Since the advent of bitcoin in 2009, cryptocurrencies have been always criticized for not having a physical backing. Also, the lack of a central authority controlling issuance and supply has rendered the value of cryptocurrencies questionable by financial experts. Add to all of this the high volatility levels of cryptos which is one of the main obstacles hindering mass adoption of cryptocurrencies.
To mitigate these challenges, the concept of gold-backed cryptocurrency has emerged. These currencies operate in a similar fashion to traditional cryptocurrencies, except that they are backed by tangible gold, via allocated or unallocated gold storage.
Stablecoins are a form of asset backed cryptocurrency which was developed to address crypto’s extreme price swings. A stablecoin is a cryptocurrency whose value is “pegged” to assets with stable value including fiat currencies (e.g. USD, EUR, etc) and precious metals.
Gold-backed cryptocurrencies are special forms of stablecoins, the value of which are pegged to that of gold. Combining the innovative capabilities of the blockchain technology with gold offers a convenient solution to the highly volatile cryptocurrency market.
Buying Gold-Backed Cryptocurrency
Gold has always been a popular investment, especially in times of uncertainty. Some investors also choose to buy fiat from gold backed currency countries, such as investing in the gold-backed yuan. Because a gold-standard currency generally has a reliable value, these have been seen as solid investments in the past. Digital gold currency can be seen as a new world currency backed in gold. Not tied to a single nation, it instead represents the borderless frontier of the internet.
Conclusion
Gold-backed cryptocurrencies seem to be one of the most popular options for stablecoins, and we suspect we’ll see more join the market in 2019. As with any crypto investment, we urge you to do your due diligence on these coins before you consider purchasing them.
