Token Redemption
exit mechanism
Token Redemption refers to the process of exchanging a digital asset ÔÇö such as a tokenized commodity or currency ÔÇö for the physical asset it represents. In the context of precious metals, token redemption allows the holder to convert blockchain-based tokens like KAU or KAG into real, deliverable gold or silver.
Use Case: “Kinesis users can redeem KAU and KAG for physical gold and silver, providing a rare digital asset that maintains real-world convertibility and ownership.”
Key Concepts:
- Physical Settlement ÔÇö Converts digital tokens into tangible bullion or delivery receipts.
- Fully Allocated Backing ÔÇö Requires 1:1 metal reserves held in audited vaults.
- Legal Ownership ÔÇö Tokens confer direct claim to the underlying physical asset.
- Exit Flexibility ÔÇö Allows movement between digital convenience and physical protection.
Summary: Token Redemption is the ultimate trust mechanism for asset-backed tokens. It ensures users can not only trade and store value digitally, but also reclaim real gold or silver at will ÔÇö reinforcing financial sovereignty and tangible wealth in a digital age.
| Feature | Redeemable Token | Non-Redeemable Asset | ETF or Synthetic |
|---|---|---|---|
| Physical Delivery | Yes ÔÇö By request or jurisdictional pickup | No | No |
| Backing Type | Fully allocated metal reserves | None or abstract token model | Unallocated pooled reserves |
| Ownership Structure | Direct legal claim | Symbolic or contractual | Shares in a trust |
| Sovereignty | High ÔÇö Can reclaim physical asset | Low ÔÇö No tangible fallback | Low ÔÇö No redemption rights |
| Examples | KAU, KAG, PaxG | BTC, DAI, most crypto | GLD, SLV, COMEX contracts |