Goldmoney on blockchain: now or later?
I had the opportunity to meet the CEO of Aurus.io and discuss about their gold backed coin built on Ethereum.
The discussion broke several misconceptions that I had and that I want to share here.
1) Blockchain gold is incompatible with depositories like Goldmoney: FALSE
The blockchain has 3 actors that are required to exist: vaults, auditors and clients. When physical gold is put in a LBMA approved, fully audited vault, coins are created in client's wallet: 1 coin per gold gram. Coins are destroyed when the gold is redeemed.
In real life, people are reluctant of managing their own wallets. That puts a lot of responsibility on a person: security of the wallet and full responsibility of transactions being 2 of them.
That's why people prefer to be clients of gold depositories/banks. Clients want to have a contract, an assurance and a monthly bill. That's what Goldmoney already does so this is a big competitive advantage.
2) If Goldmoney moves on an independent blockchain, the current Goldmoney fintech becomes obsolete: FALSE
Goldmoney would have one huge wallet on the blockchain that covers all the gold owned by its clients.
When a person buys from a merchant and both have Goldmoney accounts, the Goldmoney will use its current fintech to change ownership of the gold in its big, allocated Aurus wallet. From the blockchain perspective nothing changes but for Goldmoney and its clients, things change: this is the responsibility of Goldmoney.
When a person that is a client of Goldmoney buys from a merchant that is client of say Auragentum, Goldmoney will make a transfer from its wallet to the wallet of Auragentum and this transaction contains the information that Auragentum will need to know which of its clients is the merchant and allocate the gold internally. Goldmoney fintech initiates this transfer.
3) The current Goldmoney business model cannot make a revenue on a blockchain like Aurus: FALSE
On a blockchain, safekeeping fees won't work because they are a point of failure: if a client doesn't initiate the transaction to pay the safekeeping, the vault has no levier to force the client.
So on the blockchain, the safekeeping is payed by transaction fees.
The blockchain transaction fees apply when the buyer and the merchant are from different depositories and Goldmoney is one of them.
These inter-wallet fees cover 100% of the storage (these pay Loomis and Brinks)!!
If the buyer and the merchant both have Goldmoney accounts, it's 100% on Goldmoney to decide on the business model: pay or not for safekeeping and/or internal transactions.
By contract, Goldmoney can retract monthly/yearly gold from its clients and move it on its balance sheet in exchange of safekeeping - the gold remains on the same wallet on the blockchain.
4) Become an actor on a blockchain like Aurus brings no advantage to a large depository like Goldmoney: FALSE
There are hundreds of gold depositories like Auragentum. They are not large corporations like Goldmoney but they are very big however and in their countries at least, they have a good territorial presence and a large number of clients.
All those depositories currently associate on gold backed blokchains like Aurus.
There are dozens of gold-backed blockchains buing developed right now. From them, about 70% are scams the CEO of Aurus.io says. And from the the rest of 30%, the majority have technical problems that they mismanaged or did not solve.
We remain with a handful of gold-backed blockchain that are very strong technically, economically and legally. They will grow by attracting vaults, clients and the in-between-layer: big dealers and depositories. One will emerge.
Goldmoney cannot stand apart like a lone soldier, in the end it'll have to connect to a blockchain. Otherwise:
- its clients won't be able to trade with clients of other depositories
- vaults will ultimately connect to a blockchain and leave Goldmoney behind
Aurus.io ultimately plays the role of VISA or MasterCard.
Goldmoney will connect to a blockchain, the only question is when.
If it connects now, the advantages are:
- it can test it at low cost
- it can detect and come with solutions for points of failures
- it can contribute to the technology and be an influencer, being part pf the Aurus Gold Consortium
- it can take a large share of clients, because it adds to the power of the blokchain, it's legal and fintech strengths.
If it connects later:
- it will play a game that was created by others
- it will take what will remain from the pool of clients
The Aurus.io whitepaper is a very solid piece of work that I strongly recommend: