What Are The Fees Associated With DGLD?
DGLD Demurrage Fee
Gold Token SA (GTSA) accrues a demurrage fee that amounts to 1% of the Token Gold per year. GTSA receives the demurrage fee in the form of new DGLD issued on Token Gold according to the inflation scheme as described below.
For instance, at initiation 1 DGLD will represent a specific mass of gold (e.g. 1/10th of a fine ounce of gold) and be divisible into fractions of 8 decimal points (0.00000001 - 100 millionth of a token). The mass of gold which 1 DGLD (or fraction thereof) is representing will then be reduced at a specific rate of 1% per year and the outstanding amount of gold will be accounted for by the issuance of a new DGLD to GTSA (issuance of the new DGLD will be automatically performed every 480 blocks).
In summary, demurrage charged to DGLD holders in the form of inflation according to the inflation schedule. The new DGLD accrues to GTSA in the form of new tokens issued automatically to GTSA as part of the sidechain consensus mechanism.
DGLD Transaction Fee
For each transfer of DGLD, a transaction fee of 0.0005 DGLD will be applied.
The transaction fee is applied to mitigate the risk of a DDoS (Distributed Denial of Service) attack on the network by making it punitive economically to mount such an attack.
DGLD Exchange Prices
Authorized Participants are under a legal agreement with GTSA to set bid and ask prices on our approved exchanges equal or below 1% of the price of the associated physical LBMA gold.
Authorized Participants undertakes to set bid and ask prices for DGLD via an exchange during electronic trading hours for the CME Gold Futures Contract (as defined at https://www.cmegroup.com/trading/metals/precious/gold_contract_specifications.html).
Authorized Participants undertakes to record its market making activities and to issue a corresponding report to GTSA, describing the actions taken in order to keep the price of DGLD in above-mentioned range compared to the price of physical LBMA gold.
Gold Token Ratio
The GTR (Gold Token Ratio) determines the mass of fine gold (in ounces) that can be redeemed for 1 DGLD token. It is defined as follows, with time t = 0 at the launch of the blockchain:
GTR = 0.1/(1 + r)^(t/N)
r is the annual inflation rate
N is the number of 8 hours periods in a year(i.e. 3 x 365 = 1095)
The annual token inflation rate is defined as:
r = 1/(1 - f) - 1
f is the annual fee (demurrage) rate(i.e. with f = 1% then r = 0.0101010101…)
The GTR applies to both issuance and redemption, so that all DGLD tokens remain fungible at all times. For example, if a 400 oz (fine mass) bar is deposited at t = 0 then 4000.0 tokens are issued (with a particular token ID) as the GTR at hour t = 0 is 0.1 ounces per token. After exactly 1 year (1095 8-hour periods), the GTR is 0.1/(1 + r) = 0.099 ounces per token, and so 4000.0 tokens can be redeemed for 4000.0 × 0.099 = 396 oz (fine mass) of gold (and 400/0.099 = 4040.40404040 tokens would be required to redeem the original 400 oz bar).
If at (8 hour) period 1095 (i.e. after 1 year) another 400 oz bar is deposited, then 400/0.099 = 4040.40404040 tokens (with a specific token ID) are issued. If these tokens were redeemed in the same 8-hour period 4040.40404040 × 0.099 = 400 oz of the bar can be redeemed. If this same amount were redeemed at (8 hour) period 2190 (i.e. exactly two years after launch) the GTR will be 0.1/(1 + r)^2 = 0.09801 and the 4040.40404040 tokens can be redeemed for 4040.40404040 × 0.09801 = 396 oz (fine mass) of gold. A 400 oz bar can be redeemed for 400/0.09801 = 4081.21620243 DGLD tokens.
The GTR is updated every 480 blocks (with a 1-minute block time). Each time the GTR is updated, all issued tokens are inflated by the amount corresponding to the change in the GTR. This inflation is performed via the reissuance of new tokens (for each asset/bar) to GTSA.