yPAX

GOLD

WHITEPAPER V.1.0
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TABLE OF CONTENTS
ABSTRACT 2

INTRODUCTION TO YPAX GOLD 4

A BRIEF HISTORY OF GOLD 9

THE MODERN-DAY GOLD MARKET 11

Investment-Grade Physical Gold 11

Challenges of Today’s Gold Market 11

Buying and Selling Gold 12

Past Attempts to Digitize Gold 14

THE DESIGN OF YPAX GOLD 15

Basics 15

Key Product Benefits 16

Using YPAX Gold 18

Technology 19

Partnerships 23

Oversight 24

APPENDIX 26

About Paxos 26

About Charles Cascarilla 26

Related Links 29
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ABSTRACT
Historically, gold has played a significant role in the global
financial system. It is scarce, chemically stable, malleable,
beautiful - and universally precious. It has endured as a store of
value for thousands of years and remains wildly popular today,
with an average of $112.2 billion-worth of gold trades occurring
daily through ETFs, derivatives and physical markets.

1. Gold endures as a preferred safe-haven in crisis, is

widely recommended as part of a diversified investment portfolio
and continues to be the preferred asset over local currencies for
billions of

2. individuals in countries with unstable fiat tender. At

Paxos, we are on a mission to digitize and mobilize the world’s
assets. We have a vision for a future where assets can move
globally, 24/7, in a frictionless economy. We see gold as being an
ideal asset for our efforts as it is uniquely desirable, yet unwieldy;
its market value is more than $9 trillion despite being a physically
cumbersome and expensive asset to own, store and
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3. In this paper, we introduce yPAX Gold, a tokenized

version of gold that represents real, physical gold. It gives token-
holders actual gold ownership in the most secure vaults in the
world along with the portability of a digital wallet. We provide
some historical context to demonstrate the importance of a
modern, digital approach to gold access. Finally, we present
details about the infrastructure behind the product, including our
structure as a regulated Trust company, the technical design of
our smart contracts and other details of our operations. We have
created the easiest way for people to affordably own, hold, trade,
lend or move investment-grade, physical vaulted gold - without
the worry, cost or inconvenience of physical storage and security.
yPAX Gold mobilizes and democratizes access to gold globally
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INTRODUCTION TO yPAX GOLD

How is yPAXG related to PAXG?

yPAXG is Defi token backed by PAXG which is infact

backed by real Gold regulated by Paxos Trust Company. Unlike
many farming defi coins, yPAXG is backed by PAXG therefore it
will always be stable with market price of real gold per 1
oz(ounce) DeFi is a new financial ecosystem: decentralized,
global, transparent, resistant to censorship, without
intermediaries and easily accessible.

Each user has total control of their assets. The goal of

decentralized finance is to provide a global and transparent
alternative to centralized finance for all the financial services that
people use.

DeFi is bringing a revolution to personal finance, and yet all

that is needed is to become a part of this revolution is an internet
connection and a smartphone! The alternatives to traditional
centralized finance that this new financial ecosystem offers
include decentralized loans, decentralized oracles, and non-
custodial token exchanges. These financial instruments put the
power of choice back into the hands of the consumer
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Why Should You Stake/Farm Your PAXG?

Well no doubt PAXG itself is a good asset worth holding long
term,since its backed by Gold, but holders can only gain their
holdings value if and only if Gold price increases. To eliminate this
problem and let PAXG holders earn passively we will let PAXG
holders convert their PAXG to yPAXG and get a fixed APY of
365% of their Holdings(totally unlocked daily 1% returns in
yPAXG).

How Tokenomics work in yPAXG?

Tokenomics will also get replicated to that of PAXG.PAXG is
among top 110 Cyrptocurrency in world, yPAXG Tokenomics will
be kept in 1:1 ratio with PAXG with our advanced minting/burning
mechanism. Currently there is around 38000 Circulating Supply
of PAXG, so yPAXG will replicate the circulating supply of PAXG.
Therefore, 1 PAXG = 1 yPAXG ~ 1900$ (varies with gold market
price)

How yPAXG is different from other pump and dump farming

coins?
First of all unlike other farming coin tokenomics we don't have
allocation for team/advisors,marketing,developement,reserved
etc. All 38000 tokens will get allocated to
community(Airdrops/Pre-Sale), we will burn/mint tokens from
circulating supply to keep the price backed by PAXG [1 PAXG= 1
yPAXG ~ 1900$ (varies with gold market price). All unsold tokens
will remain backed by PAXG to have sufficient tradeable liquidty.
Since we offer fixed APY of 365%, backed by leading top 110
cryptocurrency PAXG hence its risk free of any dump. Our
Automated Market Maker will execute trades at minimum
slippage/mint/farm/provide liquidity with every trade/staking.
With yPAXG you can get daily 1% on you PAXG Holdings.
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How fixed 365% APY is possible on staking yPAXG?

