Getting To Know Gold-Distributed Cryptocurrencies, PAXG And XAUt

Cryptocurrencies supported by physical gold, PAXG and XAUt. (Photo; Doc. Value Walk)

JAKARTA Cryptocurrencies are known for their extreme volatility, as is generally known, such as Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE) and so on. In addition, there are stablecoins whose value follows the price of fiat money such as USDT, USDC, BUSD, and others.

It turns out that cryptocurrencies are not only that, there are also cryptocurrencies whose value follows the price of gold. For example, when gold writing is trading at a price of IDR 29 million per ounce. Likewise, the price of the cryptopot pegged to gold will be traded at a price equivalent to gold.

The most famous are Paxos Gold (PAXG) and Tether Gold (XAUt). The VOI.id team found the two cryptocurrencies and will elaborate them in detail.

But before that, let's identify the gold-tuned cryptocurrency. Gold-tuned cryptocurrency is a class of derivative assets that allow users to buy, trade and receive exposure to gold without worrying about its physical gold supply.

PAXG and XAUt are two popular cryptocurrencies supported by gold. Both are already trading on a number of leading crypto exchanges. Paxos Gold is listed on the world's largest crypto exchange platform, Binance and Kraken. While Tether Gold is already trading on Bitfinex. Then, the decentralized crypto exchange (DEX) that trades PAXG and XAUt, is Uniswap V3.

These tokens are built above the ERC-20 token standard. That way, PAXG and XAUt can be transferred and traded easily on both CEX and DEX as mentioned above.

Excess and Lack of Crypto Set to Gold

These tokens remove physical gold liquidity by allowing users to trade it at any time, as long as they have access to the exchange. Another benefit is that these tokens can be broken down, allowing investors to have a smaller portion and not requiring them to invest large amounts of money.

Gold-tuned tokens also bring several other benefits, widely related to cryptocurrencies. These tokens are easy to store and can be transferred - unlike physical gold. A cryptocurrency pegged with gold has the potential to be purchased through a decentralized exchange. Therefore, the holder can buy it without having to go through KYC (Know Your Customer) verification like a centralized exchange.

However, only certain crypto projects allow physical gold redeemers including PAXG and XAUt.

Then, the crypto token relies on a centralized service provider that manages physical gold storage that supports tokens, and this is completely out of investor control. Since most of them are Ethereum's ERC-20-based tokens, any purchase or transfer of tokens will be charged a high transaction fee or gas fee.

When compared to other cryptocurrencies whose value is pegged to fiat, PAXG and XAUt have fewer market caps. In our monitoring at CoinMarketCap, PAXG ranks 69 with a market capitalization of IDR 7.8 trillion. While XAUt ranks 205 with a market capitalization value of IDR 7.1 trillion.

Paxos Gold (PAXG)

According to the project's official whitepaper, each PAXG token "represents an ounce of physical gold troy from a certain charmed gold rod." Interestingly enough, if one has enough PAXG to represent the entire gold bar, they can exchange tokens for physical gold bars.

The benefit is that ownership can be divided into units up to 18 decimal points, allowing people to get exposure to small amounts of gold. This token was developed with Ethereum's ERC-20 token standard, making it easy to carry around the network.

It should also be noted that Paxos Trust Company - PAXG's publisher 0 is a regulated financial institution, as well as a eligible custodial. This is a state-arranged company regulated by NYDFS (New York State Financial Services Department) and is required to enforce the highest standards in terms of protecting customer assets. In addition, NYDFS also regulates PAXG itself.

Tether Gold (XAUt)

The Tether, better known as the USDT stablecoin publisher with a third-largest market cap with a value of IDR 363 trillion, has published Tether Gold (XAUt) in 2021. According to a Cryptopotato report, XAUt is based on Ethereum and TRC-20 TRON standards. XAUt also represents an ounce of pure gold troy on the London Good Delivery bar.

XAUt holders can obtain ownership rights that are not divided into gold on designated gold bars. Their allocation can be identified through unique serial, heavy, and purity numbers. According to documentation, XAUt holders are also allowed to check the details of gold bars associated with their addresses at any time through websites.

To make a request for acquittal in the form of physical gold, users must complete the TG Commodities Limited verification process. This is a company that issues tokens. Otherwise, tokens can be traded on several popular cryptocurrency exchanges including Bitfinex.

This is a description of the leading cryptocurrency pegged for gold. However, before making the investment, it is hoped that it will be done research first or commonly called DYOR (Do Your Own Research).