All gold-backed cryptocurrencies are derivative assets that let you access purchases, trading, and holding of physical gold at will at any time and location. They remove the transport inconveniences, illiquidity, transferability, and volatility related to dealing with physical gold.
What Is Gold Backed Cryptocurrency
- Gold-backed cryptocurrencies are derivatives whose value derives from the price equivalence of gold. The backing with gold is done to tie the derivative asset to a tangible asset, and subsequently prevent excessive price fluctuations, as happens with most cryptocurrencies.
- The amount of gold used to back that cryptocurrency should be held in gold reserves, for instance, with banks or third-party institutions known as custodians.
- The nature of backing, however, varies from one crypto to another. A single unit of crypto is equivalent to a given unit of gold. Some are backed at the ratio of 1:1, where 1 token equals 1 gram of gold.
- Investors in the token earn increased returns from gold pricing. Investors can redeem tokens back for gold.
Top Gold Backed Cryptocurrency
1. Tether Gold (XAUt)
Tether Gold (XAUt) is a new product launched by Tether. The main idea behind this token is to create a cryptocurrency backed by gold. This is said to work as a safe asset that historically gains value over time.
The coin offers security of a digital asset and the safety being pegged to physical gold. This means, as gold gains its value, XAUt will also get its price increased.
However, it is not the first digital currency built backed by gold. But it is one of the best gold backed crypto to look for.
One full XAUt token represents one troy fine ounce of gold on a London Good Delivery bar. You can transfer the coins to any on-chain address from the purchaser's Tether wallet where it is issued after purchase. Also, specific gold bars will be associated with each on-chain address where Tether gold is held.
Furthermore, each XAUt represents ownership of one troy fine ounce of physical gold on a specific gold bar. As a result, you will enjoy undivided ownership rights to gold on the specified gold bars.
- Users need to open an account at app.tether.to and have it verified to buy the tokens. Purchases are done in US dollars.
- 1 XAUt token equals or represents one troy fine ounce of gold on a London Good Delivery bar.
- It is transferrable from one on-chain Tether wallet to another.
- XAUt token is an ERC-20 token held on an Ethereum-based wallet and as a TRC20 token on the TRON blockchain.
- Tokens redeemable back to physical gold for verified users and for a certain minimum number of XAUt tokens. The gold is delivered to any location in Switzerland.
- Tokens can be redeemed to gold and then the user request for it to be sold and cash sent to them minus fees.
Minimum purchase: 50 XAUt or 50 fine troy ounces.
Market cap: 150.6 million
Total supply: 85,417
Volume: 1.0 million
Website: Tether Gold
2. Paxos Gold (PAXG)
Paxos Gold (PAXG) is one of the most popular gold-backed cryptocurrencies available out there. It is a crypto asset backed by real gold reserves held by Paxos, a for-profit company based in New York.
Each PAXG token represents the value of 1 troy fine ounce of gold custodied in vaults by Paxos and its partners. And its market value is based on the physical gold price.
The token is built on the Ethereum blockchain. As a result, you can trade the token for other crypto assets.
Also, to make sure that the value of the coin doesn’t drop, Paxos undergoes monthly audits to attest that its supply of PAXG tokens matches the amount of gold it holds.
You should also know that Paxos charges a small fee for the creation and destruction of PAXG tokens. Also, there are on-chain fees that you have to pay for moving the tokens on Ethereum.
Plus, you can easily convert or redeem PAXG for fiat, physical or unallocated gold via the Paxos platform.
- Backed by one fine troy ounce of gold at a ratio of 1:1.
- No custody fee is charged for tokens. For Major Gold ETF it is 19-40 bps per year, physical gold coins and other products is 10-100 bps per year, unallocated gold is 1-10 bps per year, and other gold tokens is up to 100 bps per year. LBMA 400 t oz gold bar has a fee of 5-25 bps per year.
- Instant settlement.
- Access to Major Gold ETFs, Gold Futures (COMEX), other gold tokens, and the ability to retail physical gold coins and bars and other products.
- Can be redeemed to physical gold.
- Regulated by the NYDFS. Futures are not regulated.
- Can be traded on Kraken, itBit exchange, Alpha Bullion, Binance, and other exchanges.
Minimum purchase: $20 or 0.01 PAXG or t oz of gold. For Major Gold ETF futures, it is 1 share. The minimum purchase for LBMA 400 t oz gold bar is $800. In other products, it is variable.
Market cap: $319,973,111
Total supply: 180,902
3. Perth Mint Gold Token (PMGT)
Next, there is the Perth Mint Gold Token (PMGT). This one is a blockchain token developed and issued by Trovio.
Each unit of PMGT represents one fine troy ounce of physical gold securely stored in The Perth Mint's central bank grade vaults.
The token is based on GoldPass, The Perth Mint's full-service gold investment platform that digitizes physical gold in the form of digital certificates.
Also, PMGT offers a tokenized version of GoldPass certificates on the Ethereum blockchain as an ERC20 token. Moreover, all the PMGT tokens are 100% backed by GoldPass certificates issued by The Perth Mint.
