In short, the answer is yes; cryptocurrencies can be backed by an exchange-traded commodity such as gold. The concept of a cryptocurrency being supported by an asset is not new. Rather, many have come to recognize these blockchain-based digital currencies as having stable value since coining the term stablecoins. Stable value can be achieved by pegging the token to another cryptocurrency, fiat money like the US dollar or even a precious metal by providing the associated collateral in a safe storage facility.
Some speculators continue to argue that any organization can state that they are holding the associated assets; it is only their word stating so. As a result, third parties have completed audits of different stablecoin creators to prove that said assets do exist and the company is reputable. This isn’t always explicitly stated, so the key in selecting an asset worth investing in is doing the necessary research to prove to yourself that the investment is worthwhile. In many cases, purchasers are won over when token creators provide the serial number, weight of the corresponding gold bar, or assurance rights to the gold in their vault. It also helps is the exchanges used are specialized in precious metal-backed stablecoins such as GoldExchange.
Benefits of investing in gold-backed stablecoins
According to the co-founder of Digix Gold, gold-backed stablecoins are similar to gold funds and, as a result, can be considered safe investments. They are also viable options for anyone wanting to invest in precious metals without worrying about the costs associated with storage and transportation.
There are many different gold-backed cryptocurrencies available today. To see what these currencies look like in practice, here are three popular use cases for coins that are currently in circulation.
Each PAX Gold (PAXG) token provides purchasers with ownership rights to one ounce of gold in Brink’s London vault. At any point in time, this token can be redeemed for physical gold assets or fiat currencies. To use these tokens, the parent company, Paxos, charges a fee for transactions within the blockchain and the creation and redemption of tokens.
GoldMint is based on two native tokens. The first, gold, is an investment instrument backed by gold and gold ETFs. The second is MNT. Each gold token is equivalent to one ounce of gold on the Gold Authority for Precious Metals (LBMA). Each purchaser receives a loan from a project partner for the gold purchased, which is then deposited into the Custody Bot repository. Simultaneously the gold is weighed and recorded in the blockchain network. With this information, the MINT blockchain releases an equivalent amount of gold tokens. The organization claims that for every GoldMint token sold, funds earned are invested into gold assets.
GoldCoin is another ERC-20 gold-backed cryptocurrency that is represented by 99.9% purity physical gold. Like other ERC-20 coins, it is based on the Ethereum network. The platform allows users to purchase gold in a secure online platform anonymously. Only a username, password, and email are required! The coin itself is fractionalized in nature, so investors can buy small amounts of the cryptocurrency at a time and exchange these assets for the equivalent value in gold.
Purchasing gold-backed cryptocurrencies
Stablecoins offer price stability and the ability to hold stable value in an asset, making them a desirable purchase. After conducting research and determining Gold-backed cryptocurrencies are where you would like to store your wealth, investors can look to a platform like GoldExchange to make their purchase. GoldExchange is the largest platform of this type in the world and has over 20 years of experience, proving its reputation as a trusted exchange. To purchase their first tokens, investors can use their credit or debit card.