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Gold-backed digital currency is a type of cryptocurrency that is backed by the physical value of gold. As with stablecoins, most of the best gold-linked cryptocurrencies represent a physical pool of gold held by the stablecoin developer.
Digital currencies with a strong backing like gold allow you to buy, sell and store physical gold at any place and time. These types of cryptocurrencies solve the problem of lack of liquidity, transfer, movement and volatility associated with trading with physical gold. Like the digital currency Tether, which is a type of digital currency backed by the dollar, the top digital currency backed by gold is also based on blockchain technology and also provides access to gold futures markets.
Most gold-backed digital currencies can be converted into physical gold. These currencies can be traded in digital currency exchanges against fiat currency or other cryptocurrencies. According to the cryptocurrency project, the ratio of gold backing in each digital currency is different;
For example, one gram of gold can support 1 token of one currency. In the rest of this article, I intend to introduce you to the best digital currencies related to gold.
What is digital currency backed by gold?
A gold-backed token is actually a currency whose price is always equal to a certain amount of gold. This amount, depending on the gold mechanism, can be gold grams or ounces. This means that the developers of the currency have gold equal to the total value of the coins in circulation. The gold used to support the value of the tokens can be stored and maintained in the developer company, a reputable bank or an institution.
As you may know, digital currencies whose value is always equal to a specific asset such as dollars or gold are called stable coins. Some gold stablecoins can be exchanged directly with gold. This means that you can sell the token in your digital currency wallet and receive gold in return.
In this case, holders of gold-backed digital currency go to the place announced by the developer company and convert their tokens into gold. In theory, cryptocurrencies converted to gold should be burned. Most gold-backed digital currencies operate as tokens on the Ethereum network with the ERC20 standard; But other blockchains such as Algorand have also hosted some of these cryptocurrencies.
Since the gold-backed digital currency is designed and implemented on the ERC-20 platform of the Ethereum network, it is possible to store and store them in the Android and iOS digital currency wallets and other desktop wallets that support ERC-20 standard tokens. will exist.
Read more: Desktop Wallet
As the value of gold increases, the price of gold-backed digital currency also increases, making it a more stable investment in digital currency than other cryptocurrencies. Most of the best gold-linked digital currencies allow investors to buy back tokens with gold;
Just as stablecoins and digital currency backed by dollars can be traded with their equivalent of $1 in fiat. Also, the Algorand blockchain network has accepted the hosting of some gold-related cryptocurrencies and silver-backed digital currency.
Read more: Learning to invest in digital currency
As the value of gold increases, the price of gold-backed digital currency also increases, making it a more stable investment in digital currency than other cryptocurrencies. Most of the best gold-linked digital currencies allow investors to buy back tokens with gold;
Just as stablecoins and digital currency backed by dollars can be traded with their equivalent of $1 in fiat. Also, the Algorand blockchain network has accepted the hosting of some gold-related cryptocurrencies and silver-backed digital currency.
Advantages and disadvantages of digital currencies related to gold
Below are some of the pros and cons of gold-backed digital currency:
Advantages:
- Most gold-backed digital currencies as tokens based on the ERC-20 standard can be traded with other major cryptocurrencies on digital currency exchanges.
- Unlike gold, digital currency backed by gold is digital and as a medium of exchange, it is possible to divide it into smaller units. In addition, they provide easy transportation for investors.
- By buying gold-backed digital currency, you will be able to have a token with the same value as gold without the need to physically store it.
- Holders of gold-backed digital currency have an easier way to enter the commodity market.
- The price of gold digital currency will fluctuate less.
Disadvantages:
- One of the disadvantages of gold-backed digital currency is low liquidity in digital currency exchanges; Because the community of investors of these cryptocurrencies is limited and therefore they are less traded in exchanges compared to other currencies.
- The best digital currencies tied to gold cannot be recognized as decentralized cryptocurrencies; Because they depend on the central organs to keep the gold.
- Although gold has the ability to protect against the downside, historically it will not provide the same returns as ETH, BTC for digital currencies.
- Unlike physical assets, digital assets may cause serious risks due to the impossibility of traditional protection.
- The growth of this market is slower than other cryptocurrencies.
Introducing 10 digital currencies backed by gold
Great care should be taken when buying gold-backed digital currency. Because just as a reputable bank may steal your gold, a cryptocurrency company will also be able to lie about its gold reserves.
Therefore, it should be researched before any action. Here are 10 of the best gold-backed cryptocurrencies:
Paxos Gold (PAXG)
Paxos Gold digital currency is a gold-backed digital currency created by Paxos. Paxos is actually the same company that created the itBit exchange in Singapore. PexGold digital currency is regulated by the New York Department of Financial Services (NYDFS) as the most trusted and common means of buying gold via digital currency.
Since valid legal bodies have control over Pax Gold, the future of this digital currency can be imagined more optimistically than its other competitors. Holders of ERC20 Pexos tokens will be able to buy, sell and transfer gold much easier than physical gold.
On the other hand, it is possible to exchange PAXG tokens in the futures market and digital currency exchanges. It can also be said that the only symbol of gold in Quinx is Pexos Gold digital currency, and other gold-related cryptocurrencies are not listed in this exchange.
