MakerDAO and Digix: DGX gold tokens to play a crucial role in DAI stablecoin

Ethereum stalwarts MakerDAO and Digix have partnered to deliver the "ultimate stablecoin" to the blockchain ecosystem – the Dai Stablecoin backed by Digix Gold tokens (DGX) as collateral.

The high market volatility of cryptocurrencies might be a useful feature for traders, but it can be off-putting to just about anyone else.

Maker is a decentralised autonomous organisation (DAO) on the Ethereum blockchain which aims to minimise the price volatility of its own stable token, the Dai, against the US dollar. Dai uses smart contracts to create a decentralized stablecoin that is pegged to 1 USD and backed by diversified collateral on-chain.

On the other hand, Digix's 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.

The DGX gold backed token is a safe source of collateral for the Dai collateral portfolio. DGX is a highly liquid and trusted asset, available as an ERC20 token on Ethereum without being correlated to the cryptocurrency market, said a statement.

The Maker team plans to launch Multi Collateral Dai with a three 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," said a statement.

"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," it said.