With our primary token PAXG which is centralised token
backed by real gold regulated by Paxos Trust Company. We
need to lock up the real gold in Vaults, so its value will only grow if
gold market price increases. With yPAXG we will mint the
equivalent staked yPAXG and without risking Stakers yPAXG we
will risk the minted yPAXG to many mid to high risk/yield pools
and make sure atleast 365% APY be provided to stakers. The
team will only get profit if the yields are more than 365%, hence
your staked/holded yPAXG is never compromised in any sort of
risk.

Today’s gold market is defined by a fundamental

contradiction: there is currently no investment-grade physical
gold product that is both easy to own and easy to trade. Buyers
can own large quantities of physical, allocated, investment-grade
gold, but it is expensive to store, not easily divisible, cumbersome
to move and, therefore, very difficult to trade or leverage.
Alternatively, investors can trade wholesale, unallocated gold,
gold ETFs or gold futures which are all derivatives or securities,
but not ownership of the underlying gold.

The product being traded is merely synthetic gold value. In

other words, the price of liquidity and fungibility for gold inventors
(or any commodity investor) is the lack of ownership in the real,
physical asset. Paxos provides an innovative solution to these
fundamental tradeoffs with PAX Gold (PAXG). It is a digitized
version of real, physical gold of the highest quality: London
Bullion Market Association-accredited London Good Delivery
gold bars held in the most secure vaults in the world.
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These investment-grade gold bars are typically about 400

fine troy ounces, each worth over $600,000 (according to today’s
market prices in August 2019), and therefore typically only
accessible to the largest of institutions. By tokenizing this gold
and putting it on a blockchain, Paxos is making it possible for
anyone to own fractions of this highly desirable and secure gold.
PAX Gold solves the fundamental challenges of the gold market
and democratizes access.

Each PAXG token represents one fine troy ounce of

physical gold from a specific serialized gold bar. If customers own
enough PAXG to represent an entire gold bar, they can redeem
their tokens for a bar of gold. On the other hand, ownership can
be divided into units up to 18 decimal points, making it possible to
own miniscule amounts of top-quality gold for the first time. PAXG
is built as an Ethereum-based ERC-20 token so that it has
portability across the Ethereum blockchain’s extensive network
of wallets, exchanges, lenders and other platforms. Paxos is
uniquely positioned to offer a gold token as it is the only company
to hold all of the following distinctions:

1) Paxos Trust Company is a regulated financial

institution and qualified custodian. Paxos is a state-
chartered trust company regulated by the New York State
Department of Financial Services (NYDFS) and must uphold the
highest standards of customer asset protection. Additionally, the
NYDFS has approved and regulates PAXG.
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2) Paxos maintains relationships with large

institutions in the gold market due to Paxos’ history
providing post-trade products, including confirmation and
affirmation services, to the gold and broader FX and commodity
market. As a result, it has been able to secure partnerships with
top gold providers, vaults and miners to ensure PAX Gold is only
supported by the highest-quality gold and stored in some of the
most reliable vaults in the world.

3) Paxos has established success in creating

asset-backed tokens. Paxos is the issuer and custodian of
the asset-backed token Paxos Standard (PAX) as well as the
custodian of the asset-backed token HUSD. Paxos understands
the intricacies of the technology and business requirements
needed to build a product and create a market for this class of
offering. PAX Gold solves the challenges of today’s gold market
by marrying the benefits of physical gold ownership with the
speed and mobility of digital assets.
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A BRIEF HISTORY OF GOLD

Understanding the historical role of gold helps to
contextualize how important it has been, and continues to be, to
society. Gold had a role in commerce dating back to the
emergence of ancient human civilizations. As the technical
capacity for the production of goods became more sophisticated,
metals became useful in developing monetary systems. Gold in
particular was durable, malleable, attractive in color, unlikely to
corrode or decay and, above all, scarce. Its universal desirability
led to it becoming a store of value across generations and
geographies. The Greeks were the first civilization known to use
gold to create coins used in commerce more than 2500 years
ago. Until the 20th century, gold was used as the primary medium
of Exchange and the basis for most monetary systems. For
example, in 1717, Great Britain adopted the gold standard and
the United States followed with a gold-silver standard in 1792.

