Compare and select the best Gold Backed Cryptocurrency based on this in-depth review of cryptocurrencies backed by Gold:
All gold-backed cryptocurrencies are derivative assets that let you access purchases, trading, and holding of physical gold at will at any time and location. They remove the transport inconveniences, illiquidity, transferability, and volatility related to dealing with physical gold.
Modern tokens backed by gold allow access to gold futures markets. They are based on blockchain technology.
As digital cryptocurrencies, most gold-backed cryptocurrencies are convertible to physical gold. They can be traded on crypto exchanges for fiat or other cryptocurrencies. Gold-backed them in different ratios depending on the project. For instance, one gram of gold or certificate backs 1 token.
This article explains what gold-backed cryptocurrencies are, how do they work and enumerates top cryptos of this nature.
Table of Contents:
What Is Gold Backed Cryptocurrency
- Gold-backed cryptocurrencies are derivatives whose value derives from the price equivalence of gold. The backing with gold is done to tie the derivative asset to a tangible asset, and subsequently prevent excessive price fluctuations, as happens with most cryptocurrencies.
- The amount of gold used to back that cryptocurrency should be held in gold reserves, for instance, with banks or third-party institutions known as custodians.
- The nature of backing, however, varies from one crypto to another. A single unit of crypto is equivalent to a given unit of gold. Some are backed at the ratio of 1:1, where 1 token equals 1 gram of gold.
- Investors in the token earn increased returns from gold pricing. Investors can redeem tokens back for gold.
Fact-Check:
- The majority of gold-backed tokens exist as ERC-20 standard tokens, but not all. They can be traded on crypto exchanges like mainstream cryptocurrencies.
- The main benefit is that, unlike gold, they are digital and can be split into small units, portable, transferrable easily to another party, and of course affordable for any level of investor.
- Most of them struggle with low liquidity given their limited investor reach–due to low trading on crypto exchanges. Other problems include dependency on central authorities and custodians to custody gold, hence beating purpose as decentralized cryptocurrencies.
Pro-Tips:
- Gold-backed cryptocurrencies are used by investors to hedge against volatility in crypto. They use them to hedge their monetary value against weak fiat money and regulation-bound stable coins.
- You need to verify the backing claims, otherwise, a project could be a scam. In most cases, projects are transparent about the backing, also verifiable through independent third-party audits and custodians.
- Gold amount backing the coins needs to match the number of coins in circulation or supply. We can confirm the token amount in circulation per project from the token contract on the blockchain.
Frequently Asked Questions
Q #1) Is Bitcoin backed by gold?
Answer: No, Bitcoin is not backed by gold, precious metal, or fiat. Bitcoin cryptocurrency derives its value from a variety of factors. These include decentralized acceptable, usability, demand, and technological value. Its price changes with demand and usability. However, we have a list of the best gold-backed cryptocurrency in this article.
Q #2) Is Bitcoin backed by assets?
Answer: No, Bitcoin is not backed by anything. Its underlying value derives from demand, usability, acceptance, and technological value. Cryptocurrency, backed by gold, assets, or other things, have their value judged/determined by the price or value of underlying assets that back them.
Further Reading => BEST Gold IRA Companies to Look For
Q #3) Who owns most Bitcoins?
Answer: Most Bitcoins are owned by corporations.
As of August 2021, Microstrategy is at the top list of firms that hold most of the Bitcoins with 108,992 Bitcoins, followed by Tesla 42,902, Galaxy Digital Holdings 16,400, Voyager Digital 12,260, and Square 8,027 Bitcoins. Over 69,369 Bitcoins owned by Silk Road operatives ended up with the US IRS or investigators of Silk Road.
Q #4) Which cryptocurrency is backed by assets?
Answer: Multiple cryptocurrencies are backed by gold, including Tether Gold, DigixGlobal, Paxos Gold, Goldcoin, Perth Mint Gold, and Meth Gold. We also have others backed by fiats like US Dollar including Tether, USD Coin, Dai, TrueUSD, Paxos Standard, Binance USD, Gemini Dollar, and Palladium Coin.
