(Kitco News) – The Bitcoin (BTC) vs. gold debate has intensified in 2024 as both assets have hit new record highs over the course of the year. But as the technology has evolved and the real-world asset (RWA) tokenization trend grows, a new investment option has emerged: gold on Bitcoin.
RWA platform Swarm, which is fully licensed and regulated by German regulator BaFin, has unveiled a new collaboration with OrdanialsBot, a program designed to mint and manage inscriptions on Bitcoin, which combines the forces of gold and ‘digital gold’ by inscribing unique serial numbers for gold bars on individual satoshis, effectively enabling the minting and trading of physical gold on the Bitcoin blockchain.
The Ordinals process involves inscribing individual satoshis (the smallest unit of BTC at 1/100,000,000 of a full bitcoin) with data, such as images or text, making them unique and giving them individual value. Ordinals are often referred to as Bitcoin's version of non-fungible tokens (NFTs).
The new service from Swarm and OrdinalsBot involves inscribing satoshis with unique gold kilobar serial numbers, allowing them to be traded on Bitcoin's Ordinals protocol.
“Establishing the ability for investors to own gold on the Bitcoin blockchain offers a unique opportunity,” said Timo Lehhes, co-founder of Swarm, in a written statement shared with Kitco Crypto. “Investors no longer need to debate whether they should hold real or digital gold when Swarm’s ordinals offer the ability to hold both simultaneously using one blockchain as a common infrastructure.”
This launch marks a unique first for the world’s safe-haven assets at a time when investors are searching for ways to maintain their purchasing power as central banks are inflating it away.
The new system allows users to trade gold on-chain and gain exposure to both physical and digital assets within a unified infrastructure, all while remaining compliant with Markets in Crypto-Assets (MiCA) regulations.
Based on the terms of the partnership, users who purchase these assets receive up to three years of storage included, with future storage costs managed programmatically. Physical gold in ounces or kilobars will be delivered to KYC-verified addresses, ensuring regulatory compliance. Buyers can select from multiple vaults around the globe, including in the United Kingdom, Dubai, and Switzerland.
“Gold is the oldest investment in the world, and the market is thriving today as much as it ever has,” said Philipp Pieper, co-founder of Swarm Markets. “Gold is the ultimate safe haven asset because it is one of the few rare assets that you can hold in your hand. Swarm’s technical approach to bringing gold on-chain offers unrivaled transparency and flexibility to any other gold product on-chain today.”
“We’re creating the Amazon Web Services of gold on-chain,” he added. “Not only will investors have unique identifiers for their NFT, linking them to a specific gold bar or ounce, but they can own and custody their gold holdings digitally via blockchain, redeem it for the physical underlying collateral, and choose where to store their physical gold. We’ve also ensured the product is compliant with MiCAR asset-reference token rules to give investors maximum confidence.”
As part of the collaboration, Gold will become the first RWA available on Trio, a marketplace developed by OrdinalsBot set to launch by the end of the year.
With interest in Bitcoin rising thanks to the launch of multiple spot BTC exchange-traded funds (ETFs), Swarm expects increased innovation on the Bitcoin blockchain, and this initiative looks to help promote the development of entire ecosystems and use cases on the Bitcoin network.
To help promote adoption, the system is designed to promote even small investments in gold, with users able to create “commodity tokens” by bundling gold NFTs, enabling investments starting at $1. They can then trade with other qualified users or opt for unrestricted options based on their compliance requirements.
Swarm Markets first unveiled their gold-backed NFTs in June, calling them the first “fully asset-backed digital gold with NFTs representing ownership, which are fully tradable and can be offered peer-to-peer.”
“Swarm’s technical approach to tokenizing gold gives investors unprecedented transparency over the collateral they own both on and off-chain,” the company said. “The gold ownership is represented in on-chain NFTs that each have unique identifiers. The gold bars will be custodied with Swarm’s key partner Brink’s, initially in its vaults in London.”
Last Thursday, the company announced the launch of bundled NFT commodity tokens, “which will allow investors to bundle together NFTs into tradable tokens,” Swarm said in a press release.
“The fully decentralized NFT-bundling platform will allow users to autonomously fractionalize real-world assets via smart contracts, into fungible xGold tokens, which can then be traded on Swarm’s dOTC platform or via Uniswap,” the release explained. “Users will receive incentives for bundling NFTs in $SMT – Swarm’s native token.”
“Starting with gold, commodity tokens deepen the DeFi integration possibilities for users, enabling them to put their assets to use on-chain, opening up lending and collateral opportunities, as well as enabling fractional gold purchasing,” Swarm said. “They are also a first step toward enabling the creation of structured on-chain products, including tokenized gold.”
“Swarm is dedicated to creating ways for DeFi users to adopt innovative and autonomous solutions for ownership and exchanging real-world assets (RWAs) on-chain,” Lehes said. “After introducing Tbills and stocks, tokenized gold was a major step in broadening the scope of what users can hold on-chain.”
“The introduction of bundled NFT commodity tokens enhances this even further and presents investors with otherwise inaccessible opportunities on-chain,” he added. “It opens up the possibility for users to autonomously collateralize their RWA NFTs and deepens the DeFi integration opportunities at a time when tokenization is revolutionizing the RWA market.”
While gold has served as a reliable store of value for centuries, especially during times of economic uncertainty, “it suffers from old-fashioned problems of storage, custody transparency, exchangeability and high barriers to entry that inhibit its efficiency as an asset,” Lehes said.
“Equally the community on-chain are demanding better forms of collateral for DeFi-based activities,” he added. “We need to start with the basics, and that’s trusted and verifiable data on-chain pertaining to real assets that sit off-chain. That’s where we believe Swarm’s approach adds real value to the DeFi ecosystem, expanding the asset universe that’s available.”
Lehes also noted that “Enabling investors to autonomously bundle RWAs such as gold for collateralization or buy commodities at lower entry points through fractionalized purchases is a big step in broadening access and enhancing the functionality of the on-chain RWA market.”
“Bundle tokens will incorporate native NFTs from and be traded on multiple chains,” Swarm explained. “For example, a bundle token could have a gold NFT on Ethereum (ETH), bundled into an ETH bundle, and be bridged and traded on BASE or Aribitrum. And vice versa. This gives users increased blockchain optionality.”
The xGold commodity tokens from Swarm are currently available on Ethereum as Ethereum-based NFTs, and the company plans to extend the service to other chains in the near future.
