Home CryptocurrencyAltcoin What is PAX Gold (PAXG) and how does it work?

What is PAX Gold (PAXG) and how does it work?

by SuperiorInvest

In last years, non-fungible tokens (NFTs), cryptocurrencies and other modern investment options have become trendy. However, physical commodities like gold are still in high demand. In 2021, the global cryptocurrency market capitalization will exceed $2 trillion. Now investors have to ask themselves: which option should I choose – crypto or gold?

Gold is a commodity that dates back thousands of years as a store of value and a medium of exchange and is still successful today. Even with the invention of decentralized digital cryptocurrency, gold has remained just as prominent. Although for most individual investors owning gold can be difficult and unaffordable. There is one crypto company, PAX Gold (PAXG), that aims to make gold ownership more democratic and accessible to everyday investors by allowing them to trade it like any other cryptocurrency.

PAX Gold has discovered a method to combine cryptocurrency with physical gold assets, making it attractive to investors accustomed to conventional alternatives. This article discusses PAX Gold (PAXG) and analyzes how the cryptocurrency works.

What is PAX Gold?

Paxos Gold is a cryptocurrency that is backed by real gold reserves held by Paxos, a for-profit company in New York. Each PAXG token is linked 1:1 to one troy ounce (t oz) of a 400 ounce London Good Delivery gold bar held in Brinks Security vaults in London. The Paxos-backed PAXG cryptocurrency is backed by gold bullion certified by the London Bullion Market Association (LBMA) and can be exchanged for real gold.

Related: What is a Gold Backed Token and how does it work?

PAX Gold investors are spared the hassle of storing and securing physical gold as well as transporting it. Shares can also be purchased in installments, making them more accessible to retail investors who would otherwise be deterred by the high price of gold. PAX Gold boasts a combination of the qualities of both physical gold ownership and cryptocurrency that provide solutions to many of the modern challenges in the gold market, such as high costs, storage issues and lack of liquidity.

Who is behind PAX Gold?

The Paxos Trust Company, a New York-based financial institution and technology company specializing in blockchain technology, created by PAX Gold. Charles Cascarilla and Richard Teo, both former analysts at different firms (Cascarilla at Goldman Sachs and Teo at Cedar Hill Capital Partners), founded Paxos in 2012.

PAX Gold is not the only crypto project that Paxos has undertaken. In addition to PAX Gold, they also created the PAX Dollar (USDP), a digital US dollar and stablecoins. They have received strong institutional backing and have raised more than $500 million in total funding from investors such as OakHC/FT, Mithril Partners and PayPal Ventures.

How does PAXG work?

The PAX Gold token is built on Ethereum blockchain, giving it portability between wallets, exchanges, decentralized finance (DeFi) platforms, and other applications that use Ethereum. PAX Gold allows users to trade, bet or exchange their tokens for high quality gold bars. These gold bars are accredited by the London Bullion Market Association and stored in secure vaults around the world. Even with these top-notch security measures and high-quality gold, PAX Gold charges no custody or storage fees – just a 0.02% transaction fee.

Is Pax Gold safe? PAX Gold is not only accredited by the gold standard, but also works reliably and transparently. Both PAX Gold and its holding company, Paxos Trust, fall under the legal jurisdiction of the New York Department of Financial Services (NYDFS). In addition, PAX Gold independently protects consumers and company assets and ensures that the consumer is safe in the event of bankruptcy.

PAXG undergoes monthly audits by an external auditing firm to ensure that its gold reserves match PAXG’s token supply. Reports from these attestations are published on the official Paxos website. In addition, PAXG developers run regularly smart contract audits look for possible errors or vulnerabilities in the network.

Is Pax Gold real gold?

As mentioned earlier, Pax gold is a tokenized gold that operates on a blockchain network. Tokenization is the digital transformation of physical and intangible assets into cryptocurrency. Specifically, the PAXG token represents physical gold from the Paxos trust. Gold is a good store of value because it retains its value over time. As such, it is often used as a hedge against inflation. When the USD loses value, gold appreciates in USD and vice versa. This makes gold a popular choice for investors looking to protect their wealth from inflation.

PAXG tokens have serial numbers that correspond to the numbers of individual gold bars. The serial number, value, and other characteristics of a holder’s physical gold can be found by entering an individual’s Ethereum wallet address into the PAXG lookup tool. They also have the option to convert their PAXG to fiat money, another cryptocurrency or allocated and unallocated gold bullion at the current market price of gold.

What is the difference between PAXG and gold ETFs?

The main difference between a gold ETF and Pax Gold is that the ETF buys a contract that mimics the price of gold, but the user does not own the underlying asset. Each PAXG token is directly linked to an actual gold bar stored in a London vault, with each PAXG token being equivalent to one.

Gold exchange traded funds (ETFs) track the value of the underlying commodity. They only give investors access to the price of gold, but not ownership. An investor who owns a gold ETF is a party to an agreement that gives them a specific fraction of the pooled gold. Gold ETFs are not comparable to owning the metal outright. For example, by the time settlement occurs, the value of the contract may be less than what you would get if you owned the gold outright.

In contrast, PAXG is a digital representation of physical gold. Each PAXG token represents one troy ounce of gold in London vaults, identifiable by serial numbers. Trading PAXG does not take days to settle like trading physical gold bars might because it is treated on Ethereum as ERC-20 token.

PAX Gold is the perfect investment for both traditional and modern investors who want to stay on trend without compromising their personal goals. With real gold assets mapped to crypto tokens, you can invest in both physical and digital assets with a single investment and enjoy the best aspects of each.

How does PAX gold make money?

PAX Gold earns income in two ways: a small gold premium aa tokenization fee on first purchase. The tokenization fee percentage depends on the initially purchased amount; it’s 1% for purchases of one ounce or less, but significantly less for larger purchases. Paxos will not charge escrow fees, but will charge a fee of 0.02% whenever a customer wants to buy or sell a token on the blockchain network.

Related: What is tokenized real estate? The Beginner’s Guide to Digital Real Estate Ownership

Can you bet PAXG? You can earn interest on your PAXG by lending to a custodian, but rates will vary depending on the lender. Staking your PAXG will also allow you to earn interest, but you have to lock your tokens for a certain period of time. How to buy PAXG? The token can be purchased on several exchanges, including Binance, Kraken, KuCoin, and Coinbase. Here are the steps to buy PAXG tokens on Coinbase crypto exchange:

  1. Download your own wallet that supports PAXG like Coinbase wallet.

  2. Safely save the recovery phrase.

  3. Understand and Prepare for Ethereum Network Fees.

  4. Buy and transfer ether (ETH) to your own wallet.

  5. In the trading section, use ETH to buy PAX Gold.

The future of asset-backed tokens

Asset-backed tokens are digital representations of physical assets that can be exchanged for an underlying asset. That asset can be gold, oil, real estate, stocks, soybeans, or just about any other commodity.

Asset-backed tokens break open markets that were once inaccessible and costly by making transactions that do not need a central figure. In this way, we ensure the security and transparency of business relationships. This is changing the way we do business and how we think about ownership and wealth creation going forward.

Asset-backed tokens can also help solve problems caused by inflated or devalued currencies, as well as an unpredictable stock market. Individuals have a viable new financial option that combines digital liquidity with real asset values ​​when needed, thanks to the potential of asset-backed tokens. We’ve already seen asset-backed tokens being used in many applications.

The future of asset tokenization is only as limited as the imagination. With new use cases emerging every day, it’s exciting to think about all the possibilities for how asset-backed tokens can help people and businesses around the world.

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