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Non-fungible tokens (NFTs), cryptocurrencies, and other modern investment options have become trendy in recent years. However, physical commodities such as gold remain in high demand. In 2021, the cryptocurrency world market capitalization will surpass his $2 trillion. Now investors have to ask themselves: Should I choose crypto or gold?
Gold is a commodity that has existed for thousands of years as a store of value and medium of exchange, and is still successful today. Despite the invention of decentralized digital cryptocurrencies, gold still holds an important position. However, owning gold is difficult and out of reach for most retail investors. There is one cryptocurrency company called PAX Gold (PAXG). Its goal is to make gold ownership more democratic, allowing everyday investors to trade it like any other cryptocurrency.
PAX Gold has discovered a way to combine cryptocurrency and physical gold assets, making them attractive to investors accustomed to traditional alternatives. In this article, we will discuss PAX Gold (PAXG) and analyze how the cryptocurrency works.
Paxos Gold is a cryptocurrency backed by real gold reserves held by Paxos, a commercial company in New York. Each PAXG token is linked 1:1 to 1 Troy Ounce (t oz) of 400 oz London Good Delivery Gold Bars held in the Brinks Security Vault in London. The Paxos-backed cryptocurrency PAXG is backed by London Bullion Market Association (LBMA) certified gold bars that can be redeemed for real bullion.
Related: What are Gold-Backed Tokens?
PAX Gold investors can avoid the hassle of physical gold storage, securing and transportation. Shares can also be purchased in parts, making them more accessible to retail investors who are hampered by the high cost of gold. PAX Gold boasts a combination of the qualities of both physical gold ownership and cryptocurrency that provide a solution to many of the modern challenges in the gold market, including high costs, storage concerns, and lack of liquidity. increase.
Paxos Trust Company, a New York City-based financial institution and technology company specializing in blockchain technology, created PAX Gold. Charles Cascarilla and Richard Teo, both former analysts at different firms (Goldman Sachs’ Cascarilla and Cedar Hill Capital Partners’ Theo), founded Paxos in 2012.
PAX Gold isn’t the only crypto project Paxos has embarked on. In addition to PAX Gold, they have also created the PAX Dollar (USDP), the Digital US Dollar and a Stablecoin. They have strong institutional backing and have raised over $500 million in total funding from investors including OakHC/FT, Mithril Partners and PayPal Ventures.
PAX Gold tokens are built on the Ethereum blockchain, making them portable across wallets, exchanges, decentralized finance (DeFi) platforms, and other apps that use Ethereum. PAX Gold allows users to exchange, wager, or redeem their tokens for high-quality gold bars. These gold bars are certified by the London Bullion Market Association and are stored in secure vaults around the world. With these top-notch security measures and high-quality gold, PAX Gold does not charge storage or storage fees. Only 0.02% transaction fee.
Is Pax Gold Safe? PAX Gold is not only Gold Standard certified, but also trustworthy and transparent. Both PAX Gold and its holding company, Paxos Trust, are under the jurisdiction of the New York Department of Financial Services (NYDFS). In addition, PAX Gold protects consumer and company assets separately, ensuring that consumers are safe in the event of bankruptcy.
PAXG is audited monthly by a third-party audit firm to ensure that its gold holdings match the supply of PAXG tokens. Reports from these certifications are published on the official Paxos website. In addition, PAXG developers regularly perform smart contract audits to search for potential bugs and vulnerabilities within the network.
As mentioned above, Pax Gold is tokenized gold that runs on a blockchain network. Tokenization is the digital transformation of both physical and intangible assets into cryptocurrencies. PAXG tokens represent physical gold specifically from the Paxos Trust Company. Gold is an excellent store of value as it retains its value over time. As such, it is often used as a hedge against inflation. When the US dollar loses value, gold becomes more expensive in the US dollar and vice versa. This makes gold a popular choice for investors looking to protect their assets from inflation.
PAXG tokens have serial numbers that match individual gold bars. By entering your personal Ethereum wallet address in the PAXG lookup tool, you can discover the owner’s physical gold serial number, value, and other characteristics. You also have the option to convert PAXG into fiat currency, another cryptocurrency, or allocated and unallocated gold bars at the current gold market price.
The main difference between gold ETFs and Pax Gold is that ETFs buy contracts that mimic the price of gold, but users do not own the underlying asset. Each PAXG token is directly linked to a real gold bar held in a vault in London, and each PAXG token is worth one.
Gold Exchange Traded Funds (ETFs) track the value of the underlying asset. They only give investors access to the price of gold, not ownership. An investor who owns a gold ETF is a party to a contract giving him or her a specified portion of the pooled gold. Her ETF on gold cannot be compared to full ownership of the metal. For example, by the time settlement occurs, the value of the contract may be lower than it would be if you simply owned the gold outright.
In contrast, PAXG is a digital representation of physical gold. Each PAXG token represents 1 troy ounce of gold in a London vault identified by a sequential number. PAXG transactions are processed as ERC-20 tokens on Ethereum, so they do not take days to settle like physical gold bar transactions.
PAX Gold is the perfect investment for both traditional and modern investors who want to stay on trend without sacrificing their personal goals. With a single investment, you can invest in both physical and digital resources, leveraging the strengths of each, as your real gold assets are reflected in your cryptocurrency tokens.
PAX Gold will generate revenue in two ways: a small premium for gold and a tokenization fee upon initial purchase. The tokenization fee percentage depends on the initial purchase amount. 1% for purchases of 1 ounce or less, significantly lower for larger purchases. Paxos does not charge a custody fee, but he does charge a 0.02% fee whenever a customer wants to buy or sell tokens on the blockchain network.
Related: What is Tokenized Real Estate? A Beginner’s Guide to Digital Property Ownership
Can I stake my PAXG? You can earn interest by lending your PAXG to a custodian, but the interest rate varies from lender to lender. Staking PAXG also earns interest, but requires locking the token for a period of time. How to buy PAXG? Tokens can be purchased on several exchanges including Binance, Kraken, KuCoin and Coinbase. Here are the steps to buy PAXG tokens on the Coinbase crypto exchange:
Download a self-custody wallet that supports PAXG like Coinbase Wallet.
Keep your recovery phrase safe.
Understand and prepare for Ethereum network charges.
Buy Ether (ETH) and transfer it to your self-custody wallet.
Purchase PAX Gold using ETH in the trading section.
An asset-backed token is a digital representation of a physical asset that can be redeemed for the underlying asset. That asset could be gold, oil, real estate, stocks, soybeans, or other commodities.
Asset-backed tokens are carving out open markets that were once inaccessible and costly by conducting transactions without a central person. This ensures both security and transparency in business relationships. This is changing the way we do business into the future and how we think about ownership and wealth creation.
Asset-backed tokens can also help address issues caused by currency appreciation or depreciation and unpredictable stock markets. Thanks to the potential of asset-backed tokens, individuals have viable new financial options that combine digital liquidity and real asset value when needed. We have already seen how asset-backed tokens are used in many applications.
The future of asset tokenization is as limited as the imagination. With new use cases being discovered every day, it’s exciting to think of all the possibilities for how asset-backed tokens can help people and businesses around the world.
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