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Gold Backed Cryptocurrencies

Gold backed cryptocurrencies are stable coins that is pegged to gold prices. There are different gold-backed cryptocurrencies with an different underlying collateral method. Tokenized gold cryptocurrencies are getting more and more popular because of easy digital transactions instead of physical transportation.

Gold Backed Coins

The gold backed cryptocurrency project's primary purpose is to create an infrastructure where the physical equivalent of blocked and unregistered gold, the standards of which are certain, can be transferred using blockchain technology.

What are Gold-Backed Coins?

A gold backed cryptocurrency is a digital investment whose value is backed by an equal price in gold. Basically, it refers to the cryptocurrency unit, the equivalent of which represents the value of gold. We can say that it is one of a kind that allows users to buy, and exchange gold without having to worry about physical storage. Also, gold backed coins eliminate the problems associated with transportation, transferability and the associated lack of liquidity associated with gold.


Advantages of Gold Backed Coins

As we all know, each type of coin has lots of advantages and disadvantages. Let's look at some of the advantages of gold backed coins. Most of the gold backed coins developed on the Ethereum network as the ERC-20 token. Another advantage is that they can be divisibility and divided into parts. Thus, inventors can buy gold in smaller quantities.

On the other hand, they can be easily stored and transferred. Unlike physical gold, gold backed coins stand out with this advantage. The last thing we can mention is that gold back coins pegged to gold could potentially be bought and sold through decentralized exchanges.

Disadvantages of Gold Backed Coins

It's time to look at some of the gold backed coins' disadvantages. Since many of the gold backed coins are ERC-20-based tokens, every purchase, sale or transfer of the token can lead to high gas fees. On the other hand, when we compare it with other, gold backed coins have much less liquidity. Because of this reason, they are not widely traded on many exchanges. It is also one of the downsides of gold backed coins.

Types of Gold Backed Coins

Of course, there are a lot of types of gold backed coins. However, we will talk about the most famous of them. These are Pax Gold (PAXG), Tether Gold (XAUT), Digix Global (DGX), and Perth Mint Gold Token (PMGT). Let's start with Paxs Gold (PAXG). PAX Gold (PAXG) is a gold-backed, ERC-20-based crypto asset issued by the Paxos company. The main purpose of using PAXG is to eliminate the need for processors to physically store physical gold and allow the purchase and storage of digital gold tokens. PAXG can be converted into gold currency. It is also thought that it will increase gold - crypto liquidity. It is also among the expectations that this effect will allow the development of various financial products dec the PAXG token. Let's switch to the Tether Gold (XAUT).

Tether Gold, just like the US Dollar, is defined as a new and powerful cryptocurrency produced in cryptocurrency format. It released to the markets as the equivalent of gold. XAUT is becoming a more accessible cryptocurrency using the ERC-20 and TRON infrastructure. Also, it allows investors to take physical delivery of their gold or use for cash. Pax Gold and Tether Gold, which we mentioned last, meet the liquidity and reputation criteria compared to others.

Now, let's look at the other ones, DGX, PMGT, and Meld Gold by Algorand. Digix Global was established in Singapore and provides DGX or Digix Global cryptocurrency tokens. Features such as transparency, security and traceability provided by the blockchain allow DGX tokens to be traded and transferred in a fully visible and audited manner. The smart contract platform feature also eliminates possible human errors and fraud risk in the gold supply chain.

The last type of gold backed coin we will talk about is Perth Mint Gold Token. It is backed by gold stored at the Perth Mint of the Western Australian government. PMGT is the only digital token in the world that is backed by government-guaranteed gold. PMGT is a gold token that provides superior confidence and cost-effectiveness for your transactions with real gold on a public blockchain that allows blockchain users to conveniently buy and sell gold stored at The Perth Mint. Currently, there are many gold backed cryptocurrencies on the cryptocurrency market. However, only the types we mentioned above are the famous ones.

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Article by Yunis
30 June 2021 (Updated 15 June 2024)
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