A Blockchain Solution for the Gold MarketOctober 11, 2016
The gold market is getting an unexpected boost in the form of blockchain technology that is currently being developed. A startup from the NYC called Paxos and EY, a global consultancy agency, have recently announced that they are creating a tech solution primarily dedicated to the gold market.
While this might sound like an odd pairing which combines one of the most ancient form of currency with the newest one, here embodied in blockchain, the news got has gotten plenty people interested. As an evergreen element of the financial market, gold appears to be a traded commodity for all ages, including the future.
Now, as the tech alternative enters the fold, the environment is reminiscent of the one discussed recently by Bill Gross, a billionaire and financial expert: as the traditional financial markets become more volatile and unstable, the traders and investors are looking both to the future and the past to find some security and better odds.
Here is how the new blockchain tech aims to further improve the situation for those who want to find more stability in gold but also to do it with the help of the latest FinTech solutions.
The mission of the new blockchain tech that is planned for the gold market is a basically provide a set of tools to the traders. These will be used first and foremost as a means of clear and settling any gold transactions. The partnership that is providing this platform to the market is using the Paxos blockchain network called Bankchain. This blockchain-based system is supposed to be the main basis for the entire service.
The same was corroborated by EY’s partner dedicated to capital markets innovation, David Williams. He stated that his company believes that the future of capital markets demand and more innovative ecosystem that is at the same time stronger than the traditional ones. For him, their new product should embody this idea perfectly as one of the key examples of collaboration between traditional financial companies and a FinTech-exclusive company that is still very young.
According to him, their product will be able to transform the marketplace. Naturally, statements like this are a regular occurrence in the tech domain, but this time and for this niche, in particular, the blockchain solution would pretty much arrive in the marketplace unopposed. This alone is a fantastic opportunity for any product, but even more so when the volume of gold trading is taken into consideration.
The Previous Idea
While it sounds very innovative, this idea has actually appeared before, only in a slightly different tech setting. In fact, less than 18 months ago, the notion of trying to reshape the function of the gold market first came about.
Back then, in summer of 2015, Paxos, now a rebranded effort that focused, along with its own bitcoin exchange, on delivering blockchain solutions, announced that it was working on a very similar project. In that period, Paxos was operating under a partnership with Euroclear.
But, the same venture was derailed until a few months ago, Paxos declared the intention of reposition itself because of the growing need for blockchain solution. The same trend is well-established and now covers huge multinational corporations, as well as national governments and military organizations.
However, Paxos is focused on offering blockchain tech primarily to the world’s corporations and banks. It seems that the gold market is a very natural focus area for any company that operates using this type of vision.
The Needs of the Gold Market
It seems that Paxos wisely gauged the needs of the gold market at this current point in time. As of now, several very well-known names in this industry are looking to use tech in their operations. Just recently, a famous gold exchange that was used as inspiration for the Flash Boys, a bestseller by Michael Lewis, also declared that they are seeking a blockchain solution.
According to them, this tech would be used to build a gold exchange that would operate on the NextGen principles, including instant trading and distributed ledger. Naturally, the same blockchain would most likely come with a full-stack accessibility solution. For traders, this would mean that they can accomplish all of their activities using mobile devices, most likely without the interference of any third-party and their commissions.
While there is no current information which shows that the exchange found their partners, there is a certainty that the same can be completed in a matter of weeks, mainly because of the multitude of blockchain developers who are eager to enter into projects like this.
Once the basics are defined, the work could begin immediately and deliver a solution in a space of less than a year. In theory, this could coincide with Paxos solution, depending on how fast they move in their later-stage development.
The Battle for the NextGen Solutions
There is little doubt that a company that provides the first fully-working version of a blockchain gold market will produce a hugely successful product. In fact, as many have hinted, they market it itching to find something that will invigorate it, especially when it comes to attracting the new generations to gold trading. Aside from the partiality of it all, there is strong promotional potential in this type of market evolution.
Today, the promotional mechanisms that bring new individuals into the gold market are somewhat in misstep with the Millennials. For a long time, ever since the tech bubble of the late 1990’s, the gold market presented itself as a secure alternative to the global volatility of any type.
Now, the level of volatility is probably substantially higher that before, but the marketing message was so tightly focused on middle-aged men for too long to effectively switch to new demographics. This is underlined by the fact that the new market is filled with people like eSports players, communications professionals and many other types of customers that saturate the Y generation.
The race to the first platforms is heating up and the winners stand a big chance of getting a huge boost to their business, especially when it comes to developers. Unlike the actual gold market, they will be validated by the platform if it is functional and stable. Like using bitcoin to bet online and other ventures that ordinary people complete using BTC that took the time to develop a user base, the blockchain-enabled gold marketplace might not take off immediately, but its effect, in the long run, will be tremendous for the gold trading industry.