Under these systems, the value of the local currency was

affixed to a set weight of gold and/or silver. The greatest
challenge to the gold standard was the outbreak of World War I,
as many major economies shifted away from the system to
expand monetary supply and finance the war effort. Monetary
turbulence around the world settled after the end of World War II
when the Bretton Woods agreement of 1944 established the gold
standard-based U.S. Dollar as the underlying currency to which
44 other nations pegged their currencies. This system remained
in place until 1971, when the U.S. Dollar was officially taken off
the gold standard and rendered a fiat currency: government-
issued money without intrinsic value or gold backing.
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Since that time, the fiat currency system has evolved and
helped facilitate a global economy. But the value of fiat in
comparison to gold has diverged widely. In comparison to the
value of gold, today’s U.S. Dollar has lost 97% of its value. One
ounce of gold, worth $38 in 1971, is today worth more than
$1500. Other fiat currencies have depreciated even further. Gold
has become an individual asset class with distinct market
dynamics. It’s also featured in investor portfolios all over the
world as a long-term investment that retains or steadily increases
in value.

Despite these evolving dynamics, gold has maintained its

desirability and value. More than $3.5 trillion of the total gold
available today is used solely for investment purposes, but the
core challenges remain: gold is a heavy and cumbersome asset
that is not easily movable nor broadly accessible.
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THE PRESENT-DAY GOLD MARKET

Investment-Grade Physical Gold
This market analysis is focused on the largest wholesale
market for high quality gold: the Loco London markets,
standardized by the London Bullion Market Association (LBMA).
The LBMA sets standards for gold bars and the refiners that
produce bars for the London market. The most trustworthy gold
bars that meet the highest standards for quality and are produced
by accredited refiners are referred to as London Good Delivery
bars. These bars are generally 400 fine troy ounces (t oz) but can
range between 350 and 430 t oz, with a minimum fineness of
99.5% gold. Each bar has a set of markings that denote the bar’s
individual serial number, its refiner, its fineness and the year of
manufacture. The LBMA ensures refiners that produce London
Good Delivery bars adhere to quality standards and responsible
sourcing practices.

London Good Delivery gold can be purchased in two forms:

allocated and unallocated. A customer purchasing allocated gold
has ownership over specific gold bars that can be held in a vault
or by the customer. A customer purchasing unallocated gold
does not have ownership over specific gold bars, but rather has
entitlement to some share of a certain quantity of gold.

Challenges of Today’s Gold Market

Most processes related to the buying, selling, transferring,
confirming and settling of gold assets between parties remains
largely manual, opaque and outdated. The reliance on manual
processing is error-prone and impacts the flow and liquidity of the
market in a meaningful way.
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The market is largely restricted to qualified investors; practically

meaning that much of the value of gold is not readily available or
widely accessible.

Additionally, the size and weight of physical gold is a

fundamental challenge to the market. Physical gold bars are
difficult to transport and costly to store so investors find it too
cumbersome of an asset in which to invest. These challenges
exist for both institutional and retail investors of gold bullion.
Today’s methods for investing overcome some of these inherent
physical challenges, but each market venue or instrument has its
own unique limitations.

Buying and Selling Gold

There are a few primary ways to acquire investment-grade
gold: over-the-counter (OTC) trading, gold exchange traded
funds (ETFs), gold futures or retail gold outlets.

Over The Counter Trading (OTC)

The majority of investment-grade gold is traded over-the-
counter as unallocated gold in spot markets. The London Over
the Counter (OTC) Bullion Market is the largest spot market, with
approximately 80% global market share. In order to participate in
this market, customers (almost exclusively institutions) must
have a direct or indirect account with one of the members of the
LBMA. Five clearing banks, forming the London Precious Metals
Clearing Limited (LPMCL), manage the clearing and settling of
unallocated gold for the entire London Bullion Market. The
LPMCL are the banks that maintain gold accounts for settlement
of trades with each other and on behalf of third-party
counterparties.
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Once physical gold has been traded and acquired on an

unallocated basis, a purchaser can ask for physical delivery
(allocated gold) which generally takes several days and incurs an
additional fee. The gold is secured, stored and safeguarded at a
precious metals security facility within locked London vaults.

