Stablecoins Backed by Precious Metals — How Do They Work?Cryptocurrencies are constantly subject to exchange rate fluctuations and are characterized by high price volatility. For making crypto money more useful and more stable, a special type was created: stablecoins.
Stablecoin is a cryptocurrency whose value is tied to some valuable asset.
This asset could be fiat money, precious metals like gold and silver, oil or almost anything that has tangible value.
The price of a stable cryptocurrency is formed in direct proportion to the established asset.
An ideal stablecoin should perform three main functions:
1) Act as a means of exchange (buying and selling goods and services directly).
2) Be a saving asset (allowing funds to be saved without loss of value).
3) Be used as a unit of accounting (comparing the cost of goods and services).
Very early stablecoins like Tether were fiat-pegged, but as time went on, developers began to associate their stablecoins to other assets such as gold.
PAX GoldEach PAXG token gives users ownership of one ounce of gold held at Brink’s London vault. The token can be redeemed in exchange for a physical gold bar at partner organizations, for example, New York Bullion Exchanges.
Furthermore, users can convert tokens into fiat currency or gold and vice versa. In addition, information on the specific gold bar to which a PAXG is attached is available to token holders. They can see the serial number, brand code, weight and thickness of the ingot.
Paxos charges a fee for transactions within the blockchain, as well as for the creation and redemption of a token. However, no commission is charged for the storage of gold to which PAXG is attached.
Digix GoldDigix Gold coins are liquid, they can be exchanged at any time for gold or other cryptocurrencies. Coins are available only on the Digix marketplace, where they can be purchased with Ether.
With the growth of prices for precious metals, the value of DGX will also go up, which can greatly strengthen the token’s position in the market. But even if the demand for a coin suddenly disappears completely, investors will still not be selling at a loss, as they can sell their gold at market price.
GoldMintGoldMint is a blockchain-based platform using Gold digital assets that are 100% backed by physical gold or exchange-traded funds (ETFs).
Ekon GoldSwiss blockchain startup Eidoo announced the creation of its stable coin in September 2017, tied to the price of gold. The stablecoin is called Ekon Gold and is an ERC-20-compliant token that will be available in the multi-currency wallet and on the hybrid decentralized exchange of the project.
It is only possible to exchange Ekon for one gram of 999 gold in a special store in Switzerland in insured safe deposit boxes and audited by independent auditing company PluriAudit SA once every 90 days.
To purchase the token, it is necessary to download the Eidoo app and, in order to comply with AML regulations, complete the KYC procedure up to Tier 2.
In October 2017, Eidoo raised $27.9 million during the token sale and received a license from the Swiss Financial Services Standards Association (VQF) under the national financial regulator, FINMA.
TiberiusThe Swiss company, Tiberius Group AG, announced the issuing of the Tiberius token in September 2018. The coins are characterized by high stability, since they are backed by a basket of seven precious metals.
https://cointelegraph.com/news/stablecoins-backed-by-precious-metals-how-do-they-work