The Fundamentals Of Gold-Backed Cryptocurrency

A gold-backed cryptocurrency is a speculative digital asset whose value is backed up by the equivalent price in gold. Each gold-backed cryptocurrency defines a single token as having an equivalent worth of certain grams or troy ounces of gold, implying that this equivalent should be present in the company's or a trusted custodian's reserves/vaults as physical collateralized assets. Unlike most cryptocurrencies, which have speculative value, the value of a gold-backed token is tied to a tangible asset, which protects it from severe price fluctuations.

When evaluating a gold cryptocurrency, make sure you own the gold. If the gold is not legally owned by the crypto developer, the gold cannot be taken if the crypto developer goes out of business.

There are, of course, risks. While the blockchain accounts for coins, accounting for physical gold stored in vaults is a different story. When assessing such tokens, consider who owns the gold and how it is stored. Is there actual gold, or is it something like a gold ETF that simply analyzes the gold price?

​The crypto coin's value will always be equal to the current gold rate. If cryptocurrency becomes popular, the price of the coin may rise to levels greater than the value of gold. If the cryptocurrency does not take off, its value will remain the same as the value of a gram of gold. It's similar to a built-in stop-loss.