It takes grit and guts to stomach the volatility that comes with trading cryptocurrency. The ones who gravitate towards cryptocurrency then are the more tech-savvy and adventurous traders. But over time, cryptocurrency has set itself up for more stable possibilities like backing certain tokens with gold. The current price of gold influences the price of the crypto tokens that are backed by this key commodity. So what cryptocurrency is backed by gold?
There is quite a number of crypto tokens that rely on precious metal. You can plumb the depths of the cryptocurrency world for these gold-backed assets. But as always, in the same world riddled with scams, research and proper judgment are crucial.
Borrowing the concept from real currencies issued by governments worldwide, gold-backed cryptocurrency works similarly. Each issued crypto coin has a corresponding value in units of physical gold. For example, a coin has a value of a gram of gold. This unit of gold then is endorsed to a third-party custodian for safekeeping or for trading with others. The price of the cryptocurrency increases, possibly exceeding the value of the gold with which it is backed if the token also increases in popularity.
While a bit more stable than the inherently porous perception-driven crypto assets, gold-backed cryptocurrency can be risky, too. How the physical assets – the gold – are stored, tracked, and accounted for is where part of the risk lies. The accounting of coins is not much of a pain in the neck because there’s an efficient blockchain for that. But check who possesses the gold that backs your cryptocurrency – are there actual units of gold backing your tokens, or are your tokens simply pegged on the prevailing prices of gold? Early on, you have to clarify this.
Credible Gold-Backed Cryptocurrencies
When you study what cryptocurrency is backed by gold, it is best and most prudent to go for the most popular ones. To be safe, here are the gold-backed cryptocurrencies that are credible:
- Tether Gold (XAUT). The XAUT, kept in blockchains like Ethereum and TRON, is the gold-backed token of Tether. If you invest here, Tether can deliver the physical gold that backs your XAUT or encash it. This way, you are assured that there’s real, physical gold and not just a proverbial, conceptual value driving your cryptocurrency up and down. You can also trust Tether because it is the largest issuer of the stablecoin. Tether’s gold reserves are kept in Swiss vaults, and gold bars have serial numbers that investors and token holders may search up on Tether’s website. The TG Commodities Ltd provides the gold-backed tokens, each of which has a counterpart of a single troy ounce of gold on a gold bar from London Good Delivery.
- Perth Mint Gold Token (PMGT). You can be assured of this crypto token’s credibility because the Australian Government itself attests to the weight and purity of the gold blocks. These physical blocks of gold are from Western Australia’s Perth Mint, which issues digital gold certificates for investors. These digital proofs, accessed in PMGT’s GoldPass app, back the tokens which traders can exchange on certain platforms. The token to certificate ratio is 1:1.
PMGT is highly recommended and is dubbed as one of the best gold-backed cryptocurrency options available. Moreover, insurance, custody, and storage cost you nothing with PMGT, compared to traditional gold assets, which could incur an exorbitant amount of handling fees, etc.
- DigixGlobal (DGX). DigixGlobal is a Singapore-based company that offers tokens with a value of 1 gram of gold each. These actual gold units are held in vaults in Singapore and Canada, which are fully insured and accredited by the Bullion Association. That is one good barometer of security.
DGX has an efficient digitization process of dividing, redeeming, and transferring the gold bars through the buying and selling of tokens, which represent virtual gold. Part of DGX’s aim for creating this efficient process is to provide users with wider and closer access to gold. Trading in DGX, however, incurs fees for the storage of gold, for example.
- Gold Coin (GLC). Gold coin resides in the Ethereum blockchain and is one of your safer alternatives in terms of gold-backed cryptocurrency. It also does not require you to put up a big amount of money because you have the option to invest in smaller increments. Unlike the other cryptocurrency types, one coin is worth a fraction of a gram of gold. If you recall, the other gold-backed options have a token to gram of gold ratio of 1:1. So if you are looking at starting small for now, Gold Coin is one currency to try.
- Meld Gold. With Meld Gold, investors may trade and transact in virtual gold tokens or in physical gold. What’s notable about Meld Gold then is the seamless link between actual gold trading and payment and sealing of deals through tokens. Meld Gold is another tech start-up based in Australia, just like the commendable PMGT. It hopes to make the buying and selling of gold easier, safer, and accessible through its digital platform. Transparent transactions are also a hallmark of Meld Gold, so it’s truly an alternative you can consider.
- BlockNote. The physical gold that backs this cryptocurrency is vaulted and insured in Zurich, Switzerland, and is regulated within the European Union. An investor has an individual gold deposit account to which BlockNote tokens are credited. For each BlockNote, 0.01 gram of gold is credited into this gold deposit account. It resides in a blockchain platform called BlockBen, which is BlockNote’s own.
We are moving to a different world of investing, and the fact that countries and governments are also exploring their own gold-backed cryptocurrency attests to that. This all became the rage when Bitcoin was hailed as the new gold when the price of 1 Bitcoin equaled the value of gold in 2017. Now that you have an idea about what cryptocurrency is backed by gold, you can be very well part of the crypto gold rush, but as always, proceed with caution. Learn more about what cryptocurrency is backed by gold here!