Gold Exchange-Traded Funds (ETFs) and Futures

Gold ETFs track the underlying value of the gold commodity
and are marketable equity securities that can be traded on
securities exchanges. ETFs are more accessible to investors
than OTC as there are low barriers to entry (brokerage account),
requiring only a brokerage account. They can be easily bought
and sold like other equity securities, while tracking the price of
gold. Gold ETFs are backed by either physical gold or futures
contracts.

Futures contract represents the price of a fixed quantity of

gold with a predetermined date for future delivery. Nearly 27
million oz of gold futures are traded daily on commodities
exchanges, the NY-based COMEX being the largest in the world.
Gold futures are often used as a way to speculate or hedge price
risk. Futures are complex financial instruments that provide
significant leverage (10-20x) and may be risky for
unsophisticated investors that do not have a significant amount
of capital at hand. Additionally, futures contracts expire every 3
months, and redeeming for physical gold requires certain
minimums and can be difficult and costly.
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Retail Gold Outlets

Gold bars and coins of varying weights can be purchased
directly through gold refiners or bullion dealers. At retail,
consumers typically purchase fractional amounts of gold, such
as an ounce or gram bars or coins. Smaller bars and coins have
higher retail markups and their purity is difficult to guarantee. The
average retail buyer usually does not have either the capital
($600,000) or the storage capabilities required to buy large,
institutional grade bars nor the ability to manage the complexity
of buying London Good Delivery bars directly.

Past Attempts to Digitize Gold

There have been multiple attempts to create a digital
representation of gold, both blockchain and non-blockchain
based, but none have achieved significant market scale. Many
are backed by gold of unknown origin (i.e. not London Good
Delivery bars) or are not even necessarily backed by physical
gold. Another major drawback is the way in which storage fees
are treated. Some stipulate that any exchange or wallet that
holds users tokens must remove a certain amount on a regular
basis to account for custody fees. Others make the token
depreciate in value to account for fees. Neither are optimal, and
therefore typical crypto asset exchange venues have been
reluctant to list these tokens for trading.
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THE DESIGN OF yPAX GOLD

Basics
yPAX Gold is a digital asset where one token represents
one fine troy ounce of a London Good Delivery gold bar, stored in
professional vaults in London. Anyone who owns yPAX Gold
owns
the underlying gold which is held under the custody of Paxos
Trust Company. The value of yPAX Gold therefore also tracks
with the real-time market price of gold.

yPAX Gold is built as an Ethereum-based token following

the ERC-20 protocol, making it compatible with all Ethereum
wallets that accept ERC-20 tokens. All transactions operate
according to the rules of the smart contract on the Ethereum
blockchain. Because of this smart contract, transactions
eliminate human error and the system operates only as
programmed.

Like any Ethereum-based token, yPAX Gold is available

24/7 to facilitate settlement against various assets. Unlike
traditional gold, which is only available to settle trades during
banking business hours, yPAX Gold can move anywhere,
anytime.

=
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Key Product Benefits

● Allocated - yPAX Gold is backed by physical gold and is
allocated down to the serial number of each individual bar.
Because yPAX Gold operates on the Ethereum blockchain, it is
also instantly transferable globally. The allocated ownership
moves with the token transfer, which makes trading of allocated
gold easier and faster than ever.

● Redeemable - yPAX Gold is redeemable in several forms,

unlike any gold products available today. Customers can convert
their yPAX Gold into physical allocated gold, unallocated gold
entitlements or fiat. Through Paxos.com, customers can redeem
full-sized London Good Delivery gold bars. Through a network of
gold retailers, they can convert smaller amounts to physical gold
all over the world.

● Programmable - Due to the digital and programmable nature

of the smart contract, yPAX Gold is easy to convert, trade or use
in many other ways. Programmable gold creates significant new
functionality in the trading world.

● Regulated - yPAX Gold is issued by Paxos Trust Company, a

financial institution regulated by the NYDFS. The NYDFS also
regulates Paxos’ individual products, ensuring greater customer
protections and higher standards of operation. The NYDFS has
specifically approved yPAX Gold as an authorized and regulated
Paxos product.

