The leading cryptocurrency Bitcoin (BTC) is often referred to as “digital gold” to denote its usefulness as a store of value. However, the rapid price fluctuations in BTC pose a question mark for investors seeking stability.
What if cryptocurrencies could fake gold prices?
The “gold or Bitcoin” debate is almost as old as Bitcoin. Despite the growing popularity of cryptocurrency, many prospective cryptocurrency investors are afraid to buy or hold cryptocurrencies due to the volatile nature of the industry. What if cryptocurrencies could imitate the price of gold while maintaining the advantages of their digital structure? What if people could enjoy the benefits of investing in gold without having to hold and protect heavy gold bars?
Gold-backed cryptocurrencies, also called “pegged to gold”, are backed by the physical value of gold. Similar to stablecoins, most gold-pegged cryptocurrencies represent a physical collection of gold stored by the stablecoin issuer. As Kriptokoin.com, we report how gold-backed altcoin projects work and the top 8 altcoin projects.
How do gold-backed tokens work?
Gold-backed cryptocurrencies are designed similarly to stablecoins. But instead of being backed by fiat currencies, it is backed by the value of physical gold. Gold-pegged tokens aim to prevent price fluctuations by linking the derivative to a tangible asset. Theoretically, the cumulative price of tokens should not be less than the value of physical assets. The amount of gold used to support a particular gold-pegged cryptocurrency must be held in gold reserves, which are usually held at banks and other third-party institutions.
The tokens pegged to gold vary in how they are backed. For example, some tokens are supported at a 1:1 ratio, while 1 token is worth 1 gram of gold, while others use different ratios. As the value of gold increases, the price of a token will also increase, making it a more stable investment than other cryptocurrencies. Gold-pegged tokens have several advantages:
- A simpler route to the commodity market
- Gold’s value is less prone to price fluctuations
- No need to physically hold gold You can have a token with the same value as gold.
However, it also has a few drawbacks:
- Although gold can protect from downsides, it has not historically carried returns similar to cryptocurrencies like BTC or ETH.
- Market growth tends to be slower than other cryptocurrencies.
- Digital assets pose new inherent risks that physical assets do not have and lack many of the same protections.
Here are the top 8 gold-backed altcoins
Perth Mint Gold Token (PMGT)
Perth Mint Gold Token (PMGT) is one of the few cryptocurrencies approved by a government. Instead of the gold stores being privately owned, all gold purchased from PMGT is traded at The Perth Mint. The currency is backed by blocks of physical gold in a 1:1 ratio and has a market capitalization of $2,212,088. Buyers receive digital gold certificates each time they purchase the token. These certificates can be exchanged for gold bullion that can be delivered directly to their address. Traders do not need to pay any transaction fees during the transaction. In addition, if investors choose not to hold the gold themselves, there is no need to pay any storage or ongoing management fees.
Gold Coin (GLC)
Gold Coin (GLC) is an ERC-20 token developed by Digital Gold LTD. Cryptocurrency was built and maintained by a group of volunteers who believe in promoting economic freedom. It is backed by 1000 GLC per ounce of gold and has a market capitalization of $1,807,944. While GLC holds investors, it has access to unique features such as two-minute confirmation speeds, making it the fastest transacter of all gold-pegged tokens. GLC also offers a special Goldcoin Wallet for every gold purchased, with no transaction fees. This makes it extremely easy for investors to buy and hold their gold.
DigixGlobal (DGX)
DigixGlobal is a Singapore-based company that provides gold-pegged DGX tokens. The DGX token is backed at a ratio of 1:1 and has a market cap of $1,183,867. Each token represents 1 ounce of gold. Gold is stored in Singapore and Canada, which is a unique added value compared to other gold-pegged tokens on this list. By having storage locations in two parts of the world, the risks of having only one location are reduced. DigixGlobal charges 1 percent per exchange and bears the demurrage (shipping) fee.
Meld Gold by Algorand (MCAU)
Meld Gold is issued by Algorand as a stable alternative to altcoins. Meld Gold makes its Gold investment available to investors in the form of Meld Digital Gold Certificates. Each gold certificate is equivalent to 1 gram of physical gold and its market value is unknown for now. Tokens (certificates) are secured in the Algorand Wallet, making it easily accessible to investors who already have a wallet. Meld has launched a partnership program to collaborate with leaders in the gold, finance and technology sectors.
Tether Gold (Gold)
Tether has built its reputation as one of the most popular stablecoins. Tether Gold was launched in 2020 and has become one of the most popular gold-pegged tokens with a market cap of 469 million USD. One token represents an ounce of gold. Tether Gold reserves are held in Swiss vaults and investors are required to pay a small fee of 0.25 percent per transaction.
AABB Gold Token (AABBG)
AABBG, Asia Broadband Inc. (AABB) was founded by. AABB is a welding company focused on the production, supply and sale of precious and base metals. Unlike other gold-pegged tokens, where gold comes from a number of sources, 100 percent of the gold purchased using AABBG comes directly from the company’s mining project. This eliminates the middleman and allows investors to buy their gold directly from the source. It then uses a unique mine-to-token gold backing format that validates the gold holdings displayed by each token. Currently, the current market value of the token is $97,382,859.21. AurusGOLD, known as
AurusGOLD (AWG)
AWG, is minted by gold investors who arbitrage between the AWG and bullion markets. Its market value is $1,880,988. Each token can be used for 1 gram of gold from London Bullion Market Association (LBMA) certification refineries. If investors are not interested in gold but are interested in holding other precious metals, they can buy tokenized precious metals in the same way as gold and keep them in their crypto wallets.
PAX Gold (PAXG)
Pax Gold was founded by USA-based Paxos. Each token is equivalent to one troy ounce of London Right Delivery gold. The PAXG token was launched in 2019 and is backed by the London Bullion Market Association-approved gold stores in Brink’s vaults. The token currently has a market cap of $610,389,228.
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