All That Glitters is Gold

I was reading some articles about Stablecoins before and I have also shared what I understood about them, albeit little. I understood what Stablecoins are and I was able to ascertain the need for such assets to exist in the cryptoverse.

We can say that the Stablecoins are trying to accomplish something noble and they want to somehow bring stability to the ever-unstable universe of cryptocurrency. They humbly exist because they are trying to bring us the best of both worlds, the stability of the physical currency, and all the good things cryptocurrency could offer, such as anonymity, transparency, and, accessibility.

As I was reading and writing my notes, I came across this particular type of Stablecoin that really piqued my interest. It was just interesting and for me, it was something that's unheard of. It was the commodity-backed Stablecoin.

How Do They Work?

Commodity-backed Stablecoins are digital assets that are funded with commodities like precious metals, oil, and real estate. A substantial reserve of a particular commodity is entrusted to a central entity to make the Stablecoin circulate online.

So basically, the issuers of commodity-based Stablecoins allow anyone who has access to cryptocurrency, which is virtually everyone to invest in gold or other precious metals, or even real estate without actually buying the said real-world assets.

The concept and the process implemented by this scheme is called Tokenization. In simpler words, tokenization is just creating digital counterparts for a real-world asset like gold.

Let's take gold for example. There are several Stablecoins out there that are backed by real-world asset gold.

Tether Gold (XAUt)

Tether Gold may sound familiar to anybody who is a bit familiar with crypto and in Stablecoins in particular, and yes, it's related to the same Tether that gives us the Stablecoin USDT. The coin is also offered by TG Commodities limited.

They promise investors that 1 XAUt is equal to one fine troy ounce of a London Delivery Gold Bar. Alright, what a mouthful unit of measurement that was, one fine troy ounce. I am not sure what on Earth that is but as per my readings, it's a tad heavier than the normal ounce people use to weigh normal things such as sugar and other weighable commodities. Maybe the measurement was originally from the land of Troy, I don't know. But they say that it's heavier than the normal ounce to make room for adjustments in regards to the gold's purity.

That's so complicated, but just to simplify it, if you hold a whole token of XAUt, you will be owning a part of a reserved gold bar. And there will be a portion of it that belongs exclusively to you.

As of writing, 1 XAUt is equivalent to $1,860.085. And I mean... wow. Gold's really expensive. And you don't get to be more stable than that. Bitcoin may rise and fall through the days but XAUt will still be worth the same as much as the gold it represents.

Also, holders of the token can choose to redeem their portion of the physical gold if they wish to. They just need to undergo verification of TG Commodities Limited.

Hmmm. I wonder where all this gold is stored.

Pax Gold (PAXG)

Second only to Tether Gold, Pax Gold is the second largest Stablecoin backed by gold. It is made possible by people behind another Stablecoin USDC. Yep, you may also be familiar with that coin. Just like XAUt, 1 whole unit of PAXG is equivalent to one fine troy ounce of London Delivery Gold. Crypto.com has it listed at 1 PAXG = $1878.93 as of the time of writing. It's quite higher than the XAUt, but this has something to do with the exchanges instead of the asset itself.

Just like the XAUt, this token can be used to redeem physical gold or even USD, whichever the investor wishes to have.

They also boast that they have the lowest fees in exchanges and they have absolutely 0 storage fees. Also, you can invest in it with as low as $20 worth of gold. Alright, now I'm interested and maybe I'll try to buy myself some gold with this.

Conclusion

Not all that glitters is gold, sometimes it's a Stablecoin. I think that looking into this type of Stablecoins is a great idea. I mean, it may even be more stable than Stablecoins itself. It may be very far-fetched but even the great dollar can collapse and precious commodities like gold and oil will always be held up with great value.

And of course, this couldn't be farther from a piece of financial advice, I don't have the keys to that kingdom, unfortunately, I only have a few bucks in my wallet, and that's literally, I have like 5 dollars in it which I can't even use. Lol. I just like the feeling of having some dollars in it. But on the other hand, I only have those, I don't have any money right now. Adulting sucks if you aren't rich. Lol. That being said, DYOR always, and thanks for reading this.

Hey!!!

Isn't learning something new interesting? Who knows that you can own real pieces of gold right on your crypto wallet? Now that's something I would really like to try. Maybe one of these days, if I ever got the money for it, I'll try it and let you know how to do it step by step. If there's anyone out there that would be willing to sponsor that dream, then I'm all yours. I think that $100 will suffice. Lol.

That's it from me and until we read again...

Cheers!!!

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Series    : All About Crypto
Title     : All That Glitters is Gold
Published : 04-May-2022
Author :  © RB