A mix of a cryptocurrency and gold called PAX Gold fills the gap between the two types of investments. It delivers cryptocurrencies’ stability and security.
Nonfungible Tokens (NFTs), cryptocurrencies, and other contemporary investment possibilities have been popular in recent years. Physical goods like gold are still in high demand, though. The market value of cryptocurrencies worldwide topped $2 trillion in 2021. Investors must now ask themselves: Should I select gold or cryptocurrency?
Gold has been used successfully as a store of wealth and a medium of trade for thousands of years and is still in use today. Gold has remained significant despite the development of decentralised digital currencies. Although acquiring gold might be challenging and out of reach for the majority of individual investors. One cryptocurrency firm, PAX Gold (PAXG), aims to increase the accessibility and democratic nature of gold ownership by enabling investors to exchange it similarly to other cryptocurrencies.
Investors used to traditional options are drawn to PAX Gold because it has figured out a way to integrate bitcoin with actual gold holdings. In this post, we’ll talk about PAX Gold (PAXG) and examine how it operates.
PAX Gold: What Is It?
A cryptocurrency called Paxos Gold is backed by actual gold reserves that are kept by Paxos, a for-profit business in New York. Each PAXG token is equivalent to one troy ounce (t oz) of a 400-ounce London Good Delivery gold bar kept in a London vault run by Brinks Security. The London Bullion Market Association (LBMA) certified gold bars that support the Paxos cryptocurrency PAXG are redeemable for physical bullion.
Investors in PAX Gold are spared the hassle of securing, transferring, and storing actual gold. Additionally, because shares may be purchased in small increments, they are more accessible to individual investors who would otherwise be constrained by the high price of gold. The actual gold ownership and cryptocurrency properties of PAX Gold combine to address many of the problems that the gold market faces today, including high prices, storage issues, and a lack of liquidity.
Why Is PAX Gold Being Used?
PAX Gold was developed by The Paxos Trust Company, a New York City-based financial institution and technology firm that focuses in blockchain technology. In 2012, Charles Cascarilla and Richard Teo, both former analysts at various companies (Teo at Cedar Hill Capital Partners and Cascarilla at Goldman Sachs), launched Paxos.
Paxos has worked on other cryptocurrency projects in addition to PAX Gold. In addition to PAX Gold, they also developed PAX Dollar (USDP), a stablecoin and digital version of the US dollar. They have strong institutional backing and have secured over $500 million from funders like PayPal Ventures, OakHC/FT, and Mithril Partners.
How is PAXG organised?
The PAX Gold token may be transferred across wallets, exchanges, decentralised finance (DeFi) platforms, and other Ethereum-based apps because it is based on the Ethereum blockchain. Users of PAX Gold can exchange, stake, or redeem their tokens for fine gold bars. The London Bullion Market Association has authorised these gold bars, which are kept in safe vaults all around the world. Even with these excellent security measures and premium gold, PAX Gold only levies a 0.02% transaction cost. There are no custodial or storage fees.
Can I trust Pax Gold? In addition to being certified to a gold level, PAX Gold also runs consistently and openly. The New York Department of Financial Services has legal control over PAX Gold and its holding firm, Paxos Trust (NYDFS). Additionally, PAX Gold safeguards both the customer’s assets and those of the business separately, making sure that the customer is safe in the case of bankruptcy.
To make sure that its gold holdings correspond to the quantity of PAXG tokens, PAXG is subject to monthly audits from a third-party auditing company. The attestations’ results are published on the Paxos website. Additionally, the developers of PAXG conduct routine audits of smart contracts to check for any potential flaws or network vulnerabilities.
Pax Gold: Is it genuine gold?
As was already explained, Pax gold is tokenized gold that runs on the blockchain. Tokenization is the conversion of tangible and intangible assets into cryptocurrency through digital means. The Paxos trust company’s physical gold is precisely represented by the PAXG token. Because gold maintains its value over time, it makes a good store of value. As a result, it’s frequently employed as an inflation hedge. Gold costs more in USD when the USD declines in value, and vice versa. Because of this, gold is a well-liked option for investors who want to shield their money against inflation.
