There's Gold or Silver in them thar hills
Gold & Silver Using Blockchain for tokenization, crowdfunding, & provenance
Gold is in the news in the Bitcoin world this week. Barry Silbert, CEO of Digital Currency Group (Coindesk, Genesis Trading, Grayscale Investments) made an ad targeting gold bugs. The essence of the ad is drop Gold and buy Bitcoin.
You may already be aware that lots of gold bugs like Bitcoin and lots of Bitcoiners like gold for their non-governmental monetary properties. Same with silver. Gold and silver both have many friends in the Bitcoin community. In a way, this is like 2 brothers fighting where they might fight each other, but they sure as hell are going to fight together against outsiders…..
So for story #1, the intrepid award-winning fintech journalist Tony Zerucha is back for a piece about tokenizing a silver miner.
Story #1: Ampersand Selling Silver Rights w/a Digital Token
by Tony Zerucha, editor Bankless Times
The only PhD student to work under John Nash, the famed mathematician whose life was chronicled in the Russell Crowe movie A Beautiful Mind, is using blockchain technology to bring to precious metals and mining industry into the twenty-first century.
“We discussed numerous times how he’d like to have a universal currency backed by a precious metal adoption model,” Mr. Patinkin said of his discussions with Mr. Nash.
The founders borrowed from this line of thinking in designing Ampersand Markets, Mr. Patinkin explained. Mining companies produce silver with a Digital Right allowing buyers the ability to obtain a specific amount of silver represented by the AXSI token. The Digital Right’s value will be consistent with market forces and will scale as the Ampersand ecosystem grows.
Ampersand’s method can produce returns much faster than the standard 10-20 year wait, Mr. Patinkin said. Investors can purchase an interest in an in-ground mining operation without the significant upfront cost and then enjoy the 10-15 percent discounts that streaming mining companies receive. All mining investments are in politically stable countries in North and South America.
The AXSI token’s design on the EOS platform is significant, Mr. Patinkin explained. It can handle 3,000 transactions/second and allows for applications supporting compliance and combating improper trading.
Mr. Patinkin said Ampersand’s hybrid token model is a direct response to the engineering failures of both pure digital assets and physical asset tokens. Because most have no intrinsic value, digital assets are prone to volatile price swings. Most asset-backed tokens are placeholders where one gram of the precious metal is equated to a value of a token. Such tokens can frequently trade at or below the spot price.
A second method is a dual token set-up where the common framework is to have a placeholder token and also a security token to generate funds.
“Investors pile into the (security) token and there is little incentive to adopt the placeholder,” he said.
Ampersand is prepared to quickly move, Mr. Patinkin said.
“Others shotgunned their technology to market and trivialized custody and arms-length care that needs to be exercised with physical assets. Our technology is already built. In 2018 and 2019 we were completing it with the tech team under (founder and CTO) Satya Avala. We’ll be present in the market with a product that is functional and complete.”
Ampersand Markets is currently in the midst of a private token sale. A mobile wallet is planned for release in the coming weeks and the Vaulted Silver Token is scheduled to be listed on a third party regulated exchange in Q3. The possibility of in-ground mineral token and an asset exchange will be pursued in the fourth quarter.
Our CNON Take: Tony’s gets as far as interviews go are pretty awesome, aren’t they? As of this writing, the AXSI token is only available to private and accredited investors but the idea of the silver rights being used to crowdfund a mine is pretty cool, as is a digitized silver token. We are watching and waiting.
Until then, the best way to take advantage of precious metals using blockchain, aside from buying gold or silver coins, is to buy stock in publicly traded miners. There are large miners like Barrick Gold (symbol: GOLD) who are public or smaller, ‘junior’ miners as they are called mostly listed in Canada. First Majestic Silver (symbol: AG) is an example of a publicly traded silver miner. Some juniors I found from this Seeking Alpha article include:
Yamana Gold (symbol: AUY)
B2Gold (symbol: BTG)
Iamgold (symbol: IAG)
These 3 junior miners are smaller and carry more risk than more established miners, yet they are all over $2.5 billion in market cap. You can also diversify into junior miners with a gold ETF from Van Eck Junior Gold Miners (symbol: GDXJ).
As always, this isn’t investment advice, but a starting point for your own research….
For less than the price of a tall coffee, you can get investment ideas like these in your email box every week.
Story #2: Using Blockchain to Help Fight Conflict Minerals
Using blockchain for supply chain management is a growing use case in a few industries. One of the most developed industries for using blockchain is food, mostly for food safety but other industries are using the tech as well.
This Bloomberg piece shows blockchain’s use in the precious metals industry for 2 reasons: Supply chain & provenance. The supply chain piece we’ve seen before but provenance is newer. Provenance means the origin of something or where something comes from. In art or other collectible type assets (including gems and metals), provenance means tracking the history of ownership of the asset as a way to authenticate it.
Conflict minerals are those metals and gems that come from areas of heavy conflict, war, or even from terrorist groups. Blockchain for provenance helps to track this so the $600 billion raw materials industry can track and trace where the metals are coming from.
Our CNON Take: It’s funny that while blockchain is supposed to be a trustless system, which is one of its biggest benefits, companies that use it for authentication then become more trusted by their own customers. ‘Apple’s or Google’s Tier 4 supplier bought all their gold from a blockchain-enabled source’, according to Nathan Williams of Minespider, a company using blockchain to track metals shipments.
We see this trend growing as Authentication is a big, broad use case for blockchain. It can be provenance for metals or art or it can be personal authentication and Identity.
How can you take advantage of this trend? Some investment possibilities include:
The big enterprise blockchain builders which include IBM, Amazon, Microsoft or platforms like Ethereum or EOS
Identity or Authentication companies like SelfKey or Civic or SecureKey
Miners, either major or junior, like those listed above as legitimate companies in the space should grow as the impact of conflict minerals declines
Hopefully, this will give you some ideas on where to start your own research.