Other asset-backed cryptocurrencies are backed by silver or oil reserves like the Petro (PTR) run by the Venezuelan government.
Q #5) Can a Bitcoin crash?
Answer: Yes and no, depending on usability and demand trends. It is not a cryptocurrency backed by gold like most cryptocurrencies in this list. That also makes it unstable in pricing. Cryptocurrencies backed by stable assets like the dollar and gold are more stable and less volatile.
Q #6) Did anyone get rich from Bitcoins?
Answer: Yes, Bitcoin has made countless millionaires after shooting in value from $0.0008 per coin in 2009, $0.08 per coin in July 2010, and a current price of $54,343 in October 2021. People who became millionaires from dealing in Bitcoins include Erik Finman. He invested $1,000 in bitcoin when he was 12, and that turned to be $1 million in April 2021.
In 2021 alone, the number of millionaires who have stashed Bitcoin increased from just 25,000 by November 2020 to 100,000 people in February.
Terms Apply: Please read all the details and terms carefully on the below Crypto platforms before investing. Cryptoassets are highly volatile. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong.
List of Top Gold Backed Cryptocurrencies
Here is the list of well-known cryptocurrencies backed by gold:
- Tether Gold (XAUT)
- DigixGlobal (DGX)
- PAX Gold (PAXG)
- Gold Coin (GLC)
- Perth Mint Gold Token (PMGT)
- Meld
Comparison Table of Cryptocurrency Backed By Gold
| Cryptocurrency | Amount of gold backing and ratio | Price per token | Our rating | Website |
|---|---|---|---|---|
| Tether Gold | 1:1 troy fine ounce of gold | $1,758.225 | 5/5 | Visit |
| DigixGlobal | 1:1 gram of gold | $58.41 | 4.8/5 | Visit |
| Paxos Gold (PAXG) | 1:1 fine troy ounce of gold | $1,767.58 | 4.6/5 | Visit |
| Gold Coin GLC | 1: 1000 GoldCoin per ounce of gold | $0.115037 | 4.5/5 | Visit |
| The Perth Mint Gold | 1:1 oz GoldPass certificate: 1 oz pure physical gold | $1,901.63 | 4.2/5 | Visit |
Detailed review:
#1) Tether Gold (XAUT)
Like other gold-backed cryptocurrencies, the XAUT gives investors without a vast amount of money to invest in gold, direct exposure to the physical gold price. This is great for non-institutional investors. The gold-backed crypto also gives investors accessibility to ETFs and other traditional financial assets.
A token owner or holder will have undivided ownership rights to gold on specified gold bars. The allocated gold is identifiable with a unique serial number, purity, and weight. The look-up website allows token holders to check at any time, the gold bars they own, and the ounces of gold they possess per each bar.
As the name suggests, it is from the stable coin Tether team. The team wants, through the token, to apply the same ideas of the Tether fiat-backed stable coins to this gold-backed coin. However, there are some differences between the fiat and gold-backed stable coins. The gold-backed tokens are issued by a new entity named TG Commodities Limited.
Features:
- Users need to open an account at app.tether.to and have it verified to buy the tokens. Purchases are done in US dollars.
- 1 XAUt token equals or represents one troy fine ounce of gold on a London Good Delivery bar.
- It is transferrable from one on-chain Tether wallet to another.
- XAUt token is an ERC-20 token held on an Ethereum-based wallet and as a TRC20 token on the TRON blockchain.
- Tokens redeemable back to physical gold for verified users and for a certain minimum number of XAUt tokens. The gold is delivered to any location in Switzerland.
- Tokens can be redeemed to gold and then the user request for it to be sold and cash sent to them minus fees.
Minimum purchase: 50 XAUt or 50 fine troy ounces.
Price: $1,758.225
Market cap: 150.6 million
Total supply: 85,417
Volume: 1.0 million
Website: Tether Gold
#2) DigixGlobal (DGX)
DigixGlobal is also for those who want to invest in physical gold but have limited cash and therefore need to invest in fractional tokens, transfer, and redeem them at will.
DGX also allows anyone to micro-accumulate gold and manage it effectively on a 24/7 basis with minimal limitations. Through DGX, users can participate in Gold ETF. The tokens are obviously tradable on cryptocurrency exchanges.
