It is not a secret that the cryptocurrency world is highly volatile, yet many investors consider it as inevitable. Traders are optimistic about the future of blockchain technology and potential.
There is a relevant part of investors, thinking of stablecoins as a perfect investment alternative. Of course, the connection between the value of a crypto and a fiat currency sounds really appealing. Anyway, we know that fiat currencies depreciate with the increasing inflation and with that stablecoins become less valuable.
However, there is a new solution - gold-backed tokens. Let’s see what exactly they are.
What are gold-backed currencies?
Actually, digital gold currencies have been around for a while. If we look back in 1995 we will see that electronic gold was actually the first digital currency backed by gold. This innovation came right after the internet became widely available.
You probably know that before Bitcoin, there were many attempts for creating digital gold money, and all of them ended up with failure. With the appearance of the blockchain, those types of problems found a solution.
Gold-backed crypto is actually an appealing concept. If someone owns gold, he can link the value of a token to a gram of gold, for example. In theory, the price of the coin can not move below its value in gold.
What do investors think about gold-backed currencies?
Investors really appreciate gold-backed coins, and here is why.
The first reason is obvious. Gold has established itself as an anti-money asset, and many investors see the precious metal as a stable way to store value, despite its limited asset class.
On the opposite site, the supply of fiat money is endless, mainly because of the disparity between the two assets.
Actually, gold has played a huge role in the economy in the past. Until the nineteenth century, gold and silver were the main means of exchange. However, gold became an actual asset class, worth investing in, after 1970. Before that, its price was fixed.
Years later, with cryptocurrencies, came new variables to the market, and investors can now benefit from the potential of digital assets and rely on the value of gold as a price floor.
Gold-backed cryptocurrencies
Here are some of the most popular gold backed cryptocurrencies on the market.
Tether Gold (XAUT)
Tether is an Ethereum-based token. A single XAUT represents a troy ounce of gold in the form of a gold bar. Users are able to verify the gold and its unique serial number, consulting an online database.
Pax Gold (PAXG)
PAX Gold is another popular gold-backed crypto. For each PAXG token, there is an amount of gold kept in one troy ounce Brink’s London Good Delivery gold bar. Buying PAXG gives you access to underlying gold, held from the Paxos Trust Company.
AABB Gold Token (AABG)
An interesting fact about the AABB token is that its founders come from the gold-mining industry. The company that created AABB Gold is Asia Broadband Inc. The company is a precious and base metals' producer, and distributor. As you might guess, the company gets its gold supply entirely from its mining operations.
The result - investors have a guarantee to receive their gold directly from the mine.
Conclusion
For a long time, gold has a reputation to be one of the safest investments. Anyway, owning gold is not as easy as it seems. Storing gold at home is not really safe or practice, and that is why gold-backed tokens seem to be a good choice for investors to own gold, without needing to store it themselves. And of course, with the rising inflation, rises the interest to this market niche.
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