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A crypto backed to gold: main options and issues
Are you looking to protect your heritage while staying in the world of digital assets ? The idea of a token backed by gold you intrigue? Here, you will discover directly what the main cryptos are to expose themselves to gold and how they work. The yellow metal, renowned for its stability, can now be purchased in the form of cryptocurrency backed by gold . This gives access to the security of physical gold while keeping the flexibility of a crypto portfolio .
Table of contents
Why opt for a crypto collateralized by gold?
The concept of digital gold was born out of the desire to associate the solidity of a precious metal with the innovation of the blockchain . We often speak of tokenization of gold or tokenized gold . You thus have a gold token representing a real fraction of physical gold stored in certified chests.
Here are the major advantages that result from it:
- Security : Gold is considered a historical refuge, especially in the face of inflation that erodes the value of the currency over the long term. To concretely measure this effect, discover our inflation calculation between 2 dates , a practical tool to view the loss of purchasing power over the years.
- Liquidity : Cryptocurrencies backed by gold switch off 24 hours a day, 7 days a week. You can sell or buy anytime.
- Fractionation : You can have very small gold parts, which facilitates asset allocation and diversification .
- No storage : unlike physical gold, no need to find a safe place or pay for chest fees.
For some time, these alternative investments have been more and more popular with investors in DeFi . The stablecoin backed up on gold even generate yields by providing liquidity on decentralized exchange platforms.
Main cryptos for gold exhibition
Several projects have emerged to offer an exhibition to gold via the blockchain . We are going to focus on three major tokens: Pax Gold (Paxg), Tether Gold (XAUT) and Comtech Gold (CGO).
Pax Gold (Paxg)
The best -known gold token Each Paxg unit corresponds to an OCE Troy (31.1 grams) of gold quality London Good Delivery, kept in chests approved by the LBMA (London Bullion Market Association).
- Emitting company: PAXOS TRUST, regulated by the New York State Financial Services Department (NYDFS).
- Proof of Reserves : monthly audits are carried out by the independent company withM.
- regulations , which reassures most investors.
- liquidity volume on large platforms such as Binance or Bybit.
Pax Gold serves as a reference for token gold , in particular because it offers direct conversions between token and physical ingots. If you have enough for a full ingot, you could remove it in the form of physical gold . This operation often attracts those who want a transparent and verified intermediary.
Tether Gold (Xaut)
Emitted by Tether Limited, Tether Gold also occupies a special place. The company is renowned for its stablecoin USDT , and Xaut continues the same logic. Each gold token corresponds to an ounce of gold kept in secure safe.
- Possibility of using it as a guarantee in the DeFi (on Uniswap , Curve, etc.).
- Exchange volume of around a few million dollars a day, less than Pax Gold, but remains comfortable for liquidity .
- Possible redemption of physical gold for costs of approximately 0.25 %, under certain conditions.
Unlike Pax Gold, Tether has been operating since a more flexible jurisdiction. This allows it to be more permissive in terms of User DeFi , but also involves less clarity on regulations . It all depends on your level of requirement in terms of audit and compliance.
Comtech Gold (CGO ): a solution backed by gold in the MENA region
Comtech Gold (CGO) is a digital token backed by physical gold, mainly targeting the Gulf and Middle East markets. Each token represents a gram of 24 carat gold, stored in secure chests in Dubai. The project is certified in accordance with sharia, which can meet the specific requirements of certain investors in the region.
Blockchain XDC: speed of treatment and reduced gas costs
The project is based on the XDC blockchain , recognized for its rapid transactions and minimal costs. The daily volume is around 600,000 dollars.
Accessible internationally, CGO offers an exposure to gold while remaining connected to the standards of Islamic finance. The regular audit and transparency around compliance are highlighted as additional credibility elements, especially for investors based in the MENA region.
Functioning of a crypto backed to gold
A crypto leaning against gold works as a stablecoin coleteralized , that is to say that each unit emitted on the blockchain represents an exact amount of physical gold , generally stored in certified and secure chests. This mechanism is based on a backing ratio 1: 1 (1 token = 1 gram or 1 ounce of gold).
Golden tokenization
Tokenization consists in creating a digital token (often on Ethereum a well -defined fraction of physical gold . The token acts as a digital version of a certificate of property on gold. The user therefore does not hold gold in hand, but a representative right on it, certified by a centralized transmitter.
For example :
- 1 paxg = 1 ounce troy d'or london good deliverry
- 1 Xaut = 1 ounce of gold stored in Switzerland
- 1 CGO = 1 gram of 24 carat gold preserved in Dubai
Can we exchange a token for physical gold?
Yes, in the majority of cases, it is theoretically possible to exchange these tokens for physical gold . However, it depends on the transmitter, the amount held and your status (particular or institutional). Here is an overview:
- PAX Gold (PAXG) allows any investor - including individuals - to request a buy -back in physical gold troops via Paxos, provided you have the required minimum quantity (eg 400 ounces for a complete ingot). Logistics costs apply, and the process is made via Paxos Trust in the United States.