The serial numbers on the PAXG tokens correspond to those on distinct gold bars. By entering a person’s Ethereum wallet address into the PAXG lookup tool, it is possible to learn the serial number, value, and other details about their physical gold holdings. They can also exchange their PAXG for another cryptocurrency, fiat money, or allocated or unallocated gold bullion bars at the current gold price.
What distinguishes gold exchange-traded funds from PAXG?
A gold ETF and Pax Gold vary primarily in that an ETF buys a contract that matches the price of gold, but the user of Pax Gold does not own the underlying asset. Each PAXG token is comparable to one genuine gold bar that is stored in a London vault and is directly linked to each PAXG token.
Exchange-traded funds (ETFs) for gold follow the price of the underlying metal. Investors are just given access to gold’s price; ownership is not granted. An investor who owns a gold ETF is a participant in a contract that allots to him or her a particular share of the gold that has been pooled. Gold ETFs fall short of full ownership of the metal in comparison. For instance, the contract value can be less by the time settlement takes place than what you would receive if you simply held the gold outright.
A PAXG, on the other hand, is a digital representation of actual gold. One troy ounce of gold is represented by each PAXG token, which is stored in sequentially numbered vaults in London. Because PAXG is managed on Ethereum as an ERC-20 token, trading it does not require the same amount of time to settle as trading actual gold bars might.
For both classic and contemporary investors who wish to stay on trend without compromising their personal ambitions, PAX Gold is the ideal investment. You can invest in both physical and digital resources with a single investment, benefiting from the greatest features of both, thanks to real gold assets that are reflected in crypto tokens.
How is PAX gold profitable?
A slight premium on the gold and a tokenization fee at the time of initial purchase are the two ways PAX Gold will generate income. The tokenization fee’s proportion varies depending on the initial purchase amount; it is 1% for purchases of less than an ounce but substantially lower for larger transactions. When a customer wants to purchase or sell a token on a blockchain network, Paxos will levy a fee of 0.02% rather than any custodial fees.
Related: What is real estate tokenization? An introduction to owning digital real estate
Can I bet on PAXG? Lending your PAXG to a custodian will allow you to earn interest, but the rate you receive will depend on the lender. You can also get interest by staking your PAXG, but you have to lock up your tokens for a set amount of time. Where can I get PAXG? A number of exchanges, including Binance, Kraken, KuCoin, and Coinbase, offer the cryptocurrency for purchase. To purchase PAXG tokens on the Coinbase cryptocurrency market, follow these steps:
Download a wallet that supports PAXG, such as the Coinbase wallet, for self-custody.
Save your recovery phrase somewhere safe.
Recognize and get ready for the Ethereum network costs.
Purchase and transfer ETH to your wallet for self-custody.
Use ETH to buy PAX Gold in the trade section.
The future of tokens backed by assets
Asset-backed tokens are electronic representations of real-world objects that may be exchanged for the original item. This asset could be any kind of commodity, including gold, oil, real estate, stock, and soybeans.
By facilitating transactions without the need for a central party, asset-backed tokens are enabling entry to marketplaces that were previously expensive and difficult to enter. We are ensuring security and openness in business interactions by doing this. This is altering how we conduct business going forward as well as how we view ownership and wealth generation.
Asset-backed tokens may also be able to aid with problems brought on by unstable stock markets, depreciated or inflated currencies, and other factors. Asset-backed tokens have the ability to provide individuals with a practical new financial option that, when necessary, combines digital liquidity with real asset values. Asset-backed tokens have previously been deployed in a wide range of applications.
Asset tokenization’s potential is only constrained by the mind. It’s thrilling to consider the many ways asset-backed tokens could benefit individuals and organisations all across the world, especially given the fresh use cases that are being found every day.