31 Jan 2018 — MakerDAO and Digix are proud to announce a partnership that combines the best of both projects to deliver the ultimate stablecoin to the blockchain ecosystem: the Dai Stablecoin backed by Digix Gold tokens (DGX) as collateral.
Cryptocurrency and blockchain technology has long been seen as the next big technological breakthrough, but in the almost 10 years since Bitcoin’s creation the promise of p2p digital cash has been held back by one big drawback: the high market volatility of cryptocurrencies.
Dai and DGX are the leading solution to this problem, with both taking a different but complementary approach. Dai uses a fully decentralized system of smart contracts to create a decentralized stablecoin that is pegged to 1 USD and backed by diversified collateral on-chain, making it resistant to market crashes. Every DGX is an Ethereum token that leverages the regulatory stability of Singapore to provide a token backed by 1 gram of gold that can be redeemed for physical gold on demand.
Dai was launched on December 17, 2017, and currently only accepts ETH as collateral. However this is about to change with an upgrade coming Q2 2018 that will enable the system to accept multiple collateral types. But because all cryptocurrency tend to be correlated, i.e. they fall and rise together, it is vitally important for the stability of Dai that Maker is able to include real world assets in the Dai collateral portfolio.
Gold backed stablecoin
This is where the synergy of Maker and Digix become apparent. Since DGX is a gold backed token, it is an ideal source of collateral for the Dai collateral portfolio. It is both a highly liquid and trusted asset, and it is available as an ERC20 token on Ethereum without being correlated to the cryptocurrency market. Considering the historical success of the gold standard and the importance of gold in central bank reserves today, it is safe to say that money backed by gold is something that people can get behind.
Because the diversification value of DGX is high when compared to most of the assets in the cryptocurrency space, the Maker team plans to launch Multi Collateral Dai with a 3 billion debt ceiling for DGX. This high debt ceiling for gold will enable Maker to more safely include ETH and crypto-correlated ERC20 tokens like REP and OMG with high debt ceilings as well. It also means that Maker will be a driver of billions of dollars of DGX demand.
DGX is the beginning in the search for real world assets to act as Dai Collateral, and security tokens from one or more crypto-friendly jurisdictions are another interesting avenue that the Maker team hopes to have available as Dai collateral around the launch of multi collateral Dai.
Digix also plans to expand the suite of products it has available to its users, and that Maker can use as Dai collateral. The next step will be silver tokens that, like DGX, are each backed by 1 gram of silver. The Maker and Digix teams will work together to make these tokens available on the Ethereum blockchain and as Dai collateral.
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