Gold-backed cryptocurrencies are derivatives whose value is derived from the price equivalence of gold. Gold backing is done to link the derivative asset to a tangible asset and, subsequently, avoid excessive price fluctuations, as is the case with most cryptocurrencies. Gold-backed cryptocurrencies, also known as “gold-pegged”, are backed by the physical value of gold. Like stablecoins, most gold-backed cryptocurrencies represent a physical collection of gold held by the issuer of the stablecoin.
The largest stablecoin is Tether (USDT). A Tether token is backed by a USD. The largest token by market capitalization is the gold token Perth Mint (PMGT) for gold-backed cryptos. Gold-backed cryptocurrencies can also be referred to as gold-backed stablecoins.
As such, they are similar to gold ETFs. The most prominent gold ETF, SPDR Gold Shares (GLD), is an exchange-traded fund that holds physical gold and divides its ownership into shares that investors can buy. A currency or token issued that represents a value of gold; for example, a physical gram of gold equals a coin. If investors are not interested in gold but are interested in owning other precious metals, AWG has also diversified into the precious metals niche.
The Australian government guarantees the purity and weight of gold, and the Mint issues digital gold certificates through the GoldPass app. He said investors would have to determine if they should have the same level of confidence in the companies behind PAXG and the gold ETF. Because of its physical base in gold, some investors are more comfortable investing in a gold-backed cryptocurrency. This fact turns gold-backed cryptocurrencies into centralized “off-chain backed” cryptocurrencies, since they are pegged to a counterparty.
On the one hand, various decentralized financial projects and decentralized exchanges allow people to earn interest on their gold deposits in a variety of mechanisms, such as loans or through liquidity funds. The cryptocurrency was built and maintained by a group of volunteers who believe in promoting economic freedom. But how is it that a centralized crypto token backed by gold is more desirable than a gold ETF? In any case, gold cryptocurrency seems inferior, as crypto investors have to worry about protecting their private keys and be familiar with managing blockchain-based assets. The reason for this is the fact that it is promised that each unit of cryptocurrency backed by gold will be backed by a predefined number of grams or troy ounces of gold.
The value of gold-backed cryptocurrencies will never fall below the value of gold at any given time, providing these cryptocurrencies with their relative “stability”. In fact, when cryptocurrencies like Bitcoin appeared, it was only natural for some people to propose and defend cryptos backed by gold. Some investors also argue that gold could be a safe haven during times of geopolitical upheaval, so recent tensions between the U.