Best Crypto Coins Backed With Gold
Are there any crypto coins backed with gold? Yes, of course. Gold-based crypto can be an alternative stablecoin for investors who looking for stability. By gold as the underlying, the performance of gold-based crypto will be greatly influenced by the world gold price.
Technically, gold-based crypto is another variant of stablecoins. This is because stablecoins are crypto assets whose value is pegged to stable-value assets in the real world. For some people who still believe in gold as an asset that can protect wealth, it becomes more valuable because of the popularity and credibility of gold.
What Is Gold-Based Crypto?
Gold-based crypto is a digital asset whose value is secured by physical gold, providing price stability and facilitating gold investment without storing physical gold.
By making gold as an underlying, every crypto coin in circulation must have the same amount of real physical gold stored in a custodian.
How Does Gold-Based Crypto Work?
The gold-based crypto works by tokenizing physical gold which then the transactions will be stored and work on the blockchain network. The tokens on the blockchain will represent ownership of the physical gold managed by the issuer. While the physical gold that is used as the underlying will be stored by the custodian, be it banking or third-party institutions.
The benchmark ratio between gold-based crypto assets and physical gold can vary. Some use a ratio of 1: 1 (1 token is equivalent to 1 troy ounce or 1 gram of gold) or smaller fractions.
Generally, gold-based crypto tokens use the ERC-20 token standard. This means the tokens can be traded, sent, and stored in wallets that support ERC-20 tokens.
Some gold-based crypto issuers also offer the feature of exchanging tokens into physical gold. If the investor decides to exchange the token, later the issuer will burn the token so that it removes it from circulation according to the number of tokens exchanged.
Benefits Of Gold-Based Crypto
By using gold as a base and utilizing by advanced blockchain technology, investors can get three benefits at once.
First, the price of gold-based crypto coins has a price that is influenced by global gold prices. This can protect investors from extreme price fluctuations as happens to crypto assets in general. The function of gold as a safe haven can still be enjoyed.
Second, by utilizing sophisticated blockchain technology, the function of gold is like turning into digital gold with the advantage of transactions that can be done quickly, without knowing territorial boundaries and much cheaper costs.
Third, owning gold-based crypto assets can provide exposure to gold assets for investors. By owning gold in crypto form, investors do not need to worry about storage like physical gold or management fees charged if buying gold-based ETFs.
Gold-Based Crypto List
Based on data from CoinMarketCap, now, the total market capitalization of gold-based crypto assets reaches US $ 959.8 million. In fact, when the world gold price is approaching its highest level in April 2023, its market capitalization has exceeded US $ 1 billion.
The following are the most popular types of gold-based cryptos:
1. PAX Gold
PAX Gold (PAXG) is a gold-based crypto issued by Paxos Trust Company. The company uses physical gold from the London Bullion Market Association (LBMA) at a ratio of 1:1. This means that 1 PAXG is equivalent to one troy ounce (400g) of LBMA gold.
All gold used as PAXG underlying is stored in LBMA vaults and audited monthly to ensure the number of PAXG tokens in circulation matches the amount of physical gold.
Meanwhile, gold from investors who buy PAXG will be stored in Paxos' custodian. Another feature offered by PAX Gold is exchanging PAXG tokens for LBMA physical gold.
Investors can purchase PAXG through various exchanges. However, for direct purchases through Paxos.com, the minimum purchase is 0.01 PAXG. So far, for fees, PAX Gold does not charge for custodial services or gold storage. However, they charge a fee of 0.02% for transaction fees and standard gas fees for transaction delivery.
Currently, PAX Gold has a market capitalization of US $ 476.52 million, the highest among other cryptocurrencies. It has a circulating supply of 248,317 PAXG.
2. Tether Gold (XAUt)
Tether Gold (XAUt) is a gold-based crypto issued by TG Commodities Limited -Tether's sister company. Similar to PAX Gold, XAUt also uses a 1:1 ratio, meaning that 1 XAUt is equivalent to 1 troy ounce of LBMA gold. All LBMA gold used as XAUt underlying is stored in a safe in Switzerland.
XAUt tokens can be divided until they reach a fraction of six decimal places (0.000001 troy ounce). However, for direct purchases through Tether Gold, the minimum amount is 50 XAUt or 50 troy ounces.
Similar to PAX Gold, users can also exchange their XAUt tokens for LBMA physical gold. However, for transaction fees, Tether Gold exempts investors from transaction fees beyond gas fees for sending transactions. They only charge an XAUt purchase or exchange fee of 25 basis points.
XAUt's current market capitalization is US$ 475.42 million, narrowly adrift of PAX Gold. Meanwhile, from the amount of supply in circulation, there are currently 246,524 XAUt.
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