You can also conveniently trade and hold gold stored at the Perth Mint. Plus, you can digitally manage your entitlements over the physical gold, convert and pick up gold bullion of your choice or get it delivered globally.
Moreover, the price of PMGT stays stable. As it represents physical gold value. As a result, it offers token holders risk diversification and hedging against market volatility at superior credit quality while avoiding costly conversions between fiat and crypto.
- The token can be redeemed in different Perth Mint’s products – from small 1 oz cast bars to 400 oz LBMA-accredited London Good Delivery bars.
- The Perth Mint publishes all balances of the Trovio‘s GoldPass accounts – hence anyone can publicly verify the backing of the token with gold.
- 1 PMGT = 1 oz GoldPass certificate = 1 oz pure physical gold. Exchange can be done through Trovio.
- You can trade the tokens on the Over-the-Counter or OTC gold market XAU.
Minimum purchase: Not available.
Market cap: $1,629,655.35
Total supply: 932
Volume: $ $12,110
Website: Perth Mint Gold Token
4. Meld Gold by Algorand
Meld Gold streamlines the gold supply chain and makes investing in gold extremely easy for all the investors out there.
The token offers secure and seamless access to its own gold. So you can easily buy, sell or trade gold in real time. Plus, it helps in reducing the volatility traditionally associated with the procurement of gold.
The meld network is extremely transparent and low risk. As a result, meld gold investors can stay protected against inflation.
Meld Gold uses Algorand's advanced protocol to deliver gold that is traceable, fungible, transactable, transferable, and redeemable.
Meld will tokenize digital gold in the form of a Meld Digital Gold Certificate. These tokens, which are equal in value to one gram of physical gold, will be supported by the Algorand Wallet. This will allow holders of digital gold to monitor the value of their assets and transact with other wallets in a quick and secure way.
- Can be bought in OTC markets and from Meld partners.
- The Algorand on which the tokens are issued supports atomic swaps and standard asset tokenization features.
- The token can be converted to any fiat and crypto on an exchange, and back to gold certificates or physical gold.
Minimum purchase: Not available.
Market cap: Not available.
Total supply: Infinity.
Website: Meld Gold by Algorand
5. Gold Coin (GLC)
In the end, there is the Gold Coin (GLC). This one is a peer to peer or P2P cryptocurrency, which was developed by an anonymous person back in 2013.
It is pretty much like Bitcoin as it has no single company or individual owner. GoldCoin is decentralized and open source, and it belongs to the world.
Since the time the coin has launched, crypto enthusiasts and programmers who believe in promoting economic freedom have got involved in its development. Thanks to these principles and a focus on game-changing usability features, like two-minute confirmation speeds and instant 0-Conf transactions, GoldCoin is fundamentally changing how cryptocurrency and economies operate.
It is a feature-rich token with a 2 min block interval compared to Bitcoin, which has a 10 min block interval. It also comes with a 32 MB block size, whereas Bitcoin has a 2MB block size.
It supports on-chain scaling and has a network capacity of 1120 TPS. Also, transactions happen instantly on it.
- 1:1000 GoldCoin per ounce of gold.
- The platform also scales through the on-chain and off-chain scaling methods.
- It is mined through the proof of work algorithm, just like Bitcoin. The blockchain also supports SegWit and Lightning.
Minimum purchase: Not available.
Market cap: $4.8 million
Total supply: 72,245,700
Website: Gold Coin
6. DigixGlobal (DGX)
DigixGlobal is also for those who want to invest in physical gold but have limited cash and therefore need to invest in fractional tokens, transfer, and redeem them at will.
DGX also allows anyone to micro-accumulate gold and manage it effectively on a 24/7 basis with minimal limitations. Through DGX, users can participate in Gold ETF. The tokens are obviously tradable on cryptocurrency exchanges.
Since the buying process is transparent, users are less prone to fraudsters. The company keeps the physical gold backing the cryptocurrency, in Singapore (The Safe House Singapore vault) and Canada. Furthermore, their custodians are members of the Bullion Association and are fully insured.
- Users need to register, choose a wallet, and then buy. It can be bought with crypto.
- 1 token or DGX is equal to or represents 1 gram of gold. Backed by 100-gram swiss gold bars from Valcambi, Produits Artistiques Metaux Precieux (PAMP) and Metalor, and other refineries.
- It is based on Ethereum blockchain, stored on Metamask, and other ETH wallets.
- Recasting assures members that the DGX is redeemable with the gold amount equivalent.
- Tokens have no demurrage (storage) fee. ETF fee is storage fee is 0.4% pa. The physical gold bar storage fee is 0.6% and the transaction fee for sending the tokens is 0.13% per transaction. The recast or token conversion fee to physical gold is 1%.
- The tokens, ETF, and Gold Bar are regulated.
Minimum purchase: $0.50 for the tokens, $150 for Gold ETF, and $50 to $600,000 for gold bar.
Market cap: $3,626,137
Total supply: 78,000
In conclusion, gold-backed cryptocurrencies are recommended for those investors interested in owning gold. Yet they want the benefits of digitally freeing up physical gold as a hedge against volatility, but think digital currencies are too volatile. Being backed by provable physical gold reserve means they are stable like stable coins backed by fiat.