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PAX Gold: A Cryptocurrency Backed by Real Gold

I have been fascinated by crypto for a long time now, and I enjoy sharing what I have learned about it on ToughNickel.

The PAX Gold logo

The PAX Gold logo

What Is PAX Gold?

PAX Gold is a token on the Ethereum blockchain that is backed by real gold. It works just like a stablecoin. In the case of a stablecoin, a company issues tokens that are backed by real currency that the company has custody of so that the stablecoins can be exchanged for real tender at any time. The reason people want tokenized versions of dollars is that they can be used on decentralized finance protocols like Aave, Compound, and Uniswap. PAX Gold works the same way, but it's tokenized gold instead of tokenized dollars.

What Is Paxos?

PAX Gold is issued by Paxos, which is the same company that issues the Paxos Standard stablecoin. They are frequently audited to ensure that they really hold all the gold that PAX Gold token holders are entitled to. Each token is backed by one fine troy ounce (t oz) of a 400 oz gold bar stored in a vault. If you own PAXG, you own the underlying physical gold, which held in custody by Paxos Trust Company.

It is important to point out that an investment in PAX Gold is not an investment in a cryptocurrency but rather an investment in gold because the token is essentially just a certificate that proves ownership of gold. Users can redeem PAX Gold tokens for physical gold at any time using the Paxos homepage.

The PAX Gold price performance copies the performance of actual gold because that's what it represents.

The PAX Gold price performance copies the performance of actual gold because that's what it represents.

Why Would Anyone Want PAX Gold?

Gold is treated by many a store of value. Unlike cash, you cannot just print more gold, which means it's much more resistant to inflation. And unlike stocks, its value doesn't depend on generating more profit; gold is intrinsically valuable, so many consider it a relatively safe bet during economic downturns. The price of gold can certainly drop for a period of time, but most consider it a good long-term investment.

One big advantage of tokenized assets is that they can be traded much more easily than real, tangible assets like gold bars. Once you have a token, you can send it to anyone on its blockchain anytime you want. You don't need to depend on banks and paperwork to move your funds. By uniting cryptocurrency technology with gold, Paxos makes it easier to trade and actually use.

Another advantage is that you can buy small fractions of a token. You don't need to buy an entire gold bar. In fact, you can buy 0.01 PAX Gold instead. Tokens can be divisible up to 18 decimal points, making it far easier to start investing without needing tons of money up front.

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Some of the returns for holding Pax Gold tokens on various platforms

Some of the returns for holding Pax Gold tokens on various platforms

The most important advantage is that tokenized gold can be used on various applications on Ethereum. You can use it on lending protocols, or you can create a liquidity pool on Uniswap with PAX Gold and USDC to make it possible to trade gold there and to earn rewards by providing liquidity.

You could also earn interest on your gold and further grow your investment that way. Even some centralized crypto savings accounts offer high interest rates for PAX Gold. Celsius offers 5% annually. Tokenized gold can therefore be used for yield farming.

Is Paxos safe?

Paxos is a trust company and custodian that is heavily regulated by the New York State Department of Financial Services. The PAX Gold token is also fully backed by allocated physical gold that is held in one of the most secure vaults worldwide. The supply of PAX Gold and underlying gold is audited every month. So yes, PAX Gold is as safe as it can be. Many gold certificates are likely less regulated and audited less frequently than the PAX Gold token.

Some of the exchanges, wallets, and lending platforms that support PAX Gold

Some of the exchanges, wallets, and lending platforms that support PAX Gold

Where Can You Buy PAX Gold?

PAX Gold can be bought directly via the Paxos homepage. There, you can also exchange your tokens for real gold, or you can sell them for dollars or cryptocurrencies. But PAX Gold can also be freely traded outside of Paxos. Many popular exchanges, like Binance or Kraken, let you trade the token.

The Pax Gold token is essentially a certificate of ownership of gold that is blockchain compatible. It is a new way of investing in gold that makes it easier to trade and makes it possible to use gold like any cryptocurrency on Ethereum. If you want to start investing in gold in a modern and convenient way, you may want to consider buying PAX Gold.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2021 Krypton Currency

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