If there is one thing we can all agree on regarding cryptocurrencies, it is that they are incredibly volatile. On a regular basis, cryptocurrencies are characterized by high volatility concerning prices. On top of that, they are frequently subjected to exchange rate fluctuations. In order to make crypto money comparatively more stable and beneficial, an innovative form of digital currency was created. This innovation was stablecoins.
What is a Stablecoin?
A ‘stablecoin’ is a special type of cryptocurrency whose value derives from a valuable asset. What exactly this asset is could be a wide range of things. It could be fiat money, oil, or precious metals such as gold and silver. For the most part, it is almost anything that has tangible value. The formation of the price of a stable cryptocurrency is primarily in direct proportion to the asset.
Some of the early variations of stablecoins – an example being Tether – were fiat-pegged for a period of time. However, developers later began to link their stablecoins to other assets like gold.
Stablecoins that are backed by precious metals are a unique entity for several reasons. Cryptos that receive backing from fiat currency are the most popular type of stablecoins. With that said, there are many who are unsure about the fiat currencies’ long-term stability. This makes sense given what has transpired in 2020, what with governments pursuing various artificial stimulus to maintain economical balance.
From here, let’s go over some of the best cryptocurrencies that receive backing from precious metals.
Palladium Coin is an ERC-20 cryptocurrency that is backed by palladium and whose foundation is built on the Ethereum network. It is the first fractionalized palladium-backed asset that was made available for purchase directly in both national currencies and cryptocurrency. It is because of this fractionalized nature that people are able to purchase any amount of Palladium Coin. Moreover, they can do so at any time.
Perth Mint Gold Token (PMGT)
Looking at crypto-backed stablecoins as a whole, Perth Mint Gold Token is among the most popular in the market. Setting itself apart from other projects that keep their bullion reserves vague, PGMT tokens receive backing from Perth Mint gold. The validity of this cryptocurrency stems from the fact that the Australian government verifies the gold’s weight and purity. In fact, the Perth Mint will typically distribute digital gold certificates through the GoldPass app to serve as proof.
Digix is a cryptocurrency that is brought to us by DigixGlobal, a company that is based in Singapore. These tokens possess a value of approximately 1 gram of gold per token. The gold that backs these tokens are held in vaults that are located in Singapore and Canada. The Bullion Association provides additional security by insuring and accrediting the vaults that are storing this gold.
DGX tokens give users an effective method of dividing, redeeming, and transferring gold bars. They execute this via buying and selling virtual gold taking on the form of tokens. The intent of the DigixGlobal founders was to create a digitization process that would normalize gold access.
Gold Coin (GLC)
Gold Coin is a gold-backed cryptocurrency that is fractional, meaning that the worth of a single coin is a fraction of 1 gram of gold. This essentially means that the Gold Coin barrier to entry is very low, which is in stark contrast to other coins. Similarly, it is different from gold itself. In the case of other coins, the buy-in tends to be quite expensive.
Gold Coin resides on the Ethereum blockchain and has been active for several years. What makes this one of the safer cryptos to invest in is the stable platform and the easy entry. Investing in it can be done incrementally due to it being able to gain your trust without immediately breaking the bank.
Because stablecoins backed by gold and other precious metals are similar to gold funds, many see them as reliable investments. One of these supporters is Digix Gold’s co-founder and COO, Shaun Djie, who states the following:
“The crypto market has generally reacted well to using stablecoins as a mode of payment, store of value and a hedge against the volatility of most cryptocurrencies.”