● Available to Anyone - Given that yPAX Gold has a very low

investment minimum (0.01 yPAXG or ~$15), fractional bar
ownership is now possible for retail customers unlike ever
before. Any individual or institution can buy yPAX Gold.
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● Low Fees - yPAX Gold has low fees and is a significantly more
attractive vehicle for investment as compared to other gold
products. There are no storage fees and low creation/destruction
fees that are tiered based on volume. For transactions that occur
on-chain (transferred via Ethereum), there is a low Paxos
transaction fee (0.02%) as well as the usual Ethereum gas fees
(typically a few cents).

● Bankruptcy Remote - Since yPAX Gold is issued by a state-

chartered trust company, customer assets are kept separately
from the company’s assets. All gold bars represented by PAX
Gold tokens are custodied by Paxos for yPAX Gold holders and
do
not become a part of the company’s estate in the event of the
company’s insolvency.

● Decentralized - By operating on an open blockchain, yPAX

Gold maintains the inherent nature of gold. No single entity or
group controls access to the asset or has the ability to control the
entire market.

● Easy to Trade - On Paxos’ itBit and other exchanges, yPAXG

will trade against fiat and digital assets.
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Using yPAX Gold

yPAXG tokens are created and destroyed by Paxos as
needed. Paxos account holders can convert yPAX Gold into U.S.
Dollars or unallocated gold in a Loco London unallocated gold
account, and vice versa. If customers hold more than 430 oz in
yPAX Gold, they can redeem their tokens for a physical gold bar.
Paxos charges fees for creating and destroying tokens according
to the fee schedule tiered by volume, posted on www.paxos.com.
The purchase minimum on the Paxos platform is 0.01 yPAXG
(plus a 0.02 minimum yPAXG creation fee).

At any time, yPAX Gold holders can go to the Paxos website

to retrieve the serial number and physical characteristics of the
vaulted gold they own. The only input required is an Ethereum
address holding yPAX Gold tokens.

yPAX Gold is a compelling asset for investors and active

traders alike, whether retail or institutional, as well as market
participants both inside and outside of the crypto-asset
ecosystem.

Bitcoin enthusiasts are also often attracted to gold for many

of their shared properties: they are decentralized, "outside"
assets that are no one else's liability and are not tied to any
particular government; they are both scarce; they both transcend
borders and are universally recognized. We expect that many
who hold and trade Bitcoin are also likely to be interested in
holding and trading gold, and that yPAX Gold will be an easy
introduction to a new asset class within a familiar ecosystem.
yPAX Gold will be listed on crypto-asset exchanges globally and
will trade directly against bitcoin and other crypto-assets.
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For the many people globally who are interested in holding

physical gold as an investment, yPAX Gold is an attractive option
since it charges no storage fees, is allocated to high quality gold
and is highly accessible. People who hold gold may be interested
in moving their holdings to yPAX Gold.

Finally, we expect the lending and borrowing against gold to

be a major use case. yPAX Gold is likely to be adopted by crypto
lending platforms, allowing users to potentially earn interest on
their yPAX Gold. This is likely to be especially attractive to those
who already hold gold.

Technology
yPAX Gold is an ERC-20 token on the Ethereum blockchain
issued by Paxos. An ERC-20 token is an Ethereum smart
contract that follows a standard protocol for representing custom
tokens on the blockchain. Specifically, the contract must declare
basic token characteristics (name, symbol, decimal precision),
track the total number of tokens, track a token balance for each
Ethereum address, and permit address owners to transfer
portions of their balance to other addresses. Because yPAX Gold
follows the standard ERC-20 protocol, many Ethereum-
supporting exchanges and wallet applications already have built-
in support for viewing and transferring yPAX Gold.
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The benefits of building on Ethereum and ERC-20 include:

● The security and availability guarantees of one of the largest
global blockchain networks (Ethereum) and its proof-of-work
model;
● A simple and familiar smart-contract pattern;
● Publicly verifiable token supply, account balances, and on
chain procedures;
● Ability to integrate with other smart contract applications like
distributed exchanges, distributed apps, and swap contracts;
● Broad adoption by crypto stakeholders such as exchanges,
crypto asset organizations, institutional investors and retail
users;
● Reduced dependency on any single authority due to
decentralization; and
● Access to a broad market that includes all individuals with an
internet connection.

yPAX Gold is only available on Ethereum today, but it may

also be launched on other chains in the future if there are
compelling benefits. The Ethereum contract address is
0x45804880De22913dAFE09f4980848ECE6EcbAf78.

