Digix Co-founder Shaun Djie: Having DigixDAO Continue to Exist Would Be Good But It’s No Longer Possible
Digix, the project behind the first gold-backed stablecoin, stood at the inception of the modern asset-backed token model. Being one of the older and most successful projects within the Ethereum ecosystem, it was also one of the precious few that managed to build and maintain a robust DAO infrastructure. Which is, as of recently, a part of the project’s history.
DAO stands for a decentralized autonomous organization. This means it is autonomously running on programmatic rules, like smart contracts, and all decision making is done via direct voting by all shareholders. After The DAO collapse, DigixDAO, the DAO infrastructure built atop the Digix project, was among the few brave to pick up the torch.
In January 2020, a vote was held among the DigixDAO community members, resulting in a definitive decision to dissolve the DAO and cash in the project’s proceeds. The liquidation of the DigixDAO fund is an important and perhaps controversial milestone for the industry, simultaneously being a story of success and failure of DAO governance.
The fact that DigixDAO worked with few hiccups and moved toward dissolution smoothly shows that this DAO implementation was sufficiently well-designed and functional. Yet the fact that DigixDAO community chose to terminate the fund due to alleged lack of progress and token price concerns shows that steps were not taken to efficiently incentivize the stakeholders to remain invested with the DAO long-term.
forklog.media talked with Digix co-founder and COO Shaun Djie to get a better understanding of what happened and why.
forklog.media: Hello, Shaun. Do you mind if we briefly recap for our readers what Digix is about?
Shaun: Digix is a company that tokenizes physical gold. We have issued a token called DGX which represents 1 gram of physical gold. DGD, on the other hand, is a governance token that has been governing the DigixDAO treasury funds since 2016. DigixDAO has been announced to be dissolved but until the end of March, the two tokens will remain connected.
forklog.media: What governance instruments DGD actually provided?
Shaun: DGD is a voting token. It allows you to vote on how the treasury of DigixDAO will be spent. Back in March 2016, Digix raised a total of 465,000 ETH and it was decided these ETH will be used to power proposals that will increase the adoption of DGX. Proposals here refer to things like community management, liquidity management and any kind of other incentives that could help promote DGX token in the entire blockchain ecosystem.
For example, let’s say someone comes around and says “I want to build an exchange to promote DGX”. The token of DGD will be used to vote either “yes” or “no” to spending the required amount to build the exchange.
forklog.media: What were some other important votes, other than the dissolution vote?
Shaun: Before the project Ragnarök, which was the dissolution proposal, there were a couple of other proposals that were quite notable. Firstly it was the NeutralG project, which is essentially an OTC trading platform for DGX gold tokens. Their proposal, which is so far the biggest proposal to date, was requesting up to $4 million worth in ETH. That proposal was passed in October 2019.
forklog.media: DGD has seen periods of huge volatility, bouncing between $10 and $400, not necessarily following the general patterns of the crypto-market. What do you attribute that to?
Shaun: I can’t really comment on any price action related to DGD. Any kind of price movement is pretty much left for the market to decide.
forklog.media: Was DGD used as a protective asset during the crypto-winter?
Shaun: Could be. Many actually looked at the DGX token itself, which is more of a safe haven as a token because it tracks the price of gold. So DGX was probably more of a hedging cryptocurrency, compared to DGD in the crypto-winter.
Digital Gold to Physical Gold
forklog.media: So, how much gold do you have in the vaults?
Shaun: Right now in total, we have 122 kilograms in the company. There are two vaults that we have around the world. One is in Singapore and the other is in Canada. Singapore vaults approximately hold 70% of the gold.
forklog.media: Why the second vault?
Shaun: We are working very closely with our Canadian partner Silver Gold Bull. It’s the largest precious metal retailer in North America. Having a partnership there, it was a good opportunity for us to open a vault in a different location apart from Singapore, to diversify and minimize the risk of some geopolitical situation.
forklog.media: DGX token owners can redeem physical gold bars at your vaults. How much gold was redeemed in this fashion since the project’s launch?
