The idea that crypto coins can be used for everyday goods and services is not a reality, yet. Stablecoins offer the potential for crypto to be used as day-to-day payments because their value is pegged to an underlying asset, where price stability is more consistent. Still, the middleman sitting in-between buyer and seller exists to exchange digital assets into traditional fiat currency. Typically, stablecoins, like Paxos or USDT, are used in the crypto market as hedging instruments or as value stores. Payment pipelines for everyday purchases are essential, and only when seamless integration is a reality can the public reap the benefits of a more streamlined infrastructure, as some blockchain purists promise. When we examine what is under the hood of our payment systems, we can see where blockchain innovation could transform older infrastructure into something better.
If we look at the evolution of stablecoins as an innovation in payments, how they are regulated and hold value creates new risks for investors. Stablecoins have been criticized over the past year as potentially not being as price stable as believed. However, the market for this type of security has grown significantly and is becoming more crowded with new coins. Are stablecoins something worth integrating into our economy? How does the crypto industry design a way where decentralized technology creates an independent and non-controlled currency that can be used for everyday transactions? Can the reality of digital gold be achieved and utilized as a form of payment?
Aurus – newly launched – has created a form of tokenized gold, and represents an actual ownership stake in physical gold. This adaptation is an innovation from existing stablecoins that could decrease the middleman footprint and could expand the traditional gold market.
I interviewed Guido Van Stijn, who is the CEO of Aurus. Aurus is a software company that provides tokenization-as-a-service (TaaS) that enables the gold market to autonomously tokenize their gold into AurusGOLD (AWG). Mr. Van Stijn explained that each AWG token is collateralized and redeemable for 1 gram of physical gold. As described to me, AWG will not be controlled by a government and exists as an ERC-20 token. The claim being regardless if Aurus survives as a company, the gold-backed token will survive on as an asset, just as a gold bar would. This is a unique approach to tokenization because each coin is traceable to a specific gold bar registration. Unlike ownership in a gold exchange-traded fund, which is an equity and does not represent physical gold ownership, AWG states that it is actual gold ownership.
Using a tokenized asset like a gold-backed token could be a benefit to the traditional gold buyer. The AWG tokens are sold at just a fraction above the gold spot price. Mr. Van Stijn explained, “Our processes are different than other gold-backed projects. All gold-backed stablecoins currently on the market have a centralized minting process. Meaning the company itself will, at some point, hold the gold. By digitally replicating the traditional gold market, Aurus is the first project to create a self-sustaining ecosystem made up of gold providers, vaults, and distributors that work together to produce a semi-decentralized gold-backed cryptocurrency.”
To allow the self-sustaining ecosystem to exist, Aurus circulates a second hybrid utility token, AurusCOIN (AWX). Mr. Mark Gesterkamp, the Business Development Director for Aurus, said, “AWX is limited to a total supply of 30,000,000 units, deriving transactional fees from the usage of AWG. AWX offers investors the opportunity to buy into the future growth of Aurus.” Mr. Van Stijn said, “As people around the world trade AWG, 70% of all the generated transaction fees are proportionally distributed across all AWX holders (paid in AWG). The remaining 30% of the generated fees are allocated towards the ecosystems’ operational costs as follows: 15% to gold providers, 15% to vault partners.” For the first time, market participants can generate a passive income stream on the bullion they sell.
Who wants gold when you can have Bitcoin?
There is nothing special about gold-backed stablecoins in crypto. But Aurus has created something different that bridges the gap between traditional gold trading and the crypto world. More importantly, access to the gold market can be achieved without the need for gold brokers. The claim made by Mr. Van Stijn is that his method lowers the barriers of entry for public gold investment.
Tony Dobra, who sits on the Aurus advisory board, formally a general manager of Baird & Co., believes that AWG is unique. Mr. Dobra said, “While it is not the only gold on the blockchain, it is the most truly gold-based trade available in crypto. Via the AWG cryptocurrency, producers, refiners, and traders can tokenize their gold in multiple locations of their choice and trade the underlying gold on several platforms and exchanges. Because there are multiple locations, providers, and traders, the best price can be obtained. You are not limited to just one location or one price provider.”
Aurus expects and is working to achieve a state where AWG will create more liquidity in the gold market. More importantly, the team at Aurus explained their main goal is for AWG to be used for everyday transactions, i.e., have AWG be used like cash for everyday purchases. While there is a long way to go before this is a reality, the Aurus project seems to be a shift in the direction of asset-backed digital currency. If this works, commodity and precious metal trading could be influenced to follow suit. As for use in payments, stablecoins like AWG, still require an exchange mechanism at the point of sale. Time will tell if this style will become publicly adopted.
Article written by Robert Anzalone