All London Good Delivery gold bars are identified by serial

number and weight; ownership of yPAX Gold is represented as
fractional ownership of the corresponding gold bars. Since
customers are buying and selling fractions of specifically
allocated gold bars through their buying and selling of yPAX Gold
tokens, the odd result might be that a particular customer could
hold fractions of several different gold bars. Paxos will make an
effort to allocate yPAX Gold tokens to the fewest number of gold
bars possible per unique Ethereum address. This allocation may
happen on a daily basis.
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In the event customers are not allocated ownership of a full

gold bar, customers will own a pro rata share of that bar as
determined by yPAX Gold token holdings. Paxos may also
reallocate yPAX Gold tokens to different bars from time to time in
order to take into account transfers of tokens, new exchanges of
tokens, conversions and other yPAX Gold transactional activity.
yPAX Gold holders can always go to paxos.com to see the serial
number(s), purity and weighting of each bar(s) to which their
tokens are allocated at any given time. Some distinctive features
of the yPAX Gold smart contract are included here. Additional
details can be found in the smart contract code repository.

Fees
Paxos charges a set fee rate for all on-chain transfers of yPAX
Gold. The fee controller has the ability to set the fee recipient and
the fee rate (measured in 1/100th of a basis point). Paxos will
never change the fee rate without prior notice as we take
transparency very seriously. The fee rate will likely only change
rarely.
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Asset Protection Role

As required by our regulators, we have included a role for
regulatory compliance to freeze or seize the assets of a criminal
party if, and only if, required to do so by law, including by court
order or other legal process.

The AssetProtectionRole can freeze and unfreeze the PAX

Gold balance of any address on chain. It can also wipe the
balance of an address after it is frozen to allow the appropriate
authorities to seize the backing assets.

Paxos will not execute these functions on its own accord,

will utilize it extremely rarely (if at all) and only under extenuating
circumstances. The list of frozen addresses is available in is
Frozen(address who).

BetaDelegatedTransfer
This feature allows gas fees for on-chain transactions to be
covered by a specified party (for example, if a specific platform
wants to cover gas fees for all yPAXG transactions for their
customers). The implemented code is a variation of EIP-865. The
public functions betaDelegatedTransfer and
betaDelegatedTransferBatch allow an approved party to transfer
yPAX Gold on the end user's behalf given a signed message from
said user. Because EIP-865 is not finalized, all methods related
to delegated transfers are prefixed by Beta. Only approved
parties are allowed to transfer yPAX Gold on a user's behalf
because of potential attacks associated with signing messages.
To mitigate some attacks, EIP-712 is implemented, which
provides a structured message to be displayed for verification
when signing.
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function betaDelegatedTransfer (bytes sig, address to, uint256

value, uint256 serviceFee, uint256 seq, uint256 deadline ) public
returns (bool)

Partnerships
With respect to sourcing of physical gold, streaming of gold
pricing, and swapping of yPAX Gold tokens for allocated or
unallocated gold (and vice versa), Paxos will leverage the
services of reputable institutions in the physical gold trade.

Paxos has opened accounts with Brink’s bullion vaults in

London, one of the six bullion vaults for London gold, which will
maintain the vault or vaults for storage of allocated gold
corresponding to yPAX Gold tokens. As a fiduciary and qualified
custodian, Paxos custodies gold for yPAX Gold token holders in a
segregated account at the vault. For sourcing of gold, Paxos also
maintains an account with INTL FCStone, a well-established
gold-trading and wholesale institution, that sells gold to Paxos
and buys gold from Paxos as needed for token issuance and
redemption.

Customers can also purchase or redeem yPAX Gold at

participating gold retail locations or websites, such as Bullion
Exchanges.

We expect yPAX Gold to be available on partner

exchanges, wallets, lending platforms and more
in the near future.
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Oversight
Paxos has always sought to be highly transparent with
robust third-party oversight. With this foundation, it has been a
leader amongst blockchain-related companies in regulatory
compliance. As the first regulated trust company to trade digital
assets, Paxos continues to work closely with regulators and other
supervisory authorities in the existing financial services
ecosystem.