Shaun: We have a 1% fee for redeeming gold tokens into physical gold bars. So far there have been 700 grams that have been redeemed.
forklog.media: Which countries were they coming from?
Shaun: Can’t reveal customer information. But there have been people that came to the vaults to redeem several hundred grams at a time.
The Dissolution of DAO
forklog.media: DigixDao is being dissolved, and it was the Digix team that sponsored the vote. What were the complaints voiced by the community that made you consider this step?
Shaun: At some point, the treasury of DigixDAO went from almost $5.5 million to upwards of close to $400-500 million dollars in value. This was due to fluctuations in ETH prices. I think some of the reservations that the token holders had were that they wanted to get back the asset that has appreciated from 2016 to where it is today when Ethereum is trading close to about $250.
The other common complaint I heard was that the proposals on the platform themselves were not as useful as intended.
forklog.media: How did you counter those complaints?
Shaun: Every governance proposal has to go through the voting process. So if the quality of the proposal is not good enough, it will simply be decided by the majority.
In regards to price, again it’s something beyond our control.
I guess it’s a matter of time that should have been given to the project to allow better proposals to come forward. Unfortunately, the token holders have decided to dissolve the project and it will be dissolved at the end of the upcoming quarter, on March 24.
forklog.media: Why was it important to keep DigixDAO intact?
Shaun: I think DGD itself is the oldest DAO system today, there are not many other DAOs out there that govern a treasury this large, much alone govern a stable asset token economy. Having this experiment continue would be a good thing for the entire Ethereum ecosystem, so people in the future would be able to see how to make a DAO work.
Having it continue its existence would be a good thing. We could witness and study the evolution of a DAO. But since it’s no longer possible, it’s time to move on to a new stage or different versions of what a DAO can be.
forklog.media: What was the importance of DigixDAO to the Digix ecosystem itself?
Shaun: It’s important for us to be able to give confidence and transparency to the token holders. To allow them to see that whenever a vote is being passed, it will be honored.
What we have done is essentially allowed the token holders to decide the outcome of the DAO. And it is being carried out as their wishes were.
forklog.media: So that was the very last decision for the Digix community?
Shaun: When DGD is no more, there will no longer be any treasury that will be decided on. So it’s not a matter of passing on the responsibility of governance, it’s just that the activity of governance ceases to exist altogether.
forklog.media: Digix will continue just as a stablecoin without DAO infrastructure, correct?
Shaun: Absolutely correct. The future plans of the company are that we will only focus on the gold token adoption. The ecosystem of building up DGX will remain, whereas the idea of building a DAO will no longer exist.
forklog.media: Did you expect it would ever come to this?
Shaun: Not so soon. The team has always been very vocal in the sense that we should give this social experiment a longer try. It’s not something we have been expecting. But it is what it is.
Life after DAO
forklog.media: The DigixDAO fund did support Digix in many ways. Will you need another crowdfunding campaign now?
Shaun: No, the company will still be privately run. We will be using our own internal funds to run the company from here onwards. Yes, it might be in the future that we will do traditional fundraising again, but for now, it will be privately funded.
forklog.media: Would that be another DAO?
Shaun: No, there will likely be no DAO, it will be just a traditional equity raise.
forklog.media: Nor a coin offering?
forklog.media: Any other plans for the future?
Shaun: We are launching a new product, related to DGX gold token and funded internally by the company. It will make it easier to buy gold and to view the gold holdings that we have in the company.
forklog.media: Finally, there is an opinion that 2020 will be the year of DeFi and stablecoins. Do you agree?
Shaun: Yes. I think the next two years could be the prime time for a lot of DeFi applications to be doing well. There is a growing movement of understanding how profitable DeFi could be, whether on the part of a consumer or on the part of a business owner. For the very first time, you are able to partake in interest-yielding platforms that are operating on a p2p basis.
The very idea of DeFi allows people to earn income from their own assets, without having to go to an intermediary, like a bank or an agency. It is definitely a growing movement and it’s probably one of the biggest if not the biggest use case of blockchain technology so far.
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