Introduction
PAX Gold (PAXG) is a digital asset. Unlike Bitcoin, Litecoin and other cryptocurrencies in the market, each PAXG token is backed by one fine troy ounce (t oz) of a 400 oz London Good Delivery gold bar. The gold bars are safely and securely kept in Brink’s vaults.
If you invest in PAXG, it means that you own the underlying physical gold which is kept in custody by Paxos Trust Company.
Compared to the other cryptocurrencies in the market, PAXG is more stable as it is commodity-backed, which means investors take possession of real assets – gold. This kind of stablecoin might take over the bandwagon other cryptocurrencies have created. Let’s find out more about it to see whether PAX Gold will steal away the crypto’s spotlight or not.
Background of PAX Gold
PAX Gold (PAXG) is a commodity-backed, gold stablecoin issued by Paxos. Paxos is the first blockchain infrastructure platform that has regulated PAXG. Its products serve as the foundation for a new, open financial system that is more efficient and quicker. Other than Paxos website, PAX Gold is traded at Binance US, Uniswap and Kraken. It can be bought at any broker account that supports PAXG trading like Crypto.com.
Currently, trillions of money are locked up in inefficient, out-of-date financial infrastructure that millions of people cannot access. Paxos is developing a revolutionary technology that will enable assets to travel instantly anywhere on the planet.
For corporate clients, Paxos utilises technology to tokenize, custody, trade, and settle assets. Its Paxos Crypto Brokerage and Stablecoin as a Service solutions allow Fintechs and financial institutions to provide crypto capabilities to their customers. It also provides securities and commodity settlement services. PayPal, Credit Suisse, Societe Generale, StoneX, and Revolut are among Paxos’ clients.
Stablecoin vs Cryptocurrency
First, we should look into the distinguishing characteristics of Stablecoin that set it apart from cryptocurrency but interlink in some ways too.
Stablecoins are cryptocurrencies whose value is tied to another cryptocurrency, fiat currency, or exchange-traded commodities (such as gold, silver and some precious metals).
Asset-backed cryptocurrencies like PAXG have the advantage of being stabilized by assets that vary outside of the cryptocurrency market. For example, the underlying asset is uncorrelated which lowers the financial risk.
Since Bitcoin and altcoins are strongly linked, cryptocurrency investors cannot avoid broad price drops without quitting the market or switching to asset-backed stablecoins. Furthermore, owing to arbitrage, Stablecoins are unlikely to fall below the value of the underlying physical commodity, provided they are administered in good faith and include a method for redeeming the asset backing them.
Stablecoins that are backed are still subjected to the same volatility and risk as the underlying asset.
Why is PAX Gold the trend now?
Stablecoins are a new type of digital currency that is backed by stable real-world assets such as fiat currency. The US dollar’s stability is combined with the efficiency of blockchain technology in PAX Gold.
This is why many investors are jumping from the “cryptocurrency boat” into “digital versions of traditional asset boats” like PAXG.
As of May 19, 2021, the flagship cryptocurrency – Bitcoin – hit more than three-month lows, falling to around $30,000 at one point. The latest decline followed a significant surge that began in the second part of the previous year.
Part of Bitcoin’s decline appears to be a temporary reversal in broader acceptability, as well as regulatory worries and weakening in more speculative sections of financial markets.
These investors are choosing PAX Gold (PAXG) as an alternative to the more volatile cryptocurrencies in order to escape the US dollar’s inflation.
PAX Gold combines the advantages of physical gold bar ownership with the speed and liquidity of a digital asset, fractional ownership, and none of the security risks associated with the physical gold bars stored in your house safe or paying for vault storage.
5 Benefits of PAX Gold
Actual gold on the blockchain provides the benefit of reflecting legal ownership of physical allotted gold while avoiding the disadvantages of limited transportability and expensive storage costs. It has the divisibility, fungibility, and tradability of any digital asset, such as Bitcoin. To put it another way, you get the finest of both tangible and digital assets at once!
Here are 5 more detailed reasons why PAXG should be in your next investment portfolio:
- Safety and security
The New York State Department of Financial Services (DFS) regulates Paxos as a trusted business and custodian of PAXG, which is completely backed by allotted gold kept in the world’s most secure vaults. So if you’re wondering if PAXG is safe, rest assured. Every month, a nationally recognised auditor will testify to the matching supply of PAXG tokens and the underlying gold.
- Backed by gold and other stable currencies
The only gold token that can be exchanged for LBMA-accredited Good Delivery gold bullion bars is the redeemable PAX Gold. Smaller quantities can be redeemed at a network of actual gold dealers for added convenience. Unallocated Loco London Gold is also available to institutional customers. Customers of Paxos can always redeem their funds for USD at current gold market rates. PAXG wallet has the same function like other cryptocurrency wallets, but what’s more special is that it can be redeemable for actual gold, if the need arises. - Competitive fee structure
Fee structure for PAXG token generation and redemption in the Paxos wallet is extremely competitive (0.03-1 percent depending on volume tiers), with minimal on-chain Ethereum transaction fees (0.02 percent) and no storage fees. For on-chain transactions, minimal Ethereum gas fees apply, as they do for all ERC-20 tokens. - Highly accessible
PAXG is an Ethereum-based ERC-20 token that may be transferred and exchanged anywhere in the globe at any time. Anyone may now buy a fraction of an LBMA-accredited London Good Delivery gold bar with minimal investment.
- Flexible
Using the Paxos platform, you can easily exchange or redeem PAXG for fiat, physical, or unallocated gold. On major crypto exchanges, you may trade PAXG for other digital currencies. PAXG can be used everywhere that ERC-20 tokens are accepted.
Other than Paxos website, PAX Gold is traded at Binance US, Uniswap and Kraken. It can be bought at any broker account that supports PAXG trading like Crypto.com.
Conclusion
With over 20 vaults, exchanges, wallets and lending platforms, PAX Gold is handled securely without the hassle of you hiding physical gold behind your painting or underneath your bed. They handle everything. The speed and liquidity of this digital asset still has a long way to go before finally hitting the common ground with cryptocurrencies. But, it’s coming out strong as most of the people still trust gold which is less volatile than the peer-to-peer ecosystem.
Take the advice here with a pinch of salt as every fluctuation in the market is unpredictable and risky.
FAQ
Yes. Paxos, the custodian behind PAX Gold, is regulated by the New York State Department of Financial Services (DFS). The currency is also backed by gold that is kept behind the world’s most secure vaults. On top of that, monthly audits are done on the PAXG tokens by a nationally recognized auditor. The auditor will testify to the matching supply of PAXG tokens against the underlying asset which is gold.
PAX Gold can be traded at PAXOS website, Binance US, and Kraken. It can also be bought at any other broker account that supports PAX trading such as Crypto.com.
Fee structure for PAXG token generation and redemption in the Paxos wallet is extremely competitive (0.03-1 percent depending on volume tiers), with minimal on-chain Ethereum transaction fees (0.02 percent) and no storage fees. For on-chain transactions, minimal Ethereum gas fees apply, as they do for all ERC-20 tokens.
At 0.03-1%, Paxos wallet fees are among the cheapest in the market. There’s also on-chain Ethereum transaction fees of 0.02%, which is also minimal, and no storage fees. This makes it very cost effective to trade and hold PAX Gold.
With the current uncertainties in the crypto markets, PAX Gold offers an in-between solution where you can invest in crypto that is also backed by real world currencies such as gold and fiat. This may help reduce the risk of an investor’s overall portfolio
