Our project submission, the ION.au Gold Digitization, is a result of a strategic partnership between Instruxi, a new web3 solution design firm, and ION Digital Corp (OTC: IONI), an industry leader in precious metal digitization, tokenization and securitization. Together, we are revolutionizing the way unmined, unrefined, and refined gold is owned and traded.
Inspired by ION’s business model of monetizing in situ gold (unmined gold that is still in the ground) by converting fully-validated gold claims into secure, efficient, and compliant gold-backed securities that can be openly traded in the financial marketplace, our collaboration leverages blockchain technology to tokenize gold claims without the gold having to be physically extracted from the ground. This groundbreaking approach allows gold owners to digitize their gold reserves claims, tokenize them as non-fungible tokens (NFTs), and then convert them into regulatory compliant securities that enable institutional investors to buy fractionalized ownership of those claims through ERC20 tokens.
This gold tokenization process represents a groundbreaking innovation in the traditional gold and precious metals marketplace, enabling claim holders to unlock the value of their reserves while minimizing the environmental impact and cost of traditional forms of gold mining and extraction. Our partnership showcases the power of collaboration and technological expertise in driving meaningful commercial change in the commodities industry.
Together, Instruxi and ION are pioneering the future of asset-backed securitization, gold ownership and the trading and hypothecation of precious metal assets, laying the foundation for a more accessible and sustainable financial ecosystem.
What it does
Generally speaking, the tooling provided in this project submission provides a robust, semi-autonomous, and transparent approach to building fractional ownership schemes for real world assets. We demonstrate the end-to-end process for digitizing, tokenizing, and ultimately fractionalizing one of ION Digital’s gold claims. A gold claim refers to a legal right or entitlement to possess and exploit a specific area of land for the purpose of extracting gold or other valuable minerals. Thus, a gold claim has a value correlated to the amount of in situ gold in that plot of land. The toolkit makes use of Chainlink Functions enabled smart contracts on Avalanche, Space and Time decentralized data warehouse, Storj object storage, and Cloudflare workers.
Using this solution, gold claim bearers such as ION Digital, digitize their gold reserves by representing claims as non-fungible tokens (NFTs). These NFTs serve as digital certificates of ownership for a specific, validated, and assessed amount of gold. Investors can participate by buying fractionalized ownership of these NFTs and the ION Gold Digitization utility facilitates the fractionalization process, allowing investors to acquire ERC20 tokens that represent a fraction of the underlying gold asset. These ERC20 tokens can then be easily traded, providing liquidity and flexibility for investors.
Key functionalities of the project submission include:
Digitization: ION performs a detailed assessment of the validity and value of the respective Gold owners claims, digitizing one (1) oz. for every verified five (5) ounces in the ground. This ratio cand and will adjust based upon the validity and existence of a third-party assay of the value of the claims.
Tokenization: The claims are tokenized as non-fungible tokens (NFTs), which serve as digital representations of the ownership of the underlying gold asset.
Fractionalization: The NFTs can be fractionally divided into ERC20 tokens, enabling investors to buy fractionalized ownership of the gold reserves.
By leveraging blockchain technology and smart contracts, the ION Gold Digitization solution offers a secure, efficient, and compliant alternative for gold owners to unlock the value of their assets while enabling investors to participate in fractional ownership and trading.
How we built it
Over the course of the hackathon, Instruxi worked with ION Digital to gather artifacts and documents to support fractionalizing the first gold claim. Our solution relies on three smart contracts, the ERC721 NFT contract, a Vault contract, and an ERC20 token contract. The fractionalization piece relies on an integration between Chainlink Functions and a decentralized data warehouse called Space and Time. Superset and Trino are used to visualize the structured data and report KPI’s.
The process begins with extracting the relevant unstructured data from the artifacts associated with Claim #1. We immediately tokenize these artifacts by placing them in a secure Storj bucket and mint an ION NFT with a metadata URI pointing to the corresponding bucket address (Claim 1 → TokenId 1 → sj://ion/claims/1). NFTs serve as digital certificates of ownership for a specific, validated, and assessed amount of gold. We then map useful data points into our reporting data model (https://github.com/instruxi-io/fractional-token-data-model), adding structure to otherwise unstructured data. This data model is hosted in Space and Time and the most important table, IONI_AUDIT (public read) can be found in the INSTRUXI namespace. It is here where the auditor’s public key and claim value’s attestation is published.
Here's an overview of how the solution was implemented:
1 . Smart Contracts:
ERC721 NFT Contract: This contract represents the non-fungible tokens (NFTs) that serve as digital certificates of ownership for the unmined gold reserves. Gold auditors create these claims as NFTs on the platform.
Vault Contract: The Vault contract is responsible for securely storing the NFTs deposited by users. When a user deposits their NFT claim into the Vault, it triggers further actions to determine the fractional ownership and mint the corresponding ERC20 tokens. We used Chainlink Functions for secure communication between the Vault contract and the decentralized data warehouse holding claim data.
