Blockchain in Beyond: Real-World Applications of Cryptocurrency
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PAX Gold
PAX Gold is a cost-effective way to help investors gain exposure to the price of gold. Investors can buy and own 1 oz of gold by buying PAX Gold tokens on various cryptocurrency exchanges.
Unlike most other digital assets, the PAXG token is backed with precious physical metal stored in secure vaults. As a result, you don’t have to worry about provenance and authenticity concerns when buying gold online.
In this article, we’ll look at what makes PAX Gold different from other digital assets and discuss its advantages and disadvantages as an investment option.
What is PAX Gold?
PAX Gold (PAXG) is a digital asset that represents physical gold. Each of its Gold-backed tokens is backed by one fine t oz of a 400 oz London Good Delivery gold bar, stored in a professional vault in London facilities. PAX Gold is issued by Paxos, a financial technology company that provides blockchain-based solutions for the financial industry.
PAX Gold is an ERC-20 token that runs on Ethereum. It is built on the Ethereum blockchain and can be stored and transferred using any Ethereum wallet that supports ERC-20 tokens. As a digital currency, PAX Gold can be bought, sold, and traded like any other digital currency, but with the added benefit of being backed by a tangible asset with a proven track record of value over time. By entering their Ethereum wallet address into the PAXG lookup tool, PAXG holders can check the serial number, value, and physical characteristics of their gold at any time.
PAX Gold aims to provide a way for investors to access the benefits of physical gold ownership without the costs and complications associated with storing, securing, and transporting it. PAX Gold is also designed to be a stablecoin linked to the real-time gold market value, making it a potential hedge against inflation and market volatility.
What does allocated and unallocated gold mean?
Allocated gold is tangible or physical gold owned by an individual or entity. It has a specific identification associated with it. At the same time, unallocated gold is owned by a financial institution or entity on behalf of multiple clients. It does not have a unique identification associated with it.
Additionally, it is possible to use fiat currency in trading PAXG on a cryptocurrency exchange, in which investors and customers can use traditional currency to gain exposure to tangible gold through digital currency.
How does PAX Gold work?
Here’s how the PAX Gold or Gold stablecoin works:
- Backed by physical gold: Each token represents one troy ounce of London Good Delivery gold, securely stored in professional vaults.
- Audited and regulated: Paxos Trust Company undergoes regular audits and is regulated by the New York State Department of Financial Services (NYDFS), ensuring transparency and compliance with regulatory standards.
- Redeemable for physical gold: This gold stablecoin can be redeemed for the underlying tangible gold through Paxos Trust Company’s partner, London Bullion Market Association (LBMA)-approved precious metals dealer, if the holder of the token meets certain conditions, such as minimum redemption amounts.
- Transferable and tradable: It can be transferred and traded on crypto exchanges like other digital currencies. This allows holders to benefit from the price movements of gold without having to own and store the metal physically.
- Lower Transaction Fee: Transactions involving gold stablecoin can be executed more quickly and with lower transaction costs than traditional gold trading, which typically involves higher fees and longer processing times.
The Technology Behind PAX Gold
PAX Gold is built on Ethereum, a decentralized platform for building decentralized applications (dApps).
Here’s a brief overview of the technology behind these gold stablecoins tokens:
- Ethereum Blockchain: PAXG is an ERC-20 token on the ETH blockchain. The ETH is a decentralized platform that allows developers to build and run smart contracts and decentralized applications (dApps).
- Smart Contracts: PAXG uses smart contracts to manage token creation, issuance, and redemption. Smart contracts are self-executing programs that are stored on the ETH. They automatically enforce the terms and conditions of a contract, removing the need for intermediaries.
- Custody: The tangible gold that backs PAXG is stored in a secure vault. This gold stablecoin uses a custody solution provided by PTC, a regulated financial institution. Paxos uses advanced security measures, such as multi-party computation, to protect the gold and ensure it is always fully backed by tangible gold.
- Auditing: PAXG is audited by Withum, a top 25 accounting firm. Withum conducts regular attestations to verify that the amount of gold backing matches the number of tokens in circulation.
Community and partnerships of PAX Gold
In terms of community and partnerships, PAXG has several notable developments:
- Partnering with precious metals dealer Dillon Gage: In January 2021, PAXG announced a partnership with Dillon Gage, a leading precious metals dealer. The partnership allows Dillon Gage to purchase and sell PAX G tokens on behalf of its customers, making it easier for investors to buy and sell gold using this Gold-backed token.