Since the buying process is transparent, users are less prone to fraudsters. The company keeps the physical gold backing the cryptocurrency, in Singapore (The Safe House Singapore vault) and Canada. Furthermore, their custodians are members of the Bullion Association and are fully insured.
Features:
- Users need to register, choose a wallet, and then buy. It can be bought with crypto.
- 1 token or DGX is equal to or represents 1 gram of gold. Backed by 100-gram swiss gold bars from Valcambi, Produits Artistiques Metaux Precieux (PAMP) and Metalor, and other refineries.
- It is based on Ethereum blockchain, stored on Metamask, and other ETH wallets.
- Recasting assures members that the DGX is redeemable with the gold amount equivalent.
- Tokens have no demurrage (storage) fee. ETF fee is storage fee is 0.4% pa. The physical gold bar storage fee is 0.6% and the transaction fee for sending the tokens is 0.13% per transaction. The recast or token conversion fee to physical gold is 1%.
- The tokens, ETF, and Gold Bar are regulated.
Minimum purchase: $0.50 for the tokens, $150 for Gold ETF, and $50 to $600,000 for gold bar.
Price: $58.41
Market cap: $3,626,137
Total supply: 78,000
Volume: $1,810
Website: DigixGlobal
#3) Paxos Gold (PAXG)
Paxos Gold is a gold-backed cryptocurrency issued by Paxos – the company behind a Singapore-based cryptocurrency exchange known as itBit. Being a regulated or legal custodian through a trusted charter issued by the New York State Department of Financial Services, the company branched to offering gold-backed cryptocurrency or token.
The ERC-20 token enables users to access high-quality gold from the traditional markets. With the token, they can own, transfer, store, and bet on gold easily and faster – of course, without the limitations of the size and weight of the large gold bars that are not easier to store, transfer ownership, or even subdivide.
Paxos Gold can also be traded as futures – where one can trade either perpetual or quarterly futures contracts on exchanges like FTX. Here, traders can buy assets at a predetermined price at a specified time in the future.
Features:
- Backed by one fine troy ounce of gold at a ratio of 1:1.
- No custody fee is charged for tokens. For Major Gold ETF it is 19-40 bps per year, physical gold coins and other products is 10-100 bps per year, unallocated gold is 1-10 bps per year, and other gold tokens is up to 100 bps per year. LBMA 400 t oz gold bar has a fee of 5-25 bps per year.
- Instant settlement.
- Access to Major Gold ETFs, Gold Futures (COMEX), other gold tokens, and the ability to retail physical gold coins and bars and other products.
- Can be redeemed to physical gold.
- Regulated by the NYDFS. Futures are not regulated.
- Can be traded on Kraken, itBit exchange, Alpha Bullion, Binance, and other exchanges.
Minimum purchase: $20 or 0.01 PAXG or t oz of gold. For Major Gold ETF futures, it is 1 share. The minimum purchase for LBMA 400 t oz gold bar is $800. In other products, it is variable.
Price: $1,767.58
Market cap: $319,973,111
Total supply: 180,902
Volume: $6,449,039
Website: Paxos Gold
#4) Gold Coin (GLC)
Gold Coin peer-to-peer cryptocurrency attempts at decentralization and economic freedom. The team that developed it believes in economic freedom and the transactional confirmation speed is just two minutes, beating many of the cryptocurrencies we know. The ERC-20 coin can be stored and sent in and from any Ethereum wallet.
It is backed at a ratio of 1000 GoldCoin per ounce of gold, which makes it less volatile than Bitcoin and other altcoins not pegged to any stable asset.
Further Reading => Top Crypto Exchanges for Altcoins
Besides, it provides all the benefits of a digital asset over gold or fiat – much better divisibility, portability, and transferability. We can redeem the cryptocurrency back to physical gold at any time the owner wants. Being crypto, it can also be converted to a fiat of choice at any time.
Besides buying the coin from exchanges like CryptoExchange.com, and the issuer or Goldcoin.com, you can also buy it through the issuer’s ATM network. Thus, you can pay via popular methods like debit or credit cards.
