Although the name implies, stablecoins are not exactly stable assets, but more like tokens anchored to another asset, as in the case of USD and gold. Basically these types of assets have been offered to the public as an option that combines the benefits of crypto asset technology with lower volatility, given its dependence on currencies/precious metals.
This time we will discuss what gold-backed stablecoins are and which ones are currently available in the cryptocurrency market. These digital assets allow you to buy a digital security that will always be proportional to gold, so you do not necessarily have to buy physical gold to benefit from its market price.
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What exactly are gold-backed stablecoins?
Gold-backed stablecoins are tokens that offer a quick and easy way to store, buy, sell, and invest in gold-backed assets with complete privacy. Blockchain technology serves to record all transactions involving these digital assets that fully represent gold.
Gold has been used to store value for thousands of years. The unprecedented long-term stability of your purchasing power surpasses any fiat currency. Unlike cryptocurrencies pegged to the US dollar, euro, or other fiat currencies, gold-backed stablecoins cannot be expropriated or frozen while the physical gold is in a secure vault in a jurisdiction with strong property rights.
What gold-backed stablecoins are there?
Currently there are many gold-backed stablecoins, although we can mention the most popular and used by users in the crypto markets.
DigiX is a cryptocurrency pegged to the real price of a gram of gold. It was designed as an ERC-20 token based on the Ethereum blockchain and it is necessary to highlight that this has been the first active crypto anchored to gold. If you have a certain amount of tokens and the price of gold increases, you will be able to obtain these benefits, which has been very useful in recent months after the gold push.
Like the other cryptocurrencies, this token belongs to a platform called DigixDAO belonging to the Ragnarok project. This platform aims to enhance and financially support initiatives that help DigiX grow.
PAX Gold (PXG)
PAX Gold (PAXG) is a gold-backed token issued by the New York City-based crypto exchange Paxos. This cryptocurrency is supported by the Ethereum blockchain (Like most ERC-20 tokens) and certifies the legal title of a physical gold bar stored in the Brink vault in London. To carry out this move, the company had the approval of the New York Department of Financial Services. Each token has the same cost of an ounce of gold and can be exchanged for a physical bar at partner institutions such as Bullion Exchanges in New York.
For this project, Paxos will expand its list of global partners from the traditional commodity industry, with the aim of ensuring that users can claim real gold regardless of whether they are in London or New York.
Although cryptocurrency projects are usually founded on excellent ideas that innovate in different fields within the digital world, they do not have the recognition of most financial institutions (until now). For this reason, backing a crypto asset with a stable or at least common value in the investment world (such as gold and the dollar) is a great way to get multiple international companies to take these projects seriously.
For common users, they will have the opportunity to save without suffering devaluation of money due to poor economic management or as an investment in the short, medium and long term. Investments in gold have been around for much of our history and this year has marked a new high in its price.