When Shamik Raja commenced the journey of setting up a gold company in Dubai in 2013, he might have been oblivious to the proportions that the venture would blow up into barely a decade later.
Mr Raja, who today sits as the global CEO of one of the fastest-growing crypto technology firms on the planet called GoldPesa, admits that his was not a designed pathway but one of chances.
A computer engineer by training, Raja says his motivation to develop a code for the GoldPesa crypto trading system was enhanced by the emerging need to cushion low-income earners from inflation and currency devaluation effects as global economics tumble.
“I asked myself, if I’m sitting in a village in Africa, and I need exposure to gold or exposure to any investment class, can I do that? It dawned on me that it wasn’t possible,” he says.
“So then I knew that I needed to create a gold-backed asset class or token where people can download a meta mask wallet, swap and convert their shillings into gold, and this is for the everyday person in emerging markets.”
How does it work?
GoldPesa’s token trades at a premium to generate wealth for token holders. Each GoldPesa token (GPX) is backed by one gramme of gold stored in a secured vault but is at this point not a stablecoin.
The firm’s idea is founded on the universally accepted convergence that gold has over the years earned a reputation as a reliable inflation hedge.
However, owning gold as an asset class never generates any yield and, in fact, on the contrary, storing gold safely actually costs money.
Raja explains that GoldPesa’s trading model encompasses storing gold as an asset class that resembles an advanced form of money where traders then get in and buy, store it in their wallets and wait for the opportune selling moments.
“I created an asset class that is an advanced form of money. It is not only a hedge against inflation, but it also has got a yield. If you can do both of those things, you create the greatest form of money, and I created gold. So for that reason, it’s for the everyday guy. It’s not for the millionaires to become billionaires, it’s for the guy in the village who has $10 to get $1,000,” he says.
“We’re charging one percent when you buy, sell or transfer the asset, we’re investing half of it into a proprietary quantitative algorithm which I’ve coded and if there are profits, all the token holders will have a huge game.”
In the event that losses are incurred in the course of investing in the proprietary algorithm, the individual investor is left with the gold stored in their wallet. Raja insists that the firm never borrows or lends against the gold.
Profits generated by the proprietary intelligent trading strategy called a PAWN are used to buy back and burn the GPX token from the market and in the process, GoldPesa triggers a market demand while cutting the supply of the tokens.
The resultant effect is that the GPX price ends up floating away from the spot price of gold and trades at a premium.
The PAWN buyback and burn feature drives the GPX token price higher creating natural volatility.
Since people tend to buy and sell volatile tokens more, the strategy results in more than one percent fees added to the capital base for the PAWN and this leads to increasingly larger buybacks and the cycle continues.
To reserve a newly minted GPX token at the spot price of gold plus one percent, one is required to first purchase the GoldPesa Option (GPO).
The GPO is an ERC20-compliant token built on the Ethereum blockchain and is a cryptocurrency in itself, whereby the intrinsic value is closely correlated to the value of GPX.
What are the exit options?
“If anyone ever wants to buy and sell, they will simply swap GPO for the US dollar-backed digital stablecoin USDC and USDC for GPO by going to the app. And like anything else with liquidity, we as a company try and maintain at least 10 percent liquidity inside of our forex bureau,” explains Raja.
On the launch of operations in Kenya, GoldPesa has set its sights on a target of four million citizens on crypto, pegged on a 2021 United Nations Conference on Trade and Development report which indicates that 8.5 percent of Kenya's population, or 4.25 million people own cryptocurrencies.
The figure places Kenya ahead of developed economies such as the United States which has 8.3 percent of its population owning digital currencies.