According to official statements from the Coinify, the new partnership will enable participants in the global bitcoin community to purchase Ethereum digital assets using bitcoin, while leveraging on Digix’s fraud-resistant and decentralised approach in the creation of blockchain gold assets and tokens.
According to a report by the International Business Times, strategic partnership that meld the functionality of bitcoin with physical assets like gold – and eventually diamonds – Digix was incepted on the concept of ‘coloured coins’ concept but pivoted to become an asset tokenisation platform based on Ethereum.
In a statement to the International Business Times, Kai Cheng Chng, the CEO and co-founder of Digix, stated: “Basically, the longer the chain gets the slower the verification becomes because you have to scan the blockchain all the way to the original transaction. It’s actually an exponential which you can’t get around without having a centralised ‘oracle’ to store the transaction history.
Chng added, “We tried again on Counterparty, but also encountered several problems. Augur, another company built on Ethereum, has expressed similar concerns here as they went through similar issues like us.”
Noting the superior speed of Ethereum transaction confirmations – averaging 14 to 17 seconds versus Bitcoin’s 10 minutes – Chng also noted that bitcoin-based solutions did not offer a comparable level of security. In an interview with Bitcoinist, he explained how three modular processes worked together, saying they, “… provide a chain of custody for an asset, which makes the platform suitable for much more than gold.”
Explaining its basis in purchasers being granted a certificate on the Ethereum blockchain in a process called the proof of asset protocol, after purchasing gold with bitcoin, which sees the documentation regarding the owner’s gold bullion uploaded on to InterPlanetary File System (IPFS) and permanently affixed on the internet.
The second layer of the protocol is where this file is hashed to attain a fixed byte length, with each entity having to use their digital key to privately sign on the blockchain to acknowledge these certificates.
From here, purchasers are then able to convert their digital gold token into other assets, trading it on a peer-to-peer (P2P) basis or through crypto-exchanges.
Commenting on its differentiation, Chng explained to the International Business Times: “Once we deploy it onto the Ethereum network, it remains there indefinitely. We are using the public infrastructure to store all the transactional history and data, so there is no chance of a malicious employee breaking in to our system to change any transactions or to steal the coin, so to speak.”
Commenting on the partnership, Mark Højgaard, CEO of Denmark-based bitcoin payments processor Coinify, stated: “We always seek new ways to support the digital currency adoption. In this case, we see a great fit because Digix is build on blockchain-based platform for applications and Coinify provides payment processing for bitcoin.”