to or less than your CACHE Gold token balance. During the checkout process you can choose to:

  • Pick up your parcel(s) at the vault (only available at some vaults)
  • Ship your parcel(s) to your mailing address (this incurs additional costs)
  • Sell your parcel(s) to a liquidity provider that accepts gold deliveries at the vault

Once you submit your redemption request, CACHE will reserve the parcels for 10 minutes in order to allow time for payment of the balance due. If you fail to send the full balance due within the time limit, the redemption request expires and any partial transfer received will be refunded to the originating address.

Some questions:

  1. What does it involve to create an account on CACHE, KYC I assume?

  2. By your estimate, what would it cost on average to ship: 10g, 100g, and 1000g to different locations around the world? Do you have a table for countries and shipping costs?

  3. What should someone do if it isn’t feasible to ship to gold? I assume selling it to a liquidity provider would be an option. Are there option to do this today, and if so how?

4.(A bit off-topic) Any plans to add Silver, Platinum or Palladium?

I would love to see tokens representing 25% each of Gold/Silver/Platinum/Palladium being exchanged by Curve in the future, but that would require at least two of these to exist…

I think Silver, Platinum and Palladium pools would be much simpler to implement on Curve and would prefer to see it done as fast as possible seeing how inflation will hit the dollar sooner or later in the coming years (probably sooner). Diversification is a must but we can’t just rely on BTC, ETH and other cryptocurrencies since they are in the same basket. The same goes for fiat currencies.

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  1. Yes registration requires KYC (legal requirement) but we’ve done everything possible to make it quick and easy.

  2. There is a shipping calculator which will provide you with cost estimates. Unfortunately due to COVID shipping is limited to US and Singapore but normally we are shipping to more than 30 countries.

  3. You can sell it for USD or you can pick it up at the vault in Singapore.

  4. Yes we plan to add Silver next and eventually other assets.

Please let us know if you have any other questions.

Out of curiosity, why do you think silver, platinum or palladium would be easier to implement on Curve than gold?

Out of curiosity, why do you think silver, platinum or palladium would be easier to implement on Curve than gold?

Sorry for my confusing phrasing. I meant that it would be easier to add them one by one (gold first of course) rather than having a Gold/Silver/Platinum/Palladium “pair” Sounds more like something Yearn would do rathe than Curve so I was just rambling I guess. :smile:

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