Features:
- 1:1000 GoldCoin per ounce of gold.
- The platform also scales through the on-chain and off-chain scaling methods.
- It is mined through the proof of work algorithm, just like Bitcoin. The blockchain also supports SegWit and Lightning.
Minimum purchase: Not available.
Price: $0.115037
Market cap: $4.8 million
Total supply: 72,245,700
Volume: $1,281.82
Website: Gold Coin
Further Reading => Have you Tried these Precious Metals IRA Companies
#5) Perth Mint Gold Token (PMGT)
The Perth Mint Gold token is a tokenized version of the GoldPass certificate at a ratio of 1:1, which is backed by physical gold at a ratio of 1:1. Each of the certificates can be traded for tokens, as can the tokens for the certificates and fiat on digital asset exchanges.
According to the token issuer website, the physical gold is stored in Perth Mint’s central bank. The held gold is guaranteed by the Government of Western Australia.
The token, like other cryptos, is easily transferable and divisible. It can be redeemed back to gold or other fiat equivalents at any time. The fiat connection unlocks liquidity even for the largest trades.
Besides, the crypto does not have any transaction, storage, or management fees. This makes it one of the most effective and affordable gold-backed tokens or gold-backed cryptocurrencies around the world.
Features:
- The token can be redeemed in different Perth Mint’s products – from small 1 oz cast bars to 400 oz LBMA-accredited London Good Delivery bars.
- The Perth Mint publishes all balances of the Trovio‘s GoldPass accounts – hence anyone can publicly verify the backing of the token with gold.
- 1 PMGT = 1 oz GoldPass certificate = 1 oz pure physical gold. Exchange can be done through Trovio.
- You can trade the tokens on the Over-the-Counter or OTC gold market XAU.
Minimum purchase: Not available.
Price: $1,901.63
Market cap: $1,629,655.35
Total supply: 932
Volume: $ $12,110
Website: Perth Mint Gold Token
#6) Meld Gold by Algorand
Like other gold-backed tokens, Meld Gold makes gold accessible to every investor. With the tokens, they can transact gold in real-time and eliminate the volatility that comes with the procurement of gold.
The token also shields investors from steep inflation, as happens in mainstream crypto markets. It also removes investment risks for investors and eliminates slow transactional times.
The token digitizes the Meld Digital Gold Certificates, each of which is backed by physical gold on a ratio. The tokens can be secured on the Algorand Wallet, through which users can monitor their token value. Like other gold-backed tokens, it allows decentralized storage and holding globally at any location and time.
Features:
- Can be bought in OTC markets and from Meld partners.
- The Algorand on which the tokens are issued supports atomic swaps and standard asset tokenization features.
- The token can be converted to any fiat and crypto on an exchange, and back to gold certificates or physical gold.
Minimum purchase: Not available.
Price: $55.68
Market cap: Not available.
Total supply: Infinity.
Volume: $9,500
Website: Meld Gold by Algorand
Conclusion
In conclusion, gold-backed cryptocurrencies are recommended for those investors interested in owning gold. Yet they want the benefits of digitally freeing up physical gold as a hedge against volatility, but think digital currencies are too volatile. Being backed by provable physical gold reserve means they are stable like stable coins backed by fiat.
We suggest gold-backed tokens that allow you to convert back to gold at any time. It is advisable to confirm the project, check evidence of physical gold reserves, and ensure the project is secure and not a scam. Being based on the blockchain means supply can publicly be verified for Tether Gold, DigixGlobal, Paxos Gold, Gold Coin, Perth Mint Gold Token, and Meld Gold.
Tether Gold, DigixGlobal, and Paxos appear transparent in terms of where they custody their physical gold besides being experienced projects. But if you are looking for a quite affordable option, look at Gold Coin’s way at just $0.1150 per token.
And while DigixGlobal appears very competitive in terms of fees, the Perth Mint Gold token is the best in the fee category with no transaction, storage, or management fees.
Research Process:
- Total tools initially short-listed for research: 6.
- Tools researched: 6.
- Time taken to research this article: 9 hours.