Any gold-backed crypto is a type of digital currency. Physical gold backs it. The value of the currency is based on the present market gold price. You can use it for transactions like any other type of crypto.
A few cryptos get backed by gold to tie the crypto to gold. So they prevent too much fluctuation in price. So, gold-backed crypto is frequently highly stable compared to other digital currencies. It is because gold’s price is usually less volatile than other assets’ prices like stocks or cryptos. If you want to trade Bitcoin, then you must visit this website.
You can use gold-backed crypto as an inflation hedge. If there is a rise in gold’s price, the currency’s value will too increase. It could protect investors from losing any money if the other assets’ prices, such as stocks, fell.
Tether gold (XAUT) is a gold-backed stablecoin and is the same Tether token behind USDT. Launched in 2020, Tether gold is currently the largest gold-backed stablecoin in the market. XAUT represents one troy ounce of gold on a London Good Delivery bar. The gold is held in a company-controlled Swiss vault.
Gold-backed cryptos can be purchased or sold on exchanges similar to any other type of crypto. You can make use of it to buy goods or any online service. If you invest in gold-backed cryptos, enjoy increased returns from the gold pricing. You can redeem tokens in gold exchange.
The working mechanism of a gold-backed token
The physical gold is used to back particular crypto. It is held in gold reserves. Custodians hold such reserves. Usually, banks or third-party institutions have it. The specific backing ratio can vary based on the crypto. For instance, a few get backed 1:1 with physical gold. Others may get supported by an ounce’s fraction.
The primary benefit of investing in gold-backed crypto is that it offers stability along with security. Gold has been used as a form of currency for a long time. Its value generally stayed steady with the passage of time.
The value of gold-backed crypto will never fall under gold’s value. Thus it makes it a relatively stable option for investment. Values of such cryptos can rise higher than gold’s value.
Most such gold-backed tokens are known to be ERC-20 standard tokens. They are built on the Ether blockchain. It means they can get stored in a wallet supporting ERC-20 tokens. Such tokens can be traded, such as mainstream cryptos making use of crypto exchanges.
Why are gold-backed stablecoins popular?
Tether gold is known to be a gold-backed stablecoin. It is the same Tether token behind the coin USDT. It will be launched in 2020. Currently, Tether gold is the largest gold-backed stablecoin in the crypto market. It represents a troy ounce of gold on a London Good Delivery bar. They hold the gold in a company-controlled Swiss vault.
Tether-gold grants access to conventional financial assets such as ETFs. Holders of a token can check the gold amount they own on the look-up website of Tether. It provides data on the gold bars such token holders own.
It can be held on the wallet that is Ether-based as one ERC-20 token. It is stored as a TRC-20 token on the TRON blockchain. The minimum buy for Tether gold is 50 XAUT or troy ounces of gold.
Benefits of gold-backed token investment
The primary benefit of gold-backed token investment is that, unlike any physical gold, they are digital. They can get divided into smaller parts. Thus they are readily transportable and easily transferable. They are also relatively more reasonable.
Another primary benefit is that as the gold-backed token is pegged to gold’s price, it will be maintaining its value even when other cryptos crash. It makes them an excellent investment during volatile periods in the crypto market.
Some gold-backed tokens too offer extra features as well as benefits. These are access to conventional financial assets such as ETFs. Any crypto ETF will track digital tokens’ prices and are traded daily. They let investors to further do portfolio diversification.
Conclusion
Accounting for the actual gold may never be as transparent as accounting for cryptos that blockchain technology protects inherently. Ascertaining if or not the physical gold exists or if its storage is safe and secured can be a matter of reliability for a few investors. So do your research correctly. Do not rely on any information available online or from friends or family members.