- Availability on major cryptocurrency exchanges: this gold stablecoin is currently available on several major cryptocurrency exchanges, including Binance, Bitfinex, Huobi, and Kraken. This makes it easy for investors to buy and sell this token using their preferred exchange.
- Growing community: PAXG has a growing community of investors and supporters interested in the benefits of gold ownership and digital currency. The PAX Gold community is active on social media platforms like Twitter, Reddit, and Telegram. They discuss the latest developments and share insights into market capitalization.
- Strategic partnerships: Paxos, the company behind PAXG, has formed partnerships with several leading firms in the crypto space, such as PayPal, Revolut, and Binance. These partnerships help increase the visibility and adoption of PAXG and establish it as a leading player in the cryptocurrency market.
Where to buy PAX Gold?
You can buy or sell it on various cryptocurrency exchanges, including:
- Bitget
- Binance
- Kraken
- KuCoin
- BingX
- Uniswap
- Gemini
How can PAX Gold be mined?
PAX Gold is a digital currency that is backed by tangible gold. Therefore, it is not mined traditionally like Bitcoin or other cryptocurrencies that rely on proof-of-work mining algorithms. Instead, it is created through a process called “minting.”
Minting PAX Gold involves the purchase of physical gold by PTC, which is the company behind PAXG. The gold is then stored in a secure vault, and a corresponding token amount is created on the ETH blockchain. 1 PAXG is equal to 1 fine troy ounce of gold.
Individuals can purchase PAXG on a cryptocurrency exchange that supports it. They can also redeem their tokens for tangible gold if they choose. Their tokens can be redeemed at any point.
How does PAX Gold compare to its competitors?
Here are some of the key features that make this token stand out:
- Backed by Physical Gold: PAXG is a digital currency backed by one fine t oz of a 400 oz London Good Delivery gold bar, stored in Brink’s vaults. This means that each token represents ownership of one ounce of tangible gold.
- Transparency and Security: The gold backing PAXG is audited by a third-party auditor regularly, providing transparency and security to investors. This helps to ensure that the amount of gold backing each token is accurate and verified.
- Accessibility: PAXG makes it easy for investors to invest in gold without the traditional barriers, such as the need to hold and store tangible gold themselves. It also allows for fractional ownership of gold so that investors can buy and sell smaller amounts of gold.
- Divisibility: If you own one token of this token and want to send a smaller amount, you can divide it into decimal fractions of this token, such as 0.5 or 0.001 PAXG, depending on the level of precision required. This high divisibility makes these gold stablecoins more flexible and easier to use in a wide range of transactions, including smaller or fractional purchases of tangible gold.
- Fast and Cheap Transactions: PAXG is built on the ETH blockchain, which means that transactions can be fast and cheap compared to traditional gold transactions, which can be slow and expensive. PAX Gold charges only an amount of 0.02 % gas fee.
- Versatility: PAXG can be used in various ways, including as a store of value, a hedge against inflation, or diversifying an investment portfolio. It can also be used in transactions with merchants accepting gold stablecoin payments.
PAXG’s main competitors in the gold-backed cryptocurrency space are Tether Gold (XAUT) and DigixDAO (DGD). Tether, a controversial stablecoin company subject to numerous controversies and legal challenges, issues Tether Gold. On the other hand, DigixDAO is a decentralized autonomous organization that issues DGX, which is similar to PAX Gold in many ways.
While Tether Gold and DigixDAO have their strengths, the regulatory oversight and trustworthiness of PAX Gold make it a safer and more reliable option for investors looking to gain exposure to physical gold through cryptocurrency. Additionally, its easy redemption process allows investors to exchange their PAXG tokens for gold bullion bars, making it a convenient option for those who want to take delivery of their gold holdings.
PAX Gold History
PAX Gold is a digital asset Paxos Trust Company (PTC) issued. This New York-based fintech company specializes in blockchain-based asset settlement solutions. It is a regulated financial institution providing an infrastructure to enable physical and digital currency movement. PAX Gold is designed to be a digital representation of tangible gold. It is backed by actual gold held in custody by PTC.
PAX Gold was launched on September 2019 and is built on the ETH blockchain. The supply of PAX Gold is tied to the tangible gold held in custody by PTC, with each token representing one fine troy ounce (t oz) of gold.
Paxos Trust Company provides daily attestations of the amount of gold held in custody and the number of PAX Gold tokens in circulation. The attestations can be viewed on the PAX Gold token page on the Paxos website.
PAX Gold has gained popularity as a way for investors to gain exposure to the price of gold without holding tangible gold themselves. It can also be easily traded on crypto exchanges, allowing for greater liquidity than gold bullion bars.
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