Scarcity in the Digital Realm

Digital Gold Services:

Custody for Crypto Assets

CONFIDENTIAL
July 19, 2019
 CONFIDENTIAL

Bitcoin as Digital Gold

Bitcoin is digital gold

with a secure uncensorable embedded
settlement network

Asset Under Management Gold capitalization: Metcalfe's law:

worldwide: $8T “the value of a network is
$100T proportional to the square of
the number of users”.

If 2% is invested in BTC, if BTC reaches a similar level, Estimated BTC investors is

price should be: its price should be: about 50 millions; with a
forecast to 350 millions price
might increase x49:

~ $100K/BTC ~ $400K/BTC ~ $500K/BTC

© 2019 Digital Gold Institute 2/16

Bitcoin Investing has some issues
▪ Institutional investors: safe
Bitcoin Investing
▪ Bitcoins are easy to buy on
exchanges, but to leave them
there has proved to be unsafe
(multiple hacks and incidents)
▪ If you do not own your
bitcoins’ private key, then
those bitcoins are not yours
▪ High-net worth individuals
▪ Bitcoin financial sovereignty:
“be your own bank!” but
unfortunately Bitcoin safe
storage is quite technical
© 2019 Digital Gold Institute
CONFIDENTIAL
The Custody problem
custody is not their business
or competence, they rely on
custodians. Traditional
financial custody practices are The need for
for assets that cannot be crypto
stolen; those practices are ill-
suited for crypto-assets with
assets’
irreversible transactions custodians
and digital
(HNWI): threat model vaults is
(coercion, violence, ramson, exploding
etc.) suggests shielded
possession; moreover, there
are inheritance and fiscal
issues
3/16
 CONFIDENTIAL

Competitors

Some companies developed custody solutions, in particular:

1. Coinbase (https://custody.coinbase.com/) Coinbase is in

advanced talks
to acquire Xapo*
2. Xapo (https://www.xapo.com/institutions/)
3. Casa HODL (https://keys.casa/) Technical solution,
inadequate for institutional
investors

They practice (to a different degree) “security by obscurity”

*https://www.theblockcrypto.com/2019/05/16/coinbase-in-advanced-talks-to-acquire-xapo-sources/

© 2019 Digital Gold Institute 4/16

 CONFIDENTIAL

Solution: Digital Gold Services

▪ Define a public protocol fully auditable

(along the line of Blockchain Commons’ Smart Custody)

▪ Develop a proprietary implementation of the protocol

− Issue quarterly proof-of-reserve to customers
− Provide insurance guarantee scheme Avoid
− Use stress canary alert to detect coercion “security by
(e.g. periodic email from a customer as OK signal) obscurity”
− Adopt multi-location worldwide operations
− Multi-signature
− Air-gapped, battery powered PCs using constant-time code for entropy and
key generation
− Hardware wallet (HSM) risk mitigation: exogenous entropy, multi-vendor
hardware, subliminal-free digital signatures, etc.
− Implement multi-level frozen/cold custody
(along the line of Square’s subzero, see next slide)
© 2019 Digital Gold Institute 5/16
 CONFIDENTIAL

Multi-level Frozen/Cold Custody

1. Frozen wallet: HSM, multi-sig federation (including multiple

legal entities), hardware covenants
2. Cold wallet: HSM, multi-sig (DGS only), different auth team

Frozen wallet Cold wallet Client wallet

~2 weeks
Different
Funds can be moved only if signed
by the federation agents and only to
authorization
specific cold wallet addresses level
DGS

© 2019 Digital Gold Institute 6/16

Team

Ferdinando M. Ametrano TBA

Executive Officer Technology Officer

Paolo Mazzocchi TBD

Operating Officer Staff

© 2019 Digital Gold Institute 7/16

 CONFIDENTIAL

Business model

1. Create public protocol/process

2. Develop proprietary platform
3. Directly offer custody service
4. Sell white-label solution to other custodians

Traction:
▪ The Rock Trading clients looking for custodian
Estimated asset under custody (AUC): €100M
▪ Institutional investors and high-net worth individuals

