Before we get to a few, new, commodity-backed blockchain assets, let’s start this article by walking through the steps of how we got to this point to begin with:
Cryptocurrencies & Blockchain Technology:
Most of you are probably familiar with cryptocurrencies. They’ve been around now for around ten years or so and have become quite popular, widespread, and the subject of much controversy and innovative growth. A cryptocurrency (or digital currency), is essentially a new form of currency created, stored, and used by some form of digital means. Each token is designed to be completely unique and non-duplicable through cryptology.
Digital money does not include your average-thought-of bank account, online bank account, or stock exchange (though this is changing). Those are merely accounting numbers, representing and keeping track of your physical cash (likely fiat money, which has many a blunderous & catastrophic end), AND they tend to be governed and controlled by a centralized agency, which if something happens to that agency, then… tisk tisk. Digital money (in general) is exactly that: 100% digital. And, it’s usually decentralized, which generally speaking means that it’s much more secure than your average centralized facility (and many people trust it a lot more as well). Digital currency’s value comes from it’s scarcity due to the math equations which must be solved, it’s unique encryption value, and the trust and overall use of it from the community.
Bitcoin was the first cryptocurrency, first published by Satoshi Nakamoto in the latter quarter of 2008 (October 31st). It was made possible by a disruptive technology which was at the time almost one and the same with Bitcoin: the blockchain. Blockchains are public (usually), distributed ledgers, which record all transactions on a network of shared computers. Since Bitcoin came on the scene, the arrival of new cryptocurrencies has exploded. Digital currencies are “mined” through solving ever-increasingly difficult math equations. This has led to an entirely new industry in itself, with it’s own niches and innovations, like pool mining. All made possible by blockchain technology.
The concept of blockchains was designed to be decentralized, meaning that a central governing factor does not control the distribution or use of the digital currency, but rather the community at large. This way, peer-to-peer (P2P) direct exchanges are made possible without any form of a middle man needed. They’ve also greatly enhanced the area of FinTech (Financial Technology). Blockchains are amazing!
Now initially, blockchains were simply used to make cryptocurrencies possible, until Vitalik Buterin came in with his idea of Ethereum. Ethereum greatly enhanced blockchain’s ability to do more than just create cryptocurrencies; Decentralized applications and Smart Contracts were made possible through Buterin’s innovation.
With the advent and advancements of blockchain technology, many banks and governments (centralizing factors) have decided to try to make use of the technology to help their own organizations become more efficient.
Commodities are in general raw materials which can be bought and sold, such as precious metals, coffee beans, oil, grains, etc, though this is not always the case. They can also be otherwise useful or valuable things, tangible or intangible. People have been using physical commodities all around the world throughout history as forms of representing and storing wealth… that wealth may have even been their very means of survival. Even today, commodities are bought and sold all the time, and with the advent of large corporate companies, they are now traded on the stock exchange, with trades in the millions of dollars worth switching hands constantly.
In more recent times, with cryptocurrencies and blockchain technology coming on the scene, it’s been made possible to digitize commodities.
Yes, this will be contested by some, who will never feel right about owning a commodity such as gold from a distance… it must be in their hands. And that’s fine, however, this new and viable concept is opening a brand new class of blockchain-based assets, for a (perhaps) niche market of individuals and corporations, which is increasing. These commodity-based digital assets on the blockchain, offer less volatility than most normal cryptocurrencies, and more stability, as they are based on the spot price of the commodity. If you want to learn more about why people are wanting to tokenize commodities, read this interesting article by nasdaq.com.
Commodity-Backed Blockchain Assets:
The first attempt at creating a digital gold asset was likely a company called e-Gold. However, this was pre-blockchain, and thus suffered and ultimately fell to a lack of transparency. It was also essentially a centralized system, but it was most certainly a pioneer in a new way of thinking of commodities and assets, and broke much new ground.
Since then, and with the aforementioned innovations that have come on the scene, a few new companies have followed the idea, offering real commodity-based digital assets on the blockchain. For example:
*ZrCoin – is a new company in 2017, offering a commodity based token as part of a new production line of synthetic Zirconium Dioxide (Zr02), an in-demand industrial commodity. You can read more about that from cryptoninjas.net. It should be noted that ZrCoin is part of their ICO to launch the new facility.
*AgriDigital – performed the first ever agricultural payment exchange using blockchain technology. A smart contract worked all of the financials of the exchange, and the seller received their funds instantly, as soon as the delivery was successful. News again from 2017. You can read more about that from blogs.platts.com.
*Bilur – is a new cryptocurrency from a UK based company named R FinTech. 1 Bilur is said to be worth 6.481 barrels (or one ton) of Brent crude oil. News of this company also comes from 2017, from ethnews.com. In other oil news, global financial institution ING made it’s first test of a large oil trade using blockchain technology – again from 2017.
*Orebits Corp – has recently partnered with Symbiont to produce a new smart certificate called Orebits, which represent gold ore deposits on the blockchain! News also coming from 2017. You can read more about this amazing convergence from BitcoinMagazine.com.
*DinarDirham – of course we couldn’t let this article go without mentioning ourselves. DinarDirham is a digital gold fintech provider startup company which launched in 2016. We offer a variety of blockchain-based assets, which are pegged to the worldwide spot price of gold bullion. Aside from our other products to store and use your funds, our assets include the DinarCoin and the Gold Smart Contract. DinarCoins can be traded for Gold Smart Contracts, which in turn can be exchanged for physical gold bullion (including our own DinarDirham Physical Gold) at select locations. Each DinarCoin is worth 4.25 grams of 999.99% gold. We also offer a DinarDirham debit card, which can use your digital gold funds via an ATM, and you can make withdrawals. As well as our own DinarDirham wallet: The Universal Bitcoin Wallet. Our DinarCoins & Gold Smart Contracts are also being accepted by a new digital wallet app called: blockchains.my, which is a new and highly advanced eWallet, with some crazy features, and bolstering some of the biggest cryptocurrencies on the market, such as Bitcoin, Ether, & Zcash. We highly recommend checking them out. They’re currently in Beta mode, so if you want to be updated on when they go live for the public, just input your email on their website.
These are just a few of the companies exploring this new asset class. And as you can see, they’re all new, and ranging from industrial chemical compounds to precious metal bullion. Turning commodities into digital tokens on the blockchain may be a new trend. It certainly seems exciting, and could offer trading of these commodities to people who otherwise wouldn’t have easy access to them, as well as provide a host of other advantages, such as instant transfers, trading in smaller denominations, transparency, and peer-to-peer functionality. We must add that although this article tried to specifically get to commodities which were directly being digitized (or the tokenisation of commodities), there are other companies allowing the trading of commodities using normal cryptocurrencies like Bitcoin, much like an exchange really, just open to digital currencies.
We certainly look forward to seeing where this exciting trend goes.
We hope you enjoyed this week’s article,
The DinarDirham team.