ERC20 Token Contract: This contract mints and burns ERC20 tokens called ION.au. ION.au represents fractional ownership of the gold reserves and the Vault contract mints these tokens in real time based on the number of fractional tokens specified for the tokenId in the Space and Time IONI_AUDIT table.
2. Audit Process:
- This process describes the rigor associated with documenting, verifying, and underwriting real world claims. Auditors create claims as NFTs, providing relevant information such as the amount and quality of the unmined gold reserves. These auditors ensure the authenticity and accuracy of the claims and make these tokens consumable by investors. The claim values are attested to in the Space and Time data warehouse.
3. Space and Time:
- The solution utilizes Space and Time, a decentralized data warehouse, to store an audit table as well as all other relevant data emitted by the smart contract set up. The Vault contract queries this table in real time to retrieve the number of fractional tokens to mint for a specific tokenId during the minting process. This integration ensures the accuracy and up-to-date information for fractional ownership calculations. Space and Time offers cryptographically secured read and write privileges over tables in their database. We use Cloudflare workers as a robust proxy for accessing Space and Time. Cloudflare Workers are an excellent edge client due to the ability to cache API keys, store encrypted secrets, and much more.
By combining these components, we have developed a robust gold claim tokenization solution. Gold claim auditors create NFT claims, users deposit these claims into the Vault, and the Vault, utilizing the decentralized data warehouse, accurately determines the number of fractional tokens to mint for the desired tokenId. This approach provides a seamless and secure experience for gold owners and investors, enabling them to participate in fractionalized ownership and trading of unmined gold reserves.
Challenges we ran into
During the development process, our team encountered two major technical challenges while building the Gold Tokenization Platform:
- Integration of Space and Time with Trino Connector:
Integrating Space and Time with our Trino connector proved to be a complex technical endeavor. This integration required in-depth domain expertise in debugging JDBC drivers, establishing secure database connections, and working with public/private key cryptography. Overcoming these challenges involved extensive troubleshooting and fine-tuning to ensure seamless communication between Space and Time and our platform.
Integration of Edge Service in Cloudflare:
Overcoming these technical challenges required a combination of deep technical expertise, creative problem-solving, and meticulous testing. Our team invested significant time and effort to ensure smooth integrations and overcome the obstacles posed by these complex technical aspects. By addressing these challenges head-on, we were able to achieve the desired functionality and maintain the security, efficiency, and reliability of the Gold Tokenization Platform.
Accomplishments that we're proud of
We are incredibly proud of several accomplishments that have been achieved during the development of our hackathon project submission. Here are some key accomplishments we take pride in:
Innovative Tokenization Solution: We have successfully developed a groundbreaking tokenization solution that enables gold owners to create claims for their unmined gold reserves and tokenize them as NFTs. This innovation revolutionizes gold ownership by allowing fractionalized ownership and trading of gold reserves without the need for physical extraction.
Strategic Partnerships: Instruxi participates in Chainlink Hackathon to develop customers' innovative approach to gold digitization. Our partnership with ION Digital Corp, an industry leader in gold tokenization, showcases our ability to form collaborative commercial partnerships. This collaboration has provided us access to invaluable industry expertise, auditors, and regulatory advisors, strengthening the credibility and reliability of our platform.
Technical Integrations: Overcoming technical challenges such as integrating Space and Time with our Trino connector demonstrates our technical prowess. We have successfully navigated complex integration processes, including debugging JDBC drivers, establishing secure database connections, and working with public/private key cryptography, to ensure seamless communication and data retrieval.
Secure and Compliant Platform: We take pride in developing a secure and compliant platform for gold tokenization. Our focus on implementing best practices in cryptography, prioritizing security considerations, and ensuring regulatory compliance has resulted in a robust and trustworthy platform for gold owners and investors.
Driving Financial Inclusion and Sustainability: By enabling fractional ownership and trading of unmined gold reserves, our platform promotes financial inclusion and opens up new opportunities for investors. Additionally, the ability to hold gold without physical extraction contributes to environmental sustainability, reducing the ecological impact of traditional mining practices.
These accomplishments highlight our commitment to innovation, technical excellence, strategic partnerships, security, and sustainable practices. We are proud of the impact our Gold Tokenization Platform has made in transforming the traditional gold market and driving positive change in the industry.
What's next for ION Digital and Instruxi
- Smart Contract improvements and audit (Proof of Reserve for token contract?)
- User friendly UX Design
- Improved 3rd party auditor integration and KYC process for buyers (ZK opportunity?)
- Agile and adaptable asset digitization and securitization process
Our shared goal is to provide a robust backend infrastructure for a compliant gold, precious metal, and physical asset digitization platform. While the solution currently does not have a front-end interface for its user experience, our focus has been on developing the smart contracts, establishing secure tokenization processes, and ensuring compliance with industry standards and regulations. Both ION and Instruxi are poised to play integral roles in shaping the future of decentralized finance, tokenized assets, and blockchain adoption. By continuing to innovate, collaborate, and adapt to market needs, they can drive significant advancements and contribute to the ongoing transformation of the digital economy.