PAX Gold (PAXG) is an ERC-20 stablecoin that provides access to physical gold reserves stored securely in London vaults. With PAXG, users can invest in gold without worrying about storage and transportation costs, since it allows them to own fractions of physical gold. PAXG can be traded as a digital asset on various centralized and decentralized crypto exchanges.
Basics
Gold has been a valuable commodity for thousands of years, used for jewelry, storing value, and hedging against inflation. However, purchasing physical gold can be costly and inconvenient for the average retail investor. Keeping gold requires a secure location, such as a bank vault; transporting it cannot be easy due to its weight.
Paxos Trust Company aims to resolve these issues with PAX Gold, tokenized gold on the blockchain.
What Is PAXG?
PAXG is a stablecoin based on the ERC-20 protocol, which is backed by physical gold reserves held in custody by the Paxos Trust Company. Each PAX Gold token represents one troy ounce of a 400-ounce London Good Delivery gold bar securely kept in gold vaults like Brink's. Since PAXG is backed by physical gold, its value is directly linked to the real-time market value of the physical gold.
PAXG is approved and regulated by the New York State Department of Financial Services.
To ensure that Paxos maintains its reserves, a third-party auditing firm conducts monthly checks to confirm that the gold reserve of Paxos matches the supply of PAXG tokens. These attestation reports are published on Paxos' official website. PAXG's developers regularly perform smart contract audits to detect potential vulnerabilities and bugs.
Furthermore, all assets of Paxos' clients, including PAXG, are safeguarded from bankruptcy and kept separately from company assets.
How Does PAXG Work?
PAXG is an ERC-20 token on the Ethereum blockchain. This makes it compatible with Ethereum-based wallets, allowing integration with DeFi DApps and DEXs on Ethereum.
Investing in PAXG eliminates the need for physical storage and high custody fees associated with buying physical gold bars. With just a 0.02% transaction fee and small Ethereum gas fees, buying gold is more accessible than ever.
Holders of PAXG tokens can identify the serial number, value, and other details of their physical gold by entering the address of their Ethereum wallet into the PAXG lookup tool. Additionally, they can always redeem their PAXG tokens for fiat currency, other crypto assets, or allocated and unallocated gold bars from gold retailers at the prevailing price.
How Does PAXG Differ From Gold ETFs?
Gold exchange-traded funds (ETFs) do not grant ownership of gold but rather track its value. These funds solely offer investors exposure to the gold price. When holding ETF shares, investors enter into a contractual agreement representing a specific portion of pooled gold. It is important to note that owning gold ETFs does not equate to complete ownership of gold. During times of crisis and market volatility, the contract value may fall below the actual value of the underlying gold by the settlement period.
Contrarily, PAXG presents a digital representation of gold. Each PAXG token symbolizes precisely one fine troy ounce of gold, safeguarded within secure London vaults and distinguishable through individual serial numbers. The process of trading PAXG is significantly more efficient than trading physical gold bars, which can take several days to settle. By existing on the Ethereum blockchain as an ERC-20 token, PAXG facilitates near-instantaneous settlement when traded.
Conclusion
Investing in cryptocurrencies has become increasingly popular recently, but physical commodities remain a staple in many investors' portfolios. Now, PAXG provides a blockchain-enabled substitute for this attractive market, taking advantage of cryptocurrencies' efficiency and liquidity.