In his monthly crypto tech column, Israeli serial entrepreneur Ariel Shapira covers emerging technologies within the crypto, decentralized finance (DeFi) and blockchain space, as well as their roles in shaping the economy of the 21st century.
The crypto market is in a downward spiral, with Bitcoin (BTC) plunging over 50% below its peak price. In an even more dramatic slump that’s now making all the headlines, Terra’s LUNA dropped 99% in a single month. The Economic Times called it a “massacre of Terra investors who were slaughtered within 48 hours.”
For now, nobody can tell how deep this plunge will be, but investors don’t have to go down with their investments. Tokens backed by real assets can allow them to hedge against the ongoing downturn.
Gold has always been a lucrative investment and has stood the test of time, consistently preserving its value no matter the market conditions. Just recently, gold was surging, and some expect it to keep climbing up throughout the year amid persistent economic shakeups. Thanks to tokenization, gold has gotten a new shine and is offering its security to the world of crypto. Here are some of the gold-backed projects that are offering investors stability when it’s off the menu in the general crypto market.
VNX, Europe’s first regulated platform for investing in tokenized precious metals, recently launched VNX Gold (VNXAU), based on Ethereum. Each VNXAU represents an ownership stake in a physical gold bullion certified by the London Bullion Market Association (LBMA), offering investors maximum security and certainty.
VNX Gold grants investors all the advantages of the underlying commodity combined with the flexibility of a crypto asset. Every VNX Gold token is linked with a unique serial number stamped on a respective gold bar, which is stored in a vault in Liechtenstein. This enables investors to effectively keep their gold in their crypto wallet without having to worry about its physical storage.
VNX Gold holders can opt to redeem their physical gold, either during an in-person visit or, for shipments over one kilogram, via delivery right to their doorstep anywhere in the world. With VNX Gold, investors have peace of mind in knowing exactly where and how secure their gold is.
Paxos, a regulated blockchain infrastructure platform, offers PAXG, a digital token backed by physical gold. Each token represents one fine troy ounce of a single 400-ounce LBMA Good Delivery-standard gold bar. PAXG owners don’t just own the token, but also the underlying physical gold, which Paxos Trust Company stores in vaults.
Paxos has a nationally-ranking auditor validate the matching supply of PAXG tokens and their underlying gold on a monthly basis to confirm the tokens’ adequate backing. The company recently decreased the minimum required purchase amount and removed custody fees, making PAXG a viable option for investors looking to start small when buying gold.
While, with most gold-backed tokens, a central issuer holds the physical gold in its custody, Australian startup Meld Gold takes a different approach. Each token represents a single gram of gold that is held by various companies across the supply chain, including Melbourne Mint, a leading Australian bullion retailer, for ultimate decentralization. Meld vets all entities before they are accepted to join the network. General manager of Meld Gold AJ Milne believes that without a single entity holding all of the issued gold, there will be no central point of failure.
The Meld Gold token has no fixed supply, but instead the market supply and demand for both traditional and digital gold determine its minting and burning.
An eclectic group of finance, IT, and blockchain experts created GoldCoin (GLC) in 2010, with the goal of making gold more widely accessible and frictionless. GLC is the first fractionalized gold-backed token that investors can purchase using any national currency or cryptocurrency.
The ERC-20 gold-backed coin allows investors to instantly buy gold in a secure and anonymous way. GLC’s fractionalized nature gives holders total economic control and freedom to purchase any quantity of gold at any time.
Investors can purchase and hold their GLC on the GoldCoin Wallet without transaction fees. With just two-minute confirmation speeds, GLC offers the quickest transaction of all gold-pegged tokens.
Tether Gold (XAUt) is a digital asset offered by TG Commodities Limited. One full XAUt token represents one fine troy ounce of gold in a LBMA Good Delivery-standard bar. Holders of XAUt can easily transfer it between any on-chain addresses from a Tether wallet where it is issued. Investors can identify their specific gold bar and the number of gold ounces they hold by entering the Ethereum address with their XAUt tokens on the Tether website.
Investors need to purchase a minimum of 50 XAUt or 50 fine troy ounces, which amounts to roughly $90,000 as of this January. They can fractionalize their token and redeem it for physical gold or pocket proceeds from selling it. However, investors must hold one full bar of gold in order to redeem any amount. This can be a potential downside for investors looking to hold a smaller amount of gold that is still easy to redeem.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Ariel Shapira is a father, entrepreneur, speaker and cyclist and serves as founder and CEO of Social-Wisdom, a consulting agency working with Israeli startups and helping them establish connections with international markets.