- Tether Gold (XAUT) also offers an exchange for physical gold, but only in specific Swiss chests. The o reinforced KYC requirements , and mainly concerns customers with significant amounts.
- Comtech Gold (CGO) authorizes conversions to gold with partners approved by the DMCC in Dubai. Access is possible for individuals, but often in a regional framework (MENA zone) with specific conditions.
In daily reality, these physical conversions remain uncommon. It is not the main use of cryptos backed by gold . What gives its value to the token is above all the confidence in the fact that the backing is real and verified , not the effective intention of claiming physical gold.
Proof of reservations
To maintain this confidence, transmitters must provide proof of reservations (Proof of Reserves) . This implies:
- Regular audits, often monthly, made by independent firms (ex: Withum for Paxg).
- The public publication of the number of tokens issued and the corresponding gold stock.
- Sometimes the use of decentralized oracles like Chainlink to ensure real -time transparency.
Without these guarantees, the value of the token could be called into question. This is why the chewing of the addition is a fundamental criterion for investors.
How is the course maintained?
The course of a token backed by gold arbitration mechanism between the price of gold on traditional markets and the price of token on crypto platforms.
Here's how it works:
- If the price of token on exchanges is lower than that of gold, arbitrators can buy it, convert it into physical gold or resell on traditional markets.
- If the price of token is higher than that of gold, holders can sell their tokens on the crypto market to make an immediate benefit, which rebalances prices.
This game of forces between purchase, sale and conversion naturally maintains parity with the gold spot . It is exactly the same principle as for a stablecoin leaning against the dollar , except that the reserve asset here is a precious metal.
How to invest practically in a crypto backed by gold?
The process is quite simple, even for a neophyte:
- Choose a reliable platform like Binance, Bybit or another Exchange supporting these tokens.
- Create and validate your account via the KYCprocedure.
- Place funds (Fiat or Cryptos) to buy the desired gold token
- Possibly withdraw the tokens on a wallet for more security .
An essential point: always check the liquidity . The most popular gold cryptocurrencies Pax Gold and Tether Gold , generally have more supplied order notebooks, therefore less panty .
What yields do we hope with a crypto backed by gold?
Unlike volatile cryptos like Bitcoin, the stablecoin backed by gold aim above all stability and protection against crises. The yield is essentially based on the evolution of the gold price.
However, the DeFi offers some opportunities:
- Provide cash by pairing your gold token with a volatile token.
- Generate a certain APY (often between 1 % and 5 %), depending on the pools.
- Lend the token backed to gold on specialized platforms.
Keep in mind that in the event of a Haussier market on gold, your crypto backed by gold will automatically gain in value. Conversely, if the precious metal decreases, you will mechanically undergo the same correction.
Points of vigilance for a crypto leaning against gold
The risks inherent in these alternative investments should not be overlooked:
- Regulations : Some jurisdictions are more permissive, resulting in less guarantees for the investor.
- Audit : Make sure the transmitter realizes a proof of reserves and published by a recognized external firm.
- Crypto wallet : remember to secure your private keys . Piracy often results in a definitive loss of your tokens .
- Transmitter : Check the reputation and financial solidity of the company that manages the crypto backed by gold .
Finally, do not forget that the tokenization of gold remains a young sector. Hence the need to find out about platforms and the surrounding legal environment.
FAQ on the Crypto backed by gold
Is it really backed 1: 1?
If the transmitter scrupulously follows the principle of Proof of Reserves , yes. According to the paxos audits for example, each paxg corresponds to a precise ounce of physical gold. Other actors also offer a 1: 1 ratio, but make sure they publish evidence via serious audit firms.
Can we exchange your digital gold for physical metal?
In the case of Pax Gold, yes, under certain conditions (sufficient quantity and payment of logistics costs). For Tether Gold , a buyout is also possible, but also involves a fairly high minimum and specific costs.
What about childcare costs?
One of the great interests of Tokenized gold is the absence of direct childcare costs for the particular investor. On the other hand, the issuer supports these costs and integrates them into its global cost structure.
What is the best time to buy?
asset allocation strategy and your approach to diversification . precious metals on the market in the market , others smooth their start -ups to reduce the risk .
Conclusion on a crypto backed to gold
Cryptocurrencies backed by gold are revolutionizing the way of investing in yellow metal. They offer the ease of a stablecoin leaning against gold , the robustness of physical gold and the world accessibility of blockchain . Between Pax Gold , Tether Gold and Comtech Gold , you have the choice to strengthen your diversification .
Nevertheless, stay aware of the need for transparency on the part of transmitters, and take the time to assess the regulations and audits . With a gold token , you benefit from potential protection against inflation, strong security via blockchain and the simplicity of managing a simple crypto portfolio . As long as you select a trusted player, the crypto backed by gold can be an excellent diversification alternative investment strategy .
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Yohan Uzzan
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
