In his monthly cryptotech column, Israeli serial entrepreneur Ariel Shapira discusses emerging technologies within the crypto, decentralized finance (DeFi), and blockchain space, as well as their role in shaping the 21st century economy.
The crypto market is in a downward spiral, with Bitcoin (BTC) diving more than 50% below its peak price. In an even more dramatic slump that is now making headlines, Terra’s LUNA fell 99% in one month. The Economic Times called it a “massacre of Terra investors who were slaughtered within 48 hours”.
For now, no one can say how deep this plunge will be, but investors need not go under with their investments. With tokens backed by real assets, they can hedge against the ongoing downturn.
Related: Stablecoins will have to reflect and evolve to live up to their name
Gold has always been a lucrative investment and has stood the test of time, consistently maintaining its value regardless of market conditions. Recently, gold has been booming and some expect it to continue to rise throughout the year amid ongoing economic shocks. Thanks to tokenization, gold has taken on a new shine and provides its security to the world of crypto. Here are some of the gold-backed projects that offer investors stability when it’s not on 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 interest in physical gold certified by the London Bullion Market Association (LBMA), providing investors with maximum safety and security.
VNX Gold offers investors all the benefits of the underlying commodity combined with the flexibility of a crypto asset. Each VNX Gold token is associated with a unique serial number stamped on a respective gold bar, which is stored in a vault in Liechtenstein. This allows investors to effectively keep their gold in their crypto wallets without having to worry about its physical storage.
VNX Gold holders can choose to redeem their physical gold either on an in-person visit or, for shipments over one kilogram, via door-to-door delivery anywhere in the world. With VNX Gold, investors have the peace of mind of knowing exactly where and how safe 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 not only own the token, but also the underlying physical gold, which Paxos Trust Company stores in vaults.
Paxos has a nationally ranked auditor who monthly validates the matching supply of PAXG tokens and their underlying gold to confirm the adequate support of the tokens. The company recently reduced the minimum purchase requirement and eliminated custody fees, making PAXG a viable option for investors looking to start small when buying gold.
While most gold-backed tokens have a central issuer in custody of the physical gold, Australian startup Meld Gold takes a different approach. Each token represents a single gram of gold held by various companies in the supply chain, including Melbourne Mint, a leading Australian gold dealer, for ultimate decentralization. Meld checks all entities before accepting them to join the network. Meld Gold CEO AJ Milne believes that without a single entity that owns all of the gold issued, there will be no central point of failure.
The Meld Gold token does not have a fixed supply, but instead the market supply and demand for both traditional and digital gold determine its minting and burning.
An eclectic group of financial, IT and blockchain experts created GoldCoin (GLC) in 2010, with the aim of making gold more widely accessible and frictionless. GLC is the first fractionated gold-backed token that investors can buy with any national currency or cryptocurrency.
The gold-backed ERC-20 coin allows investors to buy gold instantly in a safe and anonymous manner. The fractional nature of GLC gives holders total economic control and freedom to buy any amount of gold at any time.
Investors can buy and hold their GLC on the GoldCoin Wallet with no transaction fees. With a confirmation speed of just two minutes, GLC offers the fastest transaction of all gold pin 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 an LBMA Good Delivery standard bar. Holders of XAUt can easily transfer it between all on-chain addresses of a Tether wallet where it was issued. Investors can identify their particular gold bar and the number of gold ounces they hold by entering the Ethereum address with their XAUt tokens on the Tether website.
Investors must buy a minimum of 50 XAUt or 50 fine troy ounces, which works out to about $90,000 as of January. They can fractionate their token and exchange it for physical gold or pocket proceeds from the sale. However, investors must own one full bar of gold in order to repay any amount. This can be a potential drawback for investors looking for a smaller amount of gold that can still be easily redeemed.
This article does not contain investment advice or recommendations. Every investment and trading move carries risks, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.
A father, entrepreneur, speaker and cyclist, Ariel Shapira is the founder and CEO of Social-Wisdom, a consulting firm that partners with Israeli startups and helps them connect with international markets.