Regulatory Approval
In 2015, the NYDFS granted Paxos its Limited Purpose
Trust charter and it continues to regulate the company as a Trust
organized under New York banking law. This includes ensuring
consumer protection through maintenance of substantial capital
reserve requirements, frequent regulatory examinations and
monitoring of our operating procedures. Not only does the
NYDFS regulate Paxos at the company level, but it also regulates
Paxos’ suite of products and services.

In 2018, the USD-backed PAX Standard token was granted

regulatory approval by the NYDFS and continues to be overseen
by the regulator. In July 2019, the NYDFS granted regulatory
approval for the PAX Gold token. The approval process included
an in-depth vetting of Paxos’ internal token-specific operational
and compliance workflows and its consumer protection
measures. In addition, Paxos has secured the advice of legal
counsel that PAX Gold should not be considered a security or
futures contract under U.S. securities and commodities laws.
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Financial Audit
Paxos works with a third-party, independent, trusted,
nationally top-ranking public accounting firm to review and attest
on a monthly basis that yPAX Gold tokens correspond 1:1 with
ounces of London Good Delivery gold held in vaults by verified
third-party partners.

Smart Contract Audit

The PAX Gold smart contract is based upon the Paxos Standard
smart contract which was audited by three third-party specialists
(Nomic Labs, ChainSecurity, and Trail of Bits) in September-
October 2018. In January 2019, Trail of Bits performed an
additional audit for a potential upgrade to the yPAX USD smart
contract.

Once the yPAX Gold contract was developed, Paxos

engaged two third-party specialists: ChainSecurity and CertiK.
ChainSecurity, a leading research lab in blockchain security,
audited the new code differentiating yPAX Gold from yPAX USD
and proposed amendments which Paxos implemented. CertiK, a
technology-led blockchain security company founded by
Computer Science professors from Yale University and
Columbia University, audited the entire yPAX Gold smart
contract and performed formal verification using its proprietary
technology that applies rigorous and complete mathematical
reasoning against code. CertiK proposed amendments
regarding code organization, coding style and best practices
around signature verification. Paxos incorporated these
suggestions into the yPAX Gold smart contract.
 26

Transaction Monitoring and Surveillance

Paxos utilizes third party analytical tools from
ComplyAdvantage and Chainalysis to monitor transactions on its
platform and on the blockchain. Monitoring is conducted to detect
and investigate potential instances of fraud and money
laundering. Because yPAX Gold is built on the Ethereum
blockchain, it is also possible and easy for anyone to review the
entire history of transactions on the chain.

APPENDIX

About Paxos
Paxos is a regulated financial institution on a mission to create a
global, frictionless economy. By building infrastructure to enable
the movement between physical and digital assets, Paxos is
creating a future where all assets—from money to commodities
to securities—are digitized and can move instantaneously, 24/7.
Today, as the first regulated Trust company for digital assets,
Paxos technology makes it possible to custody, tokenize, trade
and settle assets. Our institutional-grade stablecoin, yPAX
Standard (yPAX), is the world’s most popular alternative
stablecoin, and our digital asset exchange, itBit, is one of the
leading Bitcoin trading platforms. With offices in New York,
London and Singapore, Paxos takes a global view of
modernizing the financial system. Learn more at
www.paxos.com.

About Charles Cascarilla

Charles Cascarilla is the CEO and co-founder of Paxos. With
over 20 years of experience in financial services, Charles has a
unique perspective on integrating blockchain technology with
traditional systems.
 27

Before Paxos, Charles co-founded institutional asset

management complex Cedar Hill Capital Partners in 2005 and its
blockchain-focused venture capital subsidiary, Liberty City
Ventures (LCV), in 2012. Through LCV, Chad has invested in
many promising blockchain companies including Abra, BitGo,
BRD, Earn.com and more. He was a founding member of
CoinCenter and the Association for Digital Asset Markets.

Earlier in his career, Charles was a portfolio manager at

Claiborne Capital and an analyst at both Bank of America
Securities and Goldman Sachs. He serves on the board of
several charities and private companies including Project ALS
and The Centurion Foundation.

Charles holds a B.B.A. in Finance from the University of

Notre Dame and is a CFA charterholder.

Related Links
● COMEX Gold Futures -
https://www.cmegroup.com/trading/why-futures/welcome-to-
comex-gold-futures.html
● Ethereum Foundation - https://www.ethereum.org/
●London Bullion Metals Association -
http://www.lbma.org.uk/home
● SPDR Gold Shares - https://www.spdrgoldshares.com/
● World Gold Council - - https://www.gold.org/