In recent years, non-fungible tokens (NFTs), cryptocurrencies, and other modern investment options have come into vogue. However, physical commodities such as gold are still in high demand. In 2021, the global cryptocurrency market cap exceeded $2 trillion. Now, investors must ask themselves: which option should I choose – crypto or gold?
Gold is a commodity that dates back thousands of years as a store of value and as a medium of exchange and is still enjoying success today. Even with the invention of decentralized digital cryptocurrency, gold has remained equally important. Although, for most individual investors, owning gold can be difficult and out of reach. There is a crypto company, PAX Gold (PAXG), whose goal is to make gold ownership more democratic and accessible to everyday investors by allowing them to trade it like any other crypto. -change.
PAX Gold has discovered a method for combining cryptocurrency with physical gold assets, making it attractive to investors accustomed to conventional alternatives. This article will discuss PAX Gold (PAXG) and analyze how the cryptocurrency works.
What is PAX Gold?
Paxos Gold is a cryptocurrency backed by real gold reserves held by Paxos, a for-profit New York corporation. Each PAXG token is tied to a 1:1 ratio for one troy ounce (t oz) of a 400 ounce London Good Delivery gold bar stored in the vaults of Brinks Security in London. The Paxos-backed cryptocurrency, PAXG, is backed by gold bullion certified by the London Bullion Market Association (LBMA) and can be exchanged for real bullion.
Related: What is a gold-backed token and how does it work?
PAX Gold investors are spared the hassle of storing and securing physical gold, as well as transporting it. Additionally, shares can be purchased on a fractional basis, making them more accessible to retail investors who would otherwise be hampered by the high cost of gold. PAX Gold has a combination of qualities from both the physical ownership of gold and cryptocurrency that provide solutions to many modern challenges in the gold market such as high costs, storage and lack of liquidity.
Who is behind PAX Gold?
The Paxos Trust Company, a New York-based financial institution and technology company specializing in blockchain technology, created PAX Gold. Charles Cascarilla and Richard Teo, both former analysts at different firms (Cascarilla at Goldman Sachs and Teo at Cedar Hill Capital Partners), founded Paxos in 2012.
PAX Gold is not the only crypto project that Paxos has undertaken. In addition to PAX Gold, they also created PAX Dollar (USDP), a digital US dollar and stablecoin. They have received strong institutional backing and have raised over $500 million in total funding from investors like OakHC/FT, Mithril Partners and PayPal Ventures.
How does PAXG work?
The PAX Gold token is built on the Ethereum blockchain, giving it portability between wallets, exchanges, decentralized finance (DeFi) platforms, and other applications that use Ethereum. PAX Gold allows users to trade, stake or exchange their tokens for high-quality gold bars. These gold bars are accredited by the London Bullion Market Association and stored in secure vaults around the world. Even with these top-notch security measures and high-quality gold, PAX Gold charges no custody or storage fees – just a 0.02% transaction fee.
Is Pax Gold safe? PAX Gold is not only accredited by a gold standard, but it also operates reliably and transparently. PAX Gold and its holding company, Paxos Trust, are under the legal jurisdiction of the New York Department of Financial Services (NYDFS). Additionally, PAX Gold independently protects the consumer and company assets, ensuring consumer safety in the event of bankruptcy.
PAXG undergoes monthly audits from a third-party auditing firm to ensure that its gold reserves match the supply of PAXG tokens. The reports of these attestations are published on the official Paxos website. Additionally, PAXG developers regularly perform smart contract audits to check for any bugs or vulnerabilities in the network.
Is Pax Gold real gold?
As mentioned earlier, Pax gold is tokenized gold that runs on a blockchain network. Tokenization is the digital transformation of physical and intangible assets into cryptocurrency. The PAXG token specifically represents physical gold from the Paxos trust company. Gold is a good store of value because it retains its value over time. As such, it is often used as an inflation hedge. When the USD loses value, gold becomes more expensive in USD and vice versa. This makes gold a popular choice for investors looking to hedge their wealth against inflation.
PAXG tokens have serial numbers that match those of individual gold bars. The serial number, value, and other characteristics of a holder’s physical gold can be discovered by entering an individual’s Ethereum wallet address into the PAXG search tool. They also have the option to convert their PAXG into fiat currency, another cryptocurrency, or allocated and unallocated gold bullion at the current gold market price.
What is the difference between PAXG and Gold ETFs?
The main difference between a gold ETF and Pax Gold is that an ETF buys a contract that mimics the price of gold, but the user does not own the underlying asset. Each PAXG token is directly linked to a real gold bar kept in a London vault, with each PAXG token being equivalent to one.
Exchange-traded funds (ETFs) on gold track the value of the underlying commodity. They simply give investors access to the price of gold, but not to ownership. An investor who owns a gold ETF is party to an agreement that gives them a specific fraction of the pooled gold. Gold ETFs cannot compare to full ownership of the metal. For example, at the time of settlement, the value of the contract may be less than what you would get if you simply owned the gold.
In contrast, a PAXG is a digital representation of physical gold. Each PAXG token represents one troy ounce of gold in London vaults which can be identified by sequential numbers. Trading PAXG doesn’t take days to settle like trading physical gold bullion might, because it’s run on Ethereum as an ERC-20 token.
PAX Gold is the perfect investment for traditional and modern investors who want to stay fashionable without compromising their personal goals. With real gold assets reflected in crypto tokens, you can invest in both physical and digital resources with a single investment, taking advantage of the best aspects of each.
How does PAX Gold make money?
PAX Gold will generate income in two ways: a small premium on gold and a tokenization fee at the time of initial purchase. The tokenization fee percentage depends on the amount initially purchased; it is 1% for purchases of one ounce or less, but significantly lower for larger purchases. Paxos will not charge custody fees, but will charge a 0.02% fee each time a client wishes to buy or sell a token on a blockchain network.
Related: What is tokenized real estate? A beginner’s guide to digital real estate ownership
Can you stake PAXG? You can earn interest on your PAXG by lending it to a custodian, but rates differ by lender. Staking your PAXG also allows you to earn interest, but you must lock your tokens for a specific period of time. How to buy PAXG? The token is available for purchase 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-service wallet that supports PAXG like the Coinbase wallet.
Safely store your recovery phrase.
Understand and prepare for Ethereum network fees.
Buy and transfer Ether (ETH) to your self-service wallet.
In the trading section, use ETH to buy PAX Gold.
The future of asset-backed tokens
Asset-backed tokens are digital representations of physical assets that can be exchanged for the underlying asset. This asset can be gold, oil, real estate, stocks, soy or just about any other commodity.
Asset-backed tokens open up markets that were once inaccessible and expensive by performing transactions that don’t need a central figure. In doing so, we ensure both security and transparency in business relations. It changes the way we do business for the future and the way we think about ownership and wealth creation.
Asset-backed tokens can also help solve problems caused by inflated or depreciating currencies, as well as the unpredictable stock market. Individuals have a viable new financial choice that combines digital liquidity with real asset values when needed, thanks to the potential of asset-backed tokens. We have already seen how asset-backed tokens are used in many applications.
The future of asset tokenization is only as limited as the imagination. With new use cases being discovered every day, it’s exciting to think about all the possibilities of how asset-backed tokens can help people and businesses around the world.
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