Pexos Gold features
- Paxos Gold is regulated by the NYDFS.
- Pexos does not charge investors any fees for keeping gold.
- The value of Pax Gold is always equal to one troy ounce of gold.
- Pax Gold provides instant settlement.
- This gold-backed digital currency has the possibility of physical exchange with gold.
- Pexos token is widely available in most reputable exchanges.
- PAXG offers traders the ability to trade other gold-based cryptocurrencies and access to major gold ETFs.
GoldCoin (GLC)
Goldcoin (GLC) is a peer-to-peer gold-backed cryptocurrency that strives to increase the freedom to trade gold and decentralize it. The developers of this cryptocurrency believe that independence, freedom of action and transaction speed of people are very important in financial systems.
The transaction speed of GLC is equal to 2 minutes and therefore it has performed better than other major cryptocurrencies. The value of 1000 units of the Goldcoin token is equal to one ounce of gold.
This ratio reduces the volatility of this currency compared to other currencies that are not connected to any assets. As a gold-backed digital currency, Gold Coin (GLC) can be directly converted into fiat currency and gold, and it can be purchased from the Gold Coin website and most exchanges.
Features of Gold Coin
- Gold Coin (GLC) token, like Bitcoin, can be mined through the Proof of Work (POW) algorithm.
- The value of each gold coin is equal to one thousandth of an ounce of gold.
Read more: Proof of Work Algorithm and how POW works
Tether Gold (XAUt)
Tether Gold digital currency allows people to directly invest in gold. Also, people who decide to enter the gold market with a small capital can use this gold-backed digital currency.
Tether Gold was produced by the originator of the digital currency Tether, and its only difference with Tether as a dollar-backed digital currency is its dependence on gold. Owners of Tether Gold digital currency have ownership rights over certain gold bars. Allocated gold is determined based on its unique serial number, weight and purity.
Features of Tether Gold
- The value of each Tether Gold digital currency token is equivalent to one ounce of gold.
- Tether Gold can be exchanged directly with gold (if the seller lives in Switzerland, gold will be sent to him)
- Tether Gold can be stored and stored with two TRC20 standards in Tron wallets and ERC20 standard in Ethereum wallets.
- By opening an account on the app.tether.to site and authenticating, users will be able to purchase Tether Gold tokens. All purchases can be made in US dollars.
- Tether Gold tokens can be transferred between Tether unchained wallets.
- The Tether Gold digital currency seller has the option to request cash instead of gold.
Digix Global (DGX)
Digix Global gold-backed digital currency is the best option for those who do not have enough cash to buy a whole gold bar or do not have a suitable place to store it. The investor will be able to buy a fraction of the DGX token with any amount of capital.
With Digix Global, it is possible to trade gold in real-time in cryptocurrency exchanges and to operate in a gold investment fund (ETF). DigixGlobal has insured all its members by storing physical gold in Canada and Singapore and made it a member of the Bullion Association.
Features of Digix Global
- DGX is an Ethereum token based on the ERC20 standard that can be stored in Ethereum wallets such as Metamask.
- DGX token can be purchased with other cryptocurrencies.
- Digix Global digital currency has no maintenance fee. Its reserve fee is 0.4% per year, as well as the reserve fee of Shams physical gold is 0.6% and the conversion of currency into gold is 1%.
- The value of one DGX token is equivalent to one gram of gold and can be supported by 100 gram gold bars.
Perth Mint Global Token Perth Mint Gold Token (PMGT)
Each Pret Mint Global PMGT token is a digital version of a GoldPass certificate of deposit, which is backed by gold like any bond with a ratio of 1:1 and can be converted into fiat currencies and gold. At the Perth Mint Bank, gold backed by the Australian government and government guarantees its quantity and quality.
PMGT does not have any transfer, maintenance or conversion costs, and this has made it one of the most affordable and effective gold-backed digital currency.
Features of Perth Mint Global Token
- Earth Meant has made it possible to publish all GoldPass account balances publicly, and everyone will be able to view and confirm the token's support.
- The PMGT token can be traded on the over-the-counter gold market of XAU.
- The Perth Mint offers gold in various forms from one ounce coins to 400 ounce bars, and the PMGT token can be converted into all of them.
- Each PMGT is worth 1 ounce of physical gold and 1 ounce of GoldPass certificate.
- Meld Gold by Algorand (MCAU)
- AurusGOLD (AWG)
- Cash Telex (CTLX)
- AABB Gold Token (AABBG)
- CACHE Gold (CGT)
With their digital nature, these tokens eliminate the risk of keeping physical gold and have the possibility of higher liquidity and easier access than physical gold. Another advantage of them is the ease of fraud concerns in providing physical gold.
The price of gold digital currency Goldcoin with 0.1150 dollars for each token has made this currency one of the most affordable cryptocurrencies for investment. Of course, you should buy based on your preferences and conditions, considering other currencies.
Digix Global digital currency (DigixGlobal) has a small fee compared to other currencies. Perth Mint Gold token also receives a decent fee; Because it does not require any storage and transaction fees or Mediterranean fees.
