Crypto Terms: Letter G

What is Gold-Backed Cryptocurrency?

Gold-Backed Cryptocurrency MEANING:
Gold-Backed Cryptocurrency - is a coin or a token that holds the value of a set amount of gold.
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Let's find out Gold-Backed Cryptocurrency meaning, definition in crypto, what is Gold-Backed Cryptocurrency, and all other detailed facts.

Gold-backed cryptocurrency is like any other digital currency except its single coin or token value is equal to a certain amount of real gold.

Not to mention that these gold-backed cryptocurrencies must have a vault or a trusted custodian where this gold is being kept as a physical collateralized asset.

Gold-backed cryptocurrencies stand out from other cryptocurrencies since their coin or token value is tied to something physical such as gold. There are even gold-backed cryptocurrencies that allow exchanging their coins or tokens for real gold.

Moreover, the fact that gold-backed cryptocurrencies are tied to a real-life asset, gold, softens the impact of severe price fluctuations that cryptocurrencies are infamous for.

Investors are becoming more and more interested in blockchain-based digital assets backed by tangible goods due to regulated stablecoins or diminishing fiat currencies.

One of the key benefits of owning digital gold currencies is that it can be easily cut up into any amount which is not possible with real-life gold bars. 

There are also downsides to gold-backed cryptocurrencies. These types of digital assets often come with low liquidity, issues with the verification of gold reserves, and reliance on a central authority. The latter becomes a significant issue since gold-backed cryptocurrency could possibly lose its credibility as a cryptocurrency since it is not completely decentralized.

Most of the gold-backed cryptocurrencies are available on the Ethereum platform, although there are always some exceptions.

The top gold-backed cryptocurrencies on the market today are Paxos Gold (PAXG), Perth Mint Gold Token (PMGT), Digix Global (DGX), Tether Gold (XAUT), and Meld Gold. PAXG is one of the few exceptions that are not part of ERC-20.