Digix gets $1.3m seed funding to turn gold into cryptocurrency

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Photo credit: dariohayashi / 123RF

Singapore-based Digix has secured US$1.25 million in seed funding, it announced today.

The round was led by Japanese VC firm Global Brain, with Shanghai’s Fenbushi Capital – one of Asia-Pacific’s most prominent backers of blockchain-related startups – also participating.

See: Japanese VC firm Global Brain to start investing in ICOs

The funding will help the startup continue building its DigixDAO platform for trading gold-backed digital tokens on the Ethereum blockchain.

By tokenizing gold bullion, Digix is aiming to create a cryptocurrency that can provide more stability for investors. Unlike the majority of cryptocurrencies currently being traded, each Digix token will represent a real, physical asset – in its case, a piece of gold stored in a secure vault somewhere in Singapore.

This reflects the concept of the gold standard, under which most of the world’s currencies were directly linked to the value of gold. Most countries abandoned the gold standard in favor of the fiat system – where the value of money is not based on the value of a commodity – during the 20th century.

By using the distributed ledger, Digix is able to securely record and track ownership of its gold-backed tokens.

Twice the tokens

Digix has created two digital tokens so far.

Digix Gold (DGX) is the result of its tokenization of gold reserves, with each unit of DGX representing 1 gram of gold.

DigixDAO (DGD) was distributed as part of the startup’s initial coin offering (ICO) in March last year. The DGD token is not backed by gold and, like most tokens that can be thought of as cryptocurrencies, its value can go up and down depending on market forces and exchange rates.

In addition to giving its holders the ability to claim rewards on DGX transactions, DGD also grants them a say in the way the Digix ecosystem is run.

As a result of the token sale, the platform became a decentralized autonomous organization (DAO) – an economic entity governed according to smart contracts on the blockchain, theoretically removing the need for a traditional corporate structure.

Buyers that hold DGD over a certain amount will be able to submit proposals to the DAO as to the direction the platform should take in order to encourage adoption of DGX. All DGD holders will be able to vote on such proposals.