Gold. It’s more than a currency. It courses through history. It’s the drive behind explorations, the growth and decline of markets and nations, and centuries of change—and its allure remains.
It’s also a physical commodity that you can hold in your hands. So how does investing and trading in a precious metal like gold work in an increasingly digitizedworld? With a highly fragmented worldwide physical gold market, the answer is complicated.
The team at Tradewind Markets believes there’s a better way to manage the ownership of gold by using cloud-based technology solutions and blockchain's distributed ledger technology (DLT) to simplify processes, increase transparency, and open up new opportunities.
“We created our platform, called VaultChain, to make it simple, secure, and efficient to invest directly in physical gold by moving physical gold trading onto an electronic platform,” says Michael Haughton, co-founder and director of Tradewind. “We seek to create the simplest and most direct way for investors to gain exposure to physical gold by bringing a degree of technical homogeneity to gold investment, settlement, and ownership.”
Due to the universality of gold’s value and its relation to the mainstream financial market, stakeholders in the gold industry have pain points for which blockchain solutions bring tremendous value.
“Gold market stakeholders, including bullion banks, investors, and custodians, share common goals to modify post-trade risk, increase transparency, standardize frameworks, and experience more efficient and cost-effective transacting processes,” says Abishek Kumarasubramanian, lead architect at Tradewind.
“The immutability and distributed nature of blockchain technology means it can address a wide range of needs, from corporate gold producers to refineries, vaults, investors, and users,” he continues. “It can be easily adapted to suit the needs of different stakeholders—all of who hold different functional and economic roles in the gold ecosystem,but need to be able to interact effectively. To drive value, we believe stakeholders need to interact in a consistent manner and on the same system.”
“Our goal is to figure out how to use a relatively simple system to do many different things for different stakeholders,” says Haughton. “We want to work with people looking beyond technology for the sake of technology or hype, who seek to fundamentally shift the way they use technology to change business processes and improve outcomes.”
The team began engaging with forward-thinking stakeholders in the gold industry, including the Royal Canadian Mint, to discuss potential commercial use cases for blockchain. In the process, it researched many cloud and blockchain technologies, ultimately choosing to build a blockchain platform using R3's Corda platform on Amazon Web Services.
“As soon as we started discussing where we would host our production nodes and build out our architecture, we went through a deep evaluation of AWS and its competitors,” says Kumarasubramanian. “We chose AWS simply because it was the best fit for what we were trying to achieve in the blockchain space.”
After deciding to build a private blockchain application, Tradewind selected R3’s Corda platform due to its ability to isolate data, offer privacy, and provide a developer-friendly technology. “The entire technology team was comfortable using theCordaplatform. Its documentation, APIs, Slack channel, and support were beneficial as we developed the initial platform,” says Kumarasubramanian.
“Our AWS architecture is extremely distributed,” says Kumarasubramanian. Tradewind uses many AWS services to run its application, including Amazon Relational Database Service (Amazon RDS) for its databases; Amazon Cognito for authentication management; Amazon API Gateway to create, publish, maintain, monitor, and secure APIs; Amazon Elastic Compute Cloud (Amazon EC2) for on-demand compute capacity; Amazon Virtual Private Cloud (Amazon VPC) to launch resources in a private and isolated network; AWS Certificate Manager to provision, manage, and deploy private SSL/TLS certificates; and Amazon Route 53 for DNS support. The platform is accessible to customers by using a REST API.
“The physical gold is currently vaulted with the Royal Canadian Mint, and we have a network of dealers using VaultChain now,” says Haughton. “The dealers generally sell the gold through an e-commerce transaction on their website. Once the end buyer purchases gold, they can see their holdings in a Tradewind wallet, which is a value-add of our platform. The dealer monetizes the interaction in the same way he or she would if they sold the buyer gold stored and monitored through moretraditional mechanisms. However, with VaultChain, the gold is tracked and the ownership managed on a cryptographically secure blockchain database.”
“We’ve built a platform to remove existing limitations and empower different parties to transact and settle between each other in new ways,” says Haughton. The platform is initially in use with gold dealers in North America but is designed to take advantage of the AWS global reach and eventually operate on a global scale.
“This is the first step of many we plan to take to fundamentally change how gold and other precious metals are owned and managed,” says Haughton. “We’re excited to continue exploring how we can take advantage of blockchain technology and deliver increased functionality on the platform.”
R3 is an enterprise blockchain software firm working with a broad ecosystem of more than 200 members and partners from both the private and public sectors to develop on Corda, its open-source blockchain platform, and Corda Enterprise, a commercial version of Corda for enterprise usage.
The Corda platformis already being used in industries from financial services to healthcare, shipping, insurance and more. It records, manages and executes institutions’ financial agreements in perfect synchrony with their peers, creating a world of frictionless commerce. Learn more at r3.com.