Precious metals like gold have always been key commodities in the trade market. With the soaring gold prices, the cryptocurrency trade market is turning to gold-backed cryptocurrency tokens. While this idea is relatively new, it has prospects of making cryptocurrency more stable.
Considering how relatively new these innovative alternatives are, many traders may be unsure of where to begin. Here are the five best gold-backed cryptocurrencies in 2020.
1. Perth Mint Gold Token (PMGT)
Backed by actual gold blocks from Western Australia’s Perth Mint, PMGT is among the best gold-backed cryptocurrency tokens available. What makes this cryptocurrency valid is the fact that the Australian government guarantees the weight and purity of the gold. The Perth Mint issues digital gold certificates as proof via the GoldPass app.
These certificates can then back PMGT tokens, at a token to certificate ratio of 1:1. Traders can exchange these tokens on platforms such as KuCoin. PMGT is a very competitive and cost-effective alternative to traditional gold assets, e.g. banked gold transfers and gold ETFs since they incur no fees for insurance, custody and storage.
InfiniGold provides real-time verification on the amount of actual gold backing the PMGTs relative to the number of GoldPass accounts created by the Perth Mint. Traders can fully redeem their PMGT holdings for physical gold even though their liquidity is relatively low.
2. DigixGlobal (DGX)
Provided by DigixGlobal, a Singapore-based company, these tokens have a value of 1 g of gold per token. Vaults in Singapore and Canada hold the gold that backs these tokens. For additional security, the Bullion Association fully insures and accredits the vaults that store this gold.
DGX tokens provide an effective way of dividing, redeeming and transferring actual gold bars through buying and selling virtual gold in the form of tokens. The founders of DigixGlobal created this digitization process to normalize access to gold.
Unlike GoldPass however, DigixGlobal charges traders a 1% fee to trade their tokens for actual gold. DigixGlobal incurs the demurrage fee, i.e. gold storage costs. With a market cap slightly under $6 million, the exchange of these tokens is very thin.
3. Gold Coin (GLC)
This gold-backed cryptocurrency is fractional, which means one coin is worth a fraction of one gram of gold. As such, this means that the barrier to entry for Gold Coin is incredibly low. This contrasts with some other coins, as well as gold itself, where the buy-in can be rather costly.
Gold Coin is on the Ethereum blockchain and has been around for years. The stable platform, along with the ease of entry, means this is one of the safer choices. You can invest in it incrementally as it gains your trust without breaking the bank right off the bat.
4. Tether Gold (XAUT)
Tether, the largest issuer of USD-backed stablecoin, now has a gold-backed token called XAUT. Formally provided by TG Commodities Ltd, each of Tether’s tokens represents a single troy ounce of gold on one London Good Delivery bar of gold.
Tether holds its gold reserves in Swiss vaults and allows the token holders to search for the serial numbers of their specific gold bars on the company website. Investors can request Tether to deliver their gold physically or redeem it for cash.
XAUT tokens reside on blockchains such as Ethereum and TRON. The current market capitalization of XAUT is approximately $50 million.
5. Meld Gold
Meld Gold, an Australian tech start-up, has joined hands with a blockchain protocol called Algorand to develop decentralized gold tokens. Through their robust digital platform, Meld Gold plans to revolutionize the buying and selling of gold by integrating into the current gold supply chain.
This integration will enable them to deliver almost instant gold trading and settlement via tokenization. According to the creators of this platform, investors will be able to transact in both virtual gold tokens and physical gold. Some potential benefits of this platform include enhanced accessibility, efficiency, and transparency of transactions.