Although stable coins have emerged as currencies matched to the dollar, this same concept can be applied to other assets. Gradually cryptocurrencies matched in euros and yen, and more recently it was the turn of gold.
Most stablecoins work with the physical ballast system in a 1 to 1 ratio, that is, for each currency issued, there is an equivalent dollar in their reserves. In the case of gold, it is possible to maintain this ballast in physical gold, futures contracts, gold investment funds, or equivalent.
Similar to dollar-paired stablecoins, the cryptocurrency issuer is responsible for ensuring that the amount issued is compatible with the ballast. This gives a huge advantage to its holders, who gain the transparency, speed, and low transfer cost brought by the blockchain.
The Bitcoin Market, a leader in the crypto market in Latin America, is preparing to launch the trading of PAX Gold, a 100% secure gold-backed stable coin.
What is tokenization, and what is its advantage?
The digitization of real assets, known as tokenization, is a process that is occurring at an accelerated rate since it confers numerous benefits to the asset. This trend is irreversible, and the Central Banks themselves already signal their intention to migrate to a token-shaped fiat currency.
On the one hand, the holder gains the transparency and autonomy conferred by the blockchain, this decentralized database. An issuer benefits from the ability to divide the asset into smaller instalments, increasing its liquidity.
When tokenizing a property, a precatory, or gold bars, it is possible to negotiate and move fractions of the asset. This expands access to previously restricted markets and facilitates the transfer and registration of ownership of this asset.
This other article details how digital security works in cryptocurrency transactions, in addition to the main protection mechanisms used by the Bitcoin Market.
How does a stablecoin work in practice?
In the case of backed stable coins, the responsible issuer, usually a company, defines a custodian, responsible for the custody of the assets. Those interested in acquiring stablecoin must transfer the values to the issuer, who in exchange will create new tokens and send them to the buyer.
This buyer is free to trade such tokens on exchanges, or to store them in a wallet if desired. It is up to the issuer to accept any redemptions, receiving the tokens, and in return returning the equivalent amount. This will vary according to each stablecoin, following the rules of the issuer.
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Everyone is free to buy directly via exchanges if they so wish, and their price will fluctuate according to market supply and demand. The tendency is for the price to move in a very similar way to the asset that makes up the ballast, as eventual differences in the quotation create arbitrage opportunities.
That is, the market itself tends to adjust the price.
Who is the issuer of PAX Gold?
Founded in 2012, Paxos was born with the Singapore itBit exchange. In 2015 the company obtained approval from the New York State Department of Financial Services (DFSNY ) to offer cryptocurrency products, including custody. In this way, it became a 100% regulated entity in the USA.
Paxos has more than 100 employees, and has already received USD 93 million in investments . They started in the stablecoin market in 2018, with the launch of the Paxos Standard token (PAX), a dollar-backed cryptocurrency that exceeds USD 200 million in circulation.
How does PAX Gold work?
Each Pax Gold (PAXG) coin issued has 1 ounce (31.1 grams) of gold equivalent in the custody of Brink's, a company listed on the US stock exchange with more than 60,000 employees. This amount of gold is equivalent to R $ 9,500, but the token is fractionable up to 18 decimal places, and it is possible to move values below R $ 0.01.
The issuing company Paxos guarantees holders duly approved in the Know Your Customer (KYC) process the right to redeem, at any time, the equivalent amount of gold . This way, even if the token does not trade on exchanges, its holder is not at risk of losing convertibility.
There are just over 24,200 tokens issued, which gives a market value of R $ 233 million. Its monthly trading volume exceeds R $ 70 million, and is currently listed on Kraken, FTX and Bithumb.
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Why invest in gold?
Precious metal has been used as a store of value and a means of payment for more than 2,600 years. Since its discovery, only 200,000 tons have been mined, measured below in relation to the size of the Statue of Liberty.
The difficulty in extracting gold makes the metal scarce, therefore an excellent way to store value. It is important to note that the use in jewelry and the like amounts to between 45% and 50% of the gold already mined.
The metal continues as an important reserve of Central Banks and international entities around the world, which hold about 36% of the stock in bars and coins. Countries like Russia and China have doubled their reserves since 2015.
How to acquire PAX Gold (PAXG) in the Bitcoin Market?
The technology chosen by Paxos was the ERC-20 token on the Ethereum network, due to its security, transparency, and flexibility through smart contracts, digital contracts. This allows the user to choose a wallet of their preference, although it is possible to keep the tokens in the custody of the Bitcoin Market if desired.
If you do not yet have an account on the Bitcoin Market, the first step to start trading PAXG is to register on our website, or through the Android / iOS application.
To start trading, it is necessary to have a balance in your account in the Bitcoin Market, that is: you will have to transfer the desired amount from your bank to the platform. With the balance deposited, just place a purchase order to purchase the desired amount of Paxos Gold (PAX). Remember that on our platform, you can now start investing in any cryptocurrency with $50.
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