1. Pax Gold (PAXG)
Pax Gold (PAXG) is a digital asset that represents ownership of a physical asset, specifically one fine troy ounce of a London Good Delivery gold bar. It is built on the Ethereum blockchain and is an ERC-20 token, meaning it can be stored in any Ethereum-compatible wallet. Pax Gold is designed to be used as a store of value and a hedging tool for individuals and institutions looking for exposure to gold.
It is issued and redeemable by Paxos Trust Company, which is a trust company and limited liability company chartered under the New York State Department of Financial Services.
2. Tether Gold (XAUT)
Tether Gold (XAUT) is a digital token that represents ownership of physical gold bars stored in professional vault facilities around the world. The design is effectively the same as PAXG, however the issuer of the token is Tether Limited, which are a less regulated and trsuted entity than Paxos Trust Company.
The advantage of XAUT is that it supports DeFi protocols and can be used to take part in yield farming on platforms such as Curve Finance, Convex Finance, Aura Finance and others.
3. Perth Mint Gold Token (PMGT)
Perth Mint Gold Token (PMGT) is a digital token that represents ownership of physical gold bars stored in the vaults of the Perth Mint, a government-owned entity in Australia. PMGT is issued by InfiniGold and the gold bars are stored in an accredited vault facility and can be physically delivered to users if requested.
PMGT is an ERC-20 token that leverages blockchain technology for faster settlement times and greater transparency compared to other gold ownership options.
Pros and Cons of Gold-Backed Crypto Assets
Gold-backed cryptocurrencies, also known as stablecoins, are digital assets that are pegged to the price of gold. The value of these cryptocurrencies is directly linked to the value of the underlying physical gold, which is held in reserve.
As with any investment, gold-backed cryptocurrencies have their trade offs. Here is a high-level overview of some of the key pros and cons to consider when buying a commodity backed crypto asset:
- Gold has a long history as a store of value and a hedge against inflation, which can provide stability for the price of the cryptocurrency.
- Gold-backed cryptocurrencies can offer investors exposure to the price of gold without the need for them to purchase and store physical gold.
- They can also offer increased accessibility and liquidity, as they can be easily bought and sold on cryptocurrency exchanges, unlike physical gold which may have limits to accessibility, storage and transportation.
- A gold-backed cryptocurrency can have lower volatility compared to other cryptocurrencies.
- As gold-backed cryptocurrencies rely on the value of physical gold, there is a risk that the gold might be stored in an unsafe or unreliable location.
- The gold reserves used to back the cryptocurrency may not be insured, which would mean that any physical loss would be borne by the investors.
- The transparency of the gold reserve may be an issue. It's important to know that there are various ways to back a gold-based crypto, which might have different level of transparency.
- Some gold-backed stablecoin projects may face regulatory issues, depending on the jurisdiction.
Overall, gold-backed cryptocurrencies can offer investors an alternative to traditional cryptocurrencies and a way to gain exposure to the price of gold. However, it's important for investors to carefully research the specifics of the gold-backed cryptocurrency they're interested in before investing, as there can be differences in terms of security, transparency and regulations.
How to Buy Gold-Backed Cryptocurrencies
The easiest way to buy a gold backed cryptocurrency like Pax Gold (PAXG) is through a regulated digital asset trading platform that offers the token. Some of the popular exchanges that offer PAXG include Binance, Kraken, Bitget, MEXC, Bybit and many others around the world.
Once you've selected an exchange and registered for a trading account, it's simply a matter of transferring your dollars or other currencies to the exchange and then buying PAXG with the funds available. The amount of PAXG you will receive will depend on the current price of gold at the time you make your purchase.
Gold-backed cryptocurrencies are an interesting way to invest in gold and can offer investors some of the benefits of a traditional gold investment. However, these investments come with their own set of risks, so it's important to understand how they work before investing. Be sure to research the token details, security measures, storage and transparency of the underlying reserves.
Additionally, be sure to choose a reliable and trusted exchange when purchasing gold-backed assets. Finally, always consider the pros and cons of any investment before committing. Ultimately, understanding how gold-backed cryptocurrencies work can help investors make a more informed decision about investing in this asset class.