© 2019 Digital Gold Institute 8/16

 CONFIDENTIAL

Market Revenues: Conservative 5Y Scenario

▪ Crypto Asset Market Cap: €180B

Bitcoin only, as of July 2019
▪ Growth Multiplier for Market Capitalization: 2x
Potential: up to 15x (i.e. $750,000 per Bitcoin)
▪ Asset Under Custody / Market Share: 1.00%
Potential: up to 5% (Coinbase wallet) or even 16% (gold
reserves of the major states/central banks)

▪ DGS Custodian Fee: 0.20%

Current fee level (Coinbase): 0.50%

Yearly Recurring Revenues: €7.2M

© 2019 Digital Gold Institute 9/16
 CONFIDENTIAL

Market Revenues: Aggressive 5Y Scenario

▪ Crypto Asset Market Cap: €180B

Bitcoin only, as of July 2019
▪ Growth Multiplier for Market Capitalization: 10x
Potential: up to 15x (i.e. $750,000 per Bitcoin)
▪ Asset Under Custody / Market Share: 5.00%
Potential: up to 5% (Coinbase wallet) or even 16% (gold
reserves of the major states/central banks)

▪ DGS Custodian Fee: 0.50%

Current fee level (Coinbase): 0.50%

Yearly Recurring Revenues: €450M

© 2019 Digital Gold Institute 10/16
 CONFIDENTIAL

Market Revenues: Plausible 5Y Scenario

▪ Crypto Asset Market Cap: €180B

Bitcoin only, as of July 2019
▪ Growth Multiplier for Market Capitalization: 4x
Potential: up to 15x (i.e. $750,000 per Bitcoin)
▪ Asset Under Custody / Market Share: 2.50%
Potential: up to 5% (Coinbase wallet) or even 16% (gold
reserves of the major states/central banks)

▪ DGS Custodian Fee: 0.25% Italian GDP is 2% of worldwide GDP;

Current fee level (Coinbase): 0.50% Italian savings is 5% of worldwide savings.

Yearly Recurring Revenues: €45M

© 2019 Digital Gold Institute 11/16
Revenues

© 2019 Digital Gold Institute 12/16

Costs (Plausible Scenario)

• Inflated 120% in the aggressive scenario

• Deflated 90% in the conservative scenario

See the dedicated cost analysis document for more details

© 2019 Digital Gold Institute 13/16
Profits

© 2019 Digital Gold Institute 14/16

 CONFIDENTIAL

Partners and Investors

• Non-investors partners have no equity
• Investors’ equity % at €5M pre-money company valuation
• Investors’ final commitments to be submitted by July 23

€1M seed money in exchange of 20% equity

▪ Exchange: The Rock Trading

▪ Law Firm: Perrone & Associati
▪ Insurance Company: TBD
▪ Audit Company: TBD
▪ Venture Capital: TBD
▪ Bank / Financial Institution: TBD
▪ Certification Authority: Intesi Group (2-?%)
▪ Tech Partner: Par-Tec (3-5%)
▪ Business Angels: Not disclosed (5-7%)

© 2019 Digital Gold Institute 15/16

Rationale and Next Steps
Rationale Next Steps
Catch a hot fintech opportunity
2019 Jul: commitment from seed investors
Develop highly sought tech skills

Achieve yearly recurring revenues in the

2019 Sep: company setup
€5-500M order

2019 Nov: insurance partner deal

Possible outcomes for the company:

1. Natural independent growth 2019 Dec: minimum viable product

2. Bought for its core solution by a major

financial institution or insurance 2020 Jan-Apr: customers onboarding
company

3. Bought for its tech skills by a major 2020 May-Jul: next investment round
player (e.g. 21/Earn bought by
Coinbase)
© 2019 Digital Gold Institute 16/16
 Ferdinando M. Ametrano
Executive Director
ferdinando@dgi.io

Paolo Mazzocchi
Chief Operating Officer
paolo@dgi.io
Scarcity in the Digital Realm

www.dgi.io info@dgi.io

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