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Mar 22, 2021

How Meld is Tokenizing Gold using Algorand

By: Algorand

In an interview with Keli Callaghan, VP of Marketing at Algorand, Michael Cotton, Founder and Managing Director of Meld, talked about how the company’s digital asset, Meld Gold, is poised to bring digital gold to a wider audience. 

Blockchain Innovation in the Gold Market

Cotton saw opportunity in the precious metals market because there had been scant innovation in the space and little technology adoption. He was excited about that and started working on innovating and slowly improved his position within the precious metal industry in Australia, where he is based. 

As someone who loves innovation and technology, he was instantly attracted to the concept of blockchain. After doing extensive research to find what fit for him, he discovered Algorand.

“After finding the Algorand blockchain, I thought, this is the perfect fit for precious metals and the direct ownership of the precious metals on blockchain,” Cotton said.

He then began working on a two-part product which was, firstly, blockchain-enabled ownership of the precious metals, which really allowed gold and silver, to become a de facto currency once more. Secondly, on top of that the product combined work on innovating the actual supply chain. 

“The brilliant part of doing that innovation is that we weren’t creating our own currency. We were creating a digital standard for gold across the planet which would allow everyone within the gold supply chain to join that network to participate and be part of the gold currency in its true form,” he explained. 

In addition, having that technology innovation of the supply chain meant that gold could be traded, exchanged, and used in a faster, more cost-effective currency style of use.

A Digital Representations of the Physical Asset 

When explaining what it means for ownership of gold to be represented in the form of a digital asset, Cotton mentioned that precious metals have often been represented by what are called gold certificates or silver certificates. 

“For us, blockchain is just allowing that certificate ownership to be digitalized. That’s in its simple form.”

“In its more robust form, you get all the incredible benefits of Algorand where it’s fungible, it’s transactable, all the great features of blockchain get to be empowered in its digital representation.” 

“In their original form, it was literally an embossed piece of paper, all the way through to now we’re talking about something that’s incredibly powerful in its digital version,” Cotton explained.

Digitizing Precious Metals in the DeFi World

Meld’s core difference from other attempts to digitize precious metals ownership, according to Cotton, hinges on two factors: 

  • First, it centers on the gold industry adopting technology versus technology trying to adopt the gold industry. This involves the entire gold supplier chain working together efficiently. 
  • The second point of distinction is that Meld offers not just the ability to buy and sell digital gold but also the decentralized capability for precious metals assets to be held globally and redeemed globally.

“If you’ve got a gold retailer who’s a participant in the Meld ecosystem in Portugal, or the USA, or New Zealand or Australia, etc., you can go and deposit gold and digitize it and withdraw physical gold. Our long-term thinking is that network will be what creates this alternative currency ecosystem of gold and bridges that traditional ecosystem of investors with the digital space.” 

Australia is serving as Meld’s initial beachhead, given Cotton’s extensive knowledge of the gold industry there.

“We really see it as a fantastic way to robustly test the ecosystem because we’re also really conscious that as much as we think we know a lot we definitely don’t know everything. So, we’re excited that within the industry we know really well, which is the Australian industry. We get the chance to really test the product, talk to the investors, talk to the users and make sure we understand what they really want from the product.” 

Cotton is keen to take the product global, explaining that Meld already has some really strong partners at a high level internationally within the gold industry, including some of the largest gold traders in the world.  

“I think where you’ll see us take those first steps (globally) is when you start to see retailer partners offering redemption and depositing of gold and digital certificates being sold over the counter in those retailers. We’ll start taking those initial steps in 2021.” 

Why Choose Algorand?

In choosing a blockchain, Cotton was attracted by the chain’s ability to process atomic swaps, low fees, and high transaction speed.

“To be honest, Algorand sort of surprised me. It’s one of those scenarios where you go, ‘I hope it can do this.’ And when I discovered Algorand, I found it could do things like atomic swaps transactions, it could handle incredible transaction speeds and featured low costs.”

Cotton’s vision of the future of digital transacting was a big reason the capacity to process atomic transactions was so important to him.

“I think, eventually, the future of a lot of transacting won’t be involving third parties. I think a lot of it will be peer-to-peer transactions. Atomic transactions are the core of what that looks like, and that is a really big stepping stone into making that a reality.”

Cotton was impressed by other features offered by the Algorand chain as well. 

“There’s a whole slew of other incredible features of Algorand that make a huge amount of sense in terms of the hybrid of traditional financial systems and the digital space. What Algorand actually does is allow this to be adopted at scale and still be regulatory compliant in many ways in terms of features you can enable.” 

In addition to its feature set, Cotton said that the team behind Algorand played a part in the decision to go with the chain.

“We met several members of the team, and we loved the team and loved the work they were doing. That also made us realize that beyond loving the technology, we thought the team was doing incredible work. I think that also gave us a huge amount of belief in the future of Algorand.” 

A Future View of Microtransactions

In terms of microtransactions, Cotton thinks they are more of a future view of his vision of gold as a form of currency.

“I think a really interesting fact, which a lot of people are unaware of, is that gold is the only currency [...] that is accepted at local currency at face value in every country in the world”

Because gold can transition borders without cost, Cotton said, he thinks the idea that gold could become more used as a currency is a real scenario, especially in systems or countries that are unbanked or countries that have financial systems that have struggled with currencies they currently operate.

“I think this would be an incredible alternative to that system, and I think the more that we can build trust in that system and lower the cost and increase transaction speeds, the better it becomes.”

The Future of Meld

Meld initially launched in November of 2020 with its partner network. Its retail launch in early 2021 allows individuals to directly interact with the digital currency and to trade between gold and silver, and redeem at local partner stores.

In terms of future plans, Cotton said he would love to see people earn interest on their gold or silver to benefit from having the kind of capabilities that the blockchain ecosystem allows for that just don’t exist in the traditional ecosystem. 

“We see enhancing what people can do with their gold as a really amazing part of this, and a component supporting better adoption of traditional gold investors to using something like Meld as a powerful tool for their current investing style.”

One feature of Meld’s system is the ability to bring a piece of gold jewelry into a dealer and turn it into Meld gold on your phone. While this has already launched in Australia, Cotton said that the option could come to the U.S. in a 12- to 24-month bracket of time. 

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