Gold-Based Cryptocurrency: What is it?

Gold-Based Cryptocurrency

The rise of cryptocurrency was so sudden and widespread that before the world could realize what was happening, it was knee-deep in it.

Cryptocurrency gained extreme popularity due to its new-found status as an investment option, away from exchange-rate risks which come with all the other investment options. With such risks involved in cryptocurrency, the upcoming gold-backed cryptocurrencies are attempting to stabilize it to some extent and provide some security to cryptocurrency owners.

How does Cryptocurrency Work?

Cryptocurrency is not present in a tangible form since it is a product of blockchain technology. This might make one not take it seriously, but the unbeatable growth of cryptocurrencies, such as Bitcoin, is proof of why one should take it seriously.

Cryptocurrency functions are very different from those of fiat money. It is a digital currency, free of regulations created by governments and banks.

Knowing that cryptocurrency is completely decentralized encourages many to use it; but often times, that also becomes the reason behind the downfall of the currency as well as an increase in the risk involved.

There is no tangible structure of how cryptocurrency is made and as its creation depends on demand and supply.

The Uncertainty and Volatility of Cryptocurrency

Cryptocurrency is hard to understand and requires extensive research on the part of the buyer to safely purchase any form of it.

Apart from issues like losing one’s cryptocurrency wallet, being the victim of a hack, lack of proper legal assistance for retrieval, etc., there is an issue with the uncertainty and volatility of the cryptocurrency market.

The precise factor that drives the rate of cryptocurrencies is not always possible to point out. However, like most commodities in the market, its rate depends on demand and supply.

However, since the size of a crypto-market is much smaller than an actual stock market, a small movement of a given cryptocurrency can have a huge impact on its price.

The issue of the legality of cryptocurrencies is also concerning. Some governments deem it illegal because an alternate currency against the nationalized currency would mean huge problems for the government, not to mention the lack of income in the form of taxes.

Combating this with Gold-Based Cryptocurrency

Once cryptocurrencies started being perceived as safe havens for investments, it was only a matter of time until gold and cryptocurrency formed a relationship.

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Furthermore, the gold market’s value or, simply, gold price is fixed at any given time and this is comforting considering cryptocurrency rates fluctuate without any explanation or set pace.

Gold is considered to be one of the most precious metals and a safe way to invest money and get results in the long run. Since gold is present in a physical form, it is much more reliable for the most of the population.

Several gold-backed cryptocurrencies are coming up and have started offering ICO’s (Initial Coin Offerings) to raise money for their startups. The ICO can be bought with fiat money easily.

This way, gold-backed cryptocurrencies aim at providing some sense of security to the owners for their digital money also has some value in the form of fiat money.

This is truly revolutionary as it bridges the gap between digital currencies and fiat money. However, this does not indicate any market relation between the two and neither is it going to affect gold prices.

How Gold-Based Cryptocurrency Works

In order to issue such a currency, a token or coin representing the value of gold is issued. The value of gold per coin/token can depend on the cryptocurrency itself.

For instance, OneGram- a new cryptocurrency based on gold, is setting up a floor price for all of its coins as the gold price of 1 gram of gold.

This gold is safely stored with a third party or can be traded with other coin-dealers/holders.

This ensures a minimum value of the token/coin as the value of this gold is based on the gold price of the day; so, even at a minimum, the coin will be equal to the current gold price.

Certain countries, too, are looking to issue their own gold-backed forms of cryptocurrency, since it offers a tangible reality earlier missing from cryptocurrencies.

In an attempt to move away from cash, China is developing its own cryptocurrencies. Since China is the world’s top buyer of gold and has been storing up gold in its bank reserves, it wouldn’t be surprising if this new cryptocurrency is also backed by gold.

Gold-Backed Cryptocurrencies You Can Invest In

Already, there are several companies offering gold-based cryptocurrencies to buyers.

Physical gold ensures that the value of these cryptocurrencies is stored in vaults in various countries across the world, depending on the token involved and the cryptocurrency itself.

These are some of the gold-backed cryptocurrencies being offered on the market right now:

  1. Lionsgold
  2. OneGram
  3. Goldmint
  4. Xaurum
  5. Gold Coin

Other crypto-currencies are in the process of being started off and are offering pre-ICOs (a token sale offered before the official ICO campaign or crowd sale), which can help investors and buyers make quite some money.

However, it is crucial to do proper research before one makes an investment in these cryptocurrencies.

  1. Golden Currency
  2. GoldVein
  3. GoldMineCoin

How to Buy Gold-Backed Cryptocurrency

Bitcoin and Ethereum are two major cryptocurrencies that are being used to buy alternate cryptocurrencies.

To buy any gold-backed cryptocurrency, it is essential to have a stash of Bitcoin or Ethereum first.

Different platforms and cryptocurrencies have their own requirements of what is needed to make a purchase, depending upon the token and what it runs on. Usually, Ethereum is used for this purpose.

In order to buy Bitcoin or Ethereum, fiat money can be deposited at crypto-exchanges. It is important to use only trusted and approved crypto-exchanges for this purpose.

>> Check out these 10 Crypto Exchanges

What to Take Away

Cryptocurrencies have been popular and feared at the same ever since they came into being, but using gold to back cryptocurrency is sure to make them a much more reliable form of currency.

The development and success or failures of the many upcoming ventures of gold-based cryptocurrencies are much-awaited in order to see the fate of this new form of cryptocurrency.

It is important to be well-informed before investing in a cryptocurrency, since most people lose money without understanding what exactly happened.

An understanding and proper knowledge of the crypto market is necessary to venture into the world of cryptocurrency; once done, it can yield unbeatable results and have many other advantages as well.

Featured Image: depositphotos/ maximsamos

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