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Company: Ampersand Markets
Who’s it built for: Mineral royalty companies (streamers), investors, and industrial buyers
Genesis Story: Co-founder and CEO of Ampersand Markets Seth Patinkin recalls conversations he had with his PhD thesis adviser, the legendary John Nash. The pioneering game theorist was interested in the idea of a global currency backed by a metal as a way to bypass the control of central banks.
Patinkin, who was a prop trader, began thinking about this idea in earnest in 2018. By then, a mutual friend had introduced him to Satya Avala, most recently the director of engineering at Yahoo Finance.
When the pair looked at the asset tokenization landscape, it was clear that the way physical assets were being tokenized wasn’t working. When tokenized, metals like silver are typically pegged to a spot price, and if a token trades at spot, there’s really no reason to choose a digital asset over the many ETFs that track metal prices.
For asset tokenization to work, concluded Patinkin and Avala, there needs to an incentive structure for both buyers and sellers of the commodity. They went in search of an adoption model.
The Big Idea: The pair hit upon an idea to create a silver token that’s comprised of two parts: physical silver and a digital right.
Ampersand’s token would use physical silver that would be placed in a vault and insured against loss, providing intrinsic value for the token. It would also issue a digital right attached to the physical silver that represents the platform’s network value — this value can scale as demand for Ampersand’s tokens increases.
By creating the digital right attached to the physical asset, buyers and sellers of silver now have a reason to hold the token.
For the sellers of silver, they can enjoy additional revenue from the sale of the digital right. And for the buyers of tokens, they’re betting on the appreciation of the digital right as the token network grows and expands, capturing utility value in the system.
“What’s also different with our tokens is that you can loan, unload, and reload them,” said Patinkin. “It’s almost like the digital right is like a digital pickup truck to load and unload the asset — just like a real pickup truck has value and utility and presumably there’s a limited rate of issuance. There’s only a certain number of pickup trucks to bring assets into the system.”
Technology Stack: Avala was intrigued by Ethereum but ultimately determined that the platform wouldn’t be able to support the governance Ampersand required with the digital and physical assets. After surveying the landscape, he chose to build on EOS.
“We have to create two different tokens that work as one,” he said. “I found EOS’ governance model gives us some more flexibility.”
Growth Plans: Over the summer of 2018, Ampersand raised a bit over $1M in seed money from a small group of private investors. Its tokens are viable on EOS and the company recently started a 12 month private sale of its tokens, primarily to crypto and digital asset investors.
Future Plans: Ampersand’s tech is ready to deploy for above ground assets. Starting with silver, the firm plans to roll out tokens for other minerals, as well, culminating eventually in the creation of a mineral marketplace.
It also has its sights set on in ground assets. Mining finance is a $100 billion market and Ampersand believes this old industry — with its heavy legal load — is ripe for tokenization. Ampersand could open up this industry to a general audience.
The company is also in talks with the CFTC to see if it can get its token defined as a commodity. There’s precedent for considering digital tokens as a commodity and if successful, this ruling would enable Ampersand to sell to a wider audience as part of some type of public offering.