In recent years, non-viable tokens (NFTs), cryptocurrencies and other modern investment options have become trendy. However, physical commodities such as gold are still in high demand. In the year By 2021, the global market capitalization for cryptocurrency will exceed $2 trillion. Now investors must ask themselves: which option should I choose – crypto or gold?
Gold has been a store of value and a medium of exchange for thousands of years and is still effective today. Despite the emergence of decentralized digital cryptocurrencies, gold has remained prominent. Although for most individual investors, gold ownership can be difficult and unattainable. There is a crypto company called PAX Gold (PAXG), whose goal is to make gold ownership more democratized and accessible to everyday investors like any other cryptocurrency.
PAX Gold has found a way to combine cryptocurrency with physical gold assets, making it attractive to investors alongside conventional alternatives. This article discusses PAX Gold (PAXG) and analyzes how the cryptocurrency works.
What is PAX Gold?
Paxos Gold is a cryptocurrency backed by real gold reserves held by New York-based for-profit Paxos. Each PAXG token is pegged at a 1:1 ratio to one troy ounce (t oz) of 400-ounce London fine delivery gold stored in London’s Brinks Security vaults. The Paxos-backed cryptocurrency, PAXG, is backed by gold bars certified by the London Bullion Market Association (LBMA) and can be exchanged for actual bullion.
Related: What is a gold-backed token and how does it work?
PAX Gold saves investors from the hassle of storing and maintaining physical gold and transporting it. Also, shares can be bought in dividends, which makes them more accessible to retail investors, who would otherwise be hindered by the high price of gold. PAX Gold boasts a combination of both physical gold ownership and cryptocurrency qualities that provide solutions to many modern challenges in the gold market, such as high costs, storage risks and lack of liquidity.
Who is behind Pax Gold?
Paxos Trust Co., 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 (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 done. In addition to Pax Gold, they have created Pax Dollar (USDP), a digital US dollar and a stablecoin. They have received strong institutional backing and have raised over $500 million in total funding from investors such as OakHC/FT, Mithril Partners and PayPal Ventures.
How does PAXG work?
The PAX Gold token is built on the Ethereum blockchain, allowing for portability between wallets, exchanges, decentralized finance (DeFi) platforms, and other applications that use Ethereum. PAX Gold allows users to trade, share or buy their tokens for high quality gold bars. These gold bars are certified by the London Bullion Market Association and stored in secure vaults around the world. Even with these high-level security measures and high-quality gold, PAX Gold charges no security or storage fees – just a 0.02% transaction fee.
Is Pax Gold safe? PAX Gold is not only gold-certified, but also works with reliability and transparency. Both PAX Gold and its holding company, Paxos Trust, are regulated by the New York Department of Financial Services (NYDFS). In addition, PAX Gold protects the consumer and the company’s assets separately, ensuring that the consumer is safe in case of bankruptcy.
PAXG conducts monthly audits from a third-party auditing firm to ensure that its gold reserves are consistent with the supply of PAXG tokens. The reports of these confirmations are published on the official website of Paxos. In addition, PAXG developers conduct regular smart contract audits to look for potential errors or vulnerabilities in the network.
Is Pax Gold real gold?
As mentioned earlier, Pax Gold is gold that runs on the blockchain network. Tokenization is the digital conversion of both physical and intangible assets into cryptocurrency. The PAXG token specifically represents physical gold from the Pax Trust Company. Gold is a good store of value because it maintains its value over time. As such, it is often used as a hedge against inflation. When the US dollar depreciates, gold becomes more expensive in USD and vice versa. This makes gold popular with investors who want to hedge their wealth against inflation.
PAXG tokens have serial numbers corresponding to each gold bar. The serial number, value, and other attributes of the physical gold holder can be found by entering an individual’s Ethereum wallet address into the PAXG lookup tool. They also have the option to convert their PAXG into fiat currency, another cryptocurrency, or allocated and unallocated gold bullion bars 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 stored in a London vault, each PAXG token is equal to one.
Gold exchange-traded funds (ETFs) track the price of the commodity. They only give investors the value of gold, but not ownership. An investor who owns a gold ETF is a party to an agreement that gives them a certain fraction of the gold they hold. Gold ETFs cannot compete with full ownership of metals. For example, when a contract is executed, the value of the contract may be less than if you owned the gold alone.
Conversely, PAXG is a numerical representation of physical gold. Each PAXG token represents one troy ounce of gold in the London vaults which can be identified by serial numbers. Because it is hosted by Ethereum as an ERC-20 token, a PAXG transaction does not take days to settle like a physical gold bar transaction would.
PAX Gold is the perfect investment for both traditional and modern investors who want to stay on trend without compromising their personal goals. With real gold assets reflected in crypto tokens, you can invest in physical and digital assets in one, taking advantage of the best aspects of each.
How does PAX Gold make money?
PAX Gold earns revenue in two ways: a small premium on gold and a token fee at the time of initial purchase. The percentage of payment for tokenization is based on the amount initially purchased; It’s 1% for purchases of one ounce or less, but much less for larger purchases. Paxos does not charge a maintenance fee, but charges 0.02% every time a customer wants to buy or sell a token on the blockchain network.
Related: What is tokenized real estate? A Beginner’s Guide to Digital Real Estate Ownership
Can you pay PAXG? You can earn interest on your PAXG by lending it to a guardian, but the rate varies by lender. Saving your PAXG also allows you to earn interest, but you have to lock your tokens for a certain period of time. How to buy PAXG? The token is available for purchase on many exchanges including Binance, Kraken, KuCoin and Coinbase. Here are the steps to buy PAXG tokens on Coinbase crypto exchange.
Download a self-sustaining wallet that supports PAXG, like the Coinbase wallet.
Store your recovery phrase safely.
Understand and prepare for Ethereum network payments.
Buy Ether (ETH) and transfer it to your own wallet.
Use ETH to buy PAX Gold in the trading section.
The future of asset-backed tokens
Asset-backed tokens are digital representations of physical assets that can be redeemed for the underlying asset. That asset could be gold, oil, real estate, equities, soybeans or just about any other commodity.
Asset-backed tokens are cracking open markets that were once inaccessible and costly by making transactions decentralized. By doing this, we are ensuring security and transparency in business dealings. This is changing the way we do business in the future and the way we think about ownership and wealth creation.
Asset-backed tokens can help solve problems caused by overvalued or undervalued currencies, as well as the unpredictable stock market. Thanks to the potential of asset-backed tokens, individuals have a new viable financial option that combines digital liquidity with real asset values when needed. We’ve already seen how asset-backed tokens are used in many applications.
The future of asset tokens is only as limited as the imagination. With new use cases emerging every day, it’s exciting to think about how asset-backed tokens can help people and businesses around the world.
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