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Gold has for long been considered a safe investment, and despite the onslaught of several investment tools and trade options, gold more or less has remained undeterred.

Cryptocurrency trade markets, primarily in the DeFi segment, are now understanding the potential of infusing gold with cryptocurrency tokens as a major breakthrough that can make cryptocurrency more stable. For those who are yet to unravel the innovation onboard, gold-backed cryptocurrencies are a refreshing change and a form to capitalize on the DeFi craze and solidity of gold. 

An insight into the gold-backed cryptocurrencies

The GoldFinX blockchain thrives on a scalable business model and stands as an agent of change. The Perth Mint Gold Token (PMGT) is considered one of the best gold-backed tokens in the market, and the Australian Government’s involvement in it has been a prime establishment of its sanctity as it gives a guarantee on the purity and weight. 

Likewise, DigixGlobal (DGX) is an optimal way of redeeming and transferring real gold bars by buying and selling virtual gold in the form of tokens. Tether, the crypto bridge, has its gold-backed tokens called XAUT that play on different blockchains such as Ethereum and TRON. 

Meld Gold with Algorand has their decentralized gold tokens. It has a sturdy digital platform and integrates buying and selling operations into the global supply chain. This allows investors to undertake gold trading and settlement through tokenization transacting in both virtual and physical gold with better transparency and empowered access via decentralized finance. 

Gold-backed cryptocurrencies tend to mirror the market price of gold. But their ability to reflect the prices is directly proportional to the extent they can be redeemed for gold. Also, gold-backed cryptocurrencies are subject to their separate market forces. They can be traded on lower liquidity markets but can still be heavily volatile. Let us understand some of the pros and cons, giving investors and traders a fair idea. 

Pros & Cons of gold-backed tokens

  • Authentic and legitimate gold-backed cryptocurrencies that reflect gold prices are considered much more stable than most of the cryptocurrencies. It is after all a reliable store of value and can give a good base to people who prefer to store their value as gold. 
  • The method of tokenizing gold on Blockchain allows investors to use gold across different blockchain applications. It is also easier to store and sell compared to actual gold. Digital gold tokens are typically better than physical tokens because they are easier to store and sell.

In hindsight, it is also important to understand its cons before getting into it. 

  • Investors should do their bit of research because associating with disreputable projects can be a common fiasco. Run through the whitepaper, its websites, and other sources that will help you to understand. 
  • Hidden fees could be involved, which makes the costs of physical gold custody slightly expensive. Also, The availability of gold-backed cryptocurrencies on exchanges could be limited, restricting its ability to be traded. 

GoldFinX stands out

GFX finances Artisanal and Small Gold mines at a global level. It understands that the market has tremendous potential and lacks transparent funding. For GoldFinX, the ideal projects could be small, but they need to have disruptive potential. It thoroughly analyzes every project by its team of internal experts and a Mining selection committee comprising prolific mining industry experts and geologists. Small mining projects face hurdles such as lackadaisical profits, shortage of labor, scalability, and outdated equipment. Furthermore, the environmental impact can be another deterrent to success, considering government policies on the same. 

GoldFinX aims to bring more investment in this space by securing digital assets joining hands with several players in this quest. In this way, the companies can ensure their profit margins and help them improve working conditions, upgrade their equipment, and protect the environment.  It has integrated social and environmental objectives in its business model because socially irreversible harm can be damaging. The industry needs alternatives to ASGMs to demolish toxic substances like mercury traveling to water bodies. 

Its blockchain solutions confirm the transparency of financial transactions related to GiX, its native token. This ensures that gold production is trackable right from its extraction to its sale globally. GoldFinX’s solutions emphasize traceability, assisting mines in selling their products to international markets.

Summing up

Gold-backed cryptocurrency is a great new DeFi opportunity. With the token price pegged to the current gold price, there is less price volatility to other tokens in DeFi. With cutting-edge technology like Blockchain, it has ushered in a new era of gold-backed digital currencies. The gold rush in the crypto sphere is an encouraging sign and will help people look at gold in novel ways. 

Disclaimer

The information discussed by The Coin Magazine is not financial advice. This is for educational and informational purposes only. Any information or strategies are thoughts and opinions relevant to accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Do your due diligence and rating before making any investments and consult your financial advisor. The researched information presented we believe to be correct and accurate however there is no guarantee or warranty as to the accuracy, timeliness, completeness. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright The Coin Magazine All rights reserved.

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