In recent years, non-fungible tokens (NFTs), cryptocurrencies and other modern investment options have become trendy. However, physical commodities like gold are still in high demand. In 2021, the global market capitalization for the cryptocurrency surpassed $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 and is still successful today as a store of value and a means of exchange. Even after the invention of decentralized digital cryptocurrencies, gold remains as prominent as it is. However, for most individual investors, buying gold can be difficult and out of reach. There is a crypto company, Pax Gold (PAXG), which aims to make gold ownership more democratic and available to everyday investors by allowing them to trade it like any other cryptocurrency.
PAX Gold has found a way to combine cryptocurrency with physical gold assets, making it attractive to investors accustomed to traditional options. 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 company based in New York. Each PAXG token is tied to one troy ounce (t oz) of a 1:1 ratio of 400-ounce London Good Delivery gold bars stored in the Brinks Security Vault in London. The Paxos-backed cryptocurrency, PAXG, is backed by gold bars certified by the London Bullion Market Association (LBMA) and can be redeemed for real bullion.
Related: What Is A Gold-Backed Token And How Does It Work?
Pax Gold saves investors the hassle of storing and securing physical gold as well as transporting it. In addition, the shares can be partially purchased, making it more accessible to retail investors who would otherwise have been constrained by the high cost of gold. PAX Gold boasts a combination of the properties of both physical gold ownership and cryptocurrency that provides a solution to many modern challenges in the gold market such as high costs, storage concerns and liquidity constraints.
Who is behind Pax Gold?
Paxos Trust Company, 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 started. In addition to Pax Gold, they have also created the Pax Dollar (USDP), a digital United States Dollar, and stablecoin. They have strong institutional support 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, giving it portability between wallets, exchanges, decentralized finance (DeFi) platforms and other apps that use Ethereum. Pax Gold allows users to trade, stake or redeem their tokens for high quality gold bars. These gold bars are recognized by the London Bullion Market Association and are stored in secure safes around the world. Even with these top-notch security measures and high-quality gold, Pax Gold does not charge any custodial or storage fees – only a 0.02% transaction fee.
Is Pax Gold safe? Not only is Pax Gold accredited with the gold standard, but it also functions reliably and transparently. Pax Gold and its holding company, Paxos Trust, are both under the legal jurisdiction of the New York Department of Financial Services (NYDFS). In addition, Pax Gold independently protects the assets of the consumer and the company, ensuring that the consumer is protected in the event of bankruptcy.
PAXG conducts monthly audits from a third-party auditing firm to ensure that its gold reserves match the supply of PAXG tokens. The report of these verifications has been released on the official website of Paxos. In addition, the developers of PAXG run regular smart contract audits to discover any potential bugs or vulnerabilities in the network.
Is Pax Gold real gold?
As mentioned earlier, Pax Gold is a tokenized gold that operates on a blockchain network. Tokenization is the digital transformation of both 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 a hedge against inflation. When USD loses value, gold in USD becomes more expensive and vice versa. This makes gold a popular choice for investors who want to protect their money from inflation.
PAXG tokens have serial numbers that correspond to individual gold bars. The serial number, value and other attributes of the holder’s physical gold can be searched for by inputting an individual’s Ethereum wallet address on the PAXG lookup tool. They also have the option to convert their PAXG into fiat money, another cryptocurrency or gold bullion bars allocated and unallocated at the current market price of gold.
What is the difference between PAXG and Gold ETF?
The main difference between a Gold ETF and Pax Gold is that the ETF buys a contract that mimics the price of gold, but the underlying asset is not owned by the user. Each PAXG token is directly linked to an actual gold bar held in a London vault, with each PAXG token being worth one.
Gold Exchange Traded Funds (ETFs) track the value of the underlying commodity. They give investors access to just the price of gold, but not ownership. An investor who owns a gold ETF is a party to an agreement that gives him a specific portion of the gold deposited. Gold ETFs cannot be compared to outright ownership of the metal. For example, by the time the settlement takes place, the value of the contract may be less than what you would have received if you only had the gold outright.
In contrast, PAXG is a digital representation of physical gold. Each PAXG token represents one troy ounce of gold in a London vault that can be identified by ordinal numbers. Trading PAXG does not take days to settle as physical gold bar trading can take place as it is regulated on Ethereum as an ERC-20 token.
Pax Gold is the perfect investment for both traditional and modern investors who want to stay on trend without compromising on 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 revenue in two ways: a small premium on gold and a token fee at the time of initial purchase. The percentage of the token fee depends on the amount initially purchased; This is 1% for purchases of one ounce or less but significantly less for larger purchases. Paxos will not charge a custodial fee, but will charge a 0.02% fee whenever a customer wants to buy or sell tokens on the blockchain network.
Related: What is tokenized real estate? A Beginner’s Guide to Digital Real Estate Ownership
Can you bet on PAXG? You can earn interest by lending your PAXG to a custodian, but rates will vary depending on the lender. You can also earn interest by betting your PAXG, but you will need to lock in your tokens for a certain period. 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-custodial wallet that supports PAXG like the Coinbase Wallet.
Store your recovery phrase safely.
Understand and prepare for Ethereum network fees.
Buy and transfer Ether (ETH) to your self-custodial wallet.
In the Trade section, use ETH to buy PAX Gold.
The future of asset-backed tokens
An asset-backed token is a digital representation of a physical asset that can be redeemed for the underlying asset. That asset can be about gold, oil, real estate, equity, soybeans or any other commodity.
Asset-backed tokens are cracking open markets that were once inaccessible and expensive by making transactions that did not require a central figure. By doing so, we are ensuring both security and transparency in business relationships. It is changing the way we do business and the way we think about ownership and wealth creation for the future.
Asset-backed tokens can also help address issues caused by inflation or depreciating currencies, as well as unpredictable stock markets. 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 being used in many applications.
The future of asset tokenization is limited only as a fantasy. With new use cases being discovered every day, it is exciting to think about all the possibilities how asset-backed tokens can help people and businesses around the world.
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