Monday 05 June 2023
When Shamik Raja began the journey of setting up a gold company in Dubai in 2013, he might have been unaware of the proportions the business was about to explode into.
When Shamik Raja began the journey of building a gold company in Dubai in 2013, he might have been unaware of the proportions the business would explode into just a decade later.
Mr Raja, who now sits as the global CEO of one of the fastest growing crypto tech companies on the planet called GoldPesa, admits it was not a designed path but a fluke.
A computer engineer by training, Raja says his motivation to develop code for the GoldPesa crypto trading system was bolstered by the emerging need to protect low-income people from the effects of inflation and currency devaluation as the world economy is collapsing.
"I wondered if I'm sitting in a village in Africa and I need exposure to gold or an investment class, can I do it? I figured it's not was not possible," he said.
"So I knew I had to create a gold-backed asset class or token where people can download a meta mask wallet, trade and convert their shillings into gold, and that's for the person mainstream in emerging markets."
How it works?
The GoldPesa token trades at a premium to generate wealth for token holders. Each GoldPesa (GPX) token is backed by one gram of gold stored in a secure vault, but is not at this stage a stablecoin.
The company's idea is based on the universally accepted convergence that gold has earned a reputation over the years as a reliable hedge against inflation.
Read: Crypto and NFT Tax Signals Kenya's Softening Stance
However, owning gold as an asset class never generates a return and, in fact, on the contrary, storing gold safely actually costs money.
Raja explains that GoldPesa's business model encompasses the storage of gold as an asset class that resembles an advanced form of currency where traders then go in and buy, store it in their wallets and wait for opportune times to sell. .
“I created an asset class that is an advanced form of money. It is not only a hedge against inflation, but it also has a return. If you can do those two 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 up to the millionaires to become billionaires, it's up to the guy in the village who has $10 to get $1,000,” he says.
"We charge one percent when you buy, sell or transfer the asset, we invest half of it in a proprietary quantitative algorithm that I coded and if there are profits, all token holders will have huge play .”
In the event that losses are incurred while investing in the proprietary algorithm, the individual investor is left with the gold stored in their wallet. Raja insists that the company never borrows or lends against gold.
Profits generated by the proprietary smart trading strategy called PAWN are used to buy back and burn the GPX token in the market, and in doing so, GoldPesa triggers market demand while reducing the token supply.
The resulting effect is that the GPX price eventually moves away from the spot price of gold and trades at a premium.
PAWN's buy-and-burn feature drives up the price of the GPX token, creating natural volatility.
Since people tend to buy and sell more volatile tokens, the strategy results in more than a one percent fee being added to the PAWN capital base, resulting in increasingly larger redemptions and the cycle continues.
To reserve a newly created GPX token at the spot price of gold plus one percent, one must first purchase the GoldPesa (GPO) option.
GPO is an ERC20 compliant token built on the Ethereum blockchain and is a cryptocurrency in itself, in which the intrinsic value is closely correlated to the value of GPX.
What are the exit options?
“If someone ever wants to buy and sell, they will simply swap GPO for the USDC digital stablecoin and USDC for GPO by going to the app. And like anything else with cash, we as a company try to keep at least 10% cash inside our currency exchange,” says Raja.
Read: New cryptocurrency offers a trading platform for Kenyans
When launching operations in Kenya, GoldPesa set its sights on a target of four million crypto citizens, based on a 2021 United Nations Conference on Trade and Development report that indicates that 8.5% of Kenya's population, or 4.25 million people own cryptocurrencies.
This figure puts Kenya ahead of developed economies such as the United States, where 8.3% of the population owns digital currencies.