Cryptocurrencies backed by gold are an increasingly popular alternative for traders seeking to escape increasing market instability and the looming threat of stagflation. Gold-backed cryptocurrencies are derivative assets that let you access purchases, trading, and holding of physical gold at will at any time and location. They remove the transport inconveniences, illiquidity, transferability, and volatility related to dealing with real gold.
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As digital cryptocurrencies, most gold-backed cryptocurrencies are convertible to physical gold. They can be traded on crypto exchanges for fiat or other cryptocurrencies. Gold-backed them in different ratios depending on the project. For instance, one gram of gold or certificate backs 1 token.
The amount of gold used to back that cryptocurrency should be held in gold reserves, for instance, with banks or third-party institutions known as custodians. The nature of backing, however, varies from one crypto to another. A single unit of crypto is equivalent to a given unit of gold. Investors in the token backed in gold earn increased returns from gold pricing and can redeem tokens back for gold. Gold amount backing the coins needs to match the number of coins in circulation or supply.
Which cryptocurrency is backed by gold?
Multiple cryptocurrencies are backed by gold, including Tether Gold, DigixGlobal, Paxos Gold, Gold coin, Perth Mint Gold, and Meth Gold. We also have others backed by fiats like US Dollar including Tether, USD Coin, Dai, TrueUSD, Paxos Standard, Binance USD, Gemini Dollar, and Palladium Coin. Other asset-backed cryptocurrencies are backed by silver or oil reserves like the Petro (PTR) run by the Venezuelan government.
How the Gold Stablecoin on the first true halal HAQQ blockchain works?
Recently, we have already talked about what the Golden Stablecoin project will be on the first halal blockchain HAQQ. You can read it here.
1. The issue is solved by attracting participants who have licenses to work with precious metals. The attracted participant records the place, form and conditions of gold storage. BC receives information and determines the volume of GSCs available for issue. Once GSC is issuing, gold is deposited for the validity period of the GSC.
2. BC exists in a decentralized system that unites all the participants. They have full access to the blockchain and can control what is happening in it. The control of the availability of gold is carried out by the audit commission (auditor) in accordance with the Rules established by the Participants. Participants acting as depositories of gold may have different jurisdictions. It is essential to be able to pay for gold with fiat funds or GSC, depending on such country’ jurisdiction.
3. The proposed mechanism for replenishing the gold reserve of the system is the purchase of gold by Participant 1 for fiat from a licensed Participant from its reserves. Informing the BC. Issue of GSC – transfer it to the Participant’s account 1. A note on the deposit of the corresponding amount of gold from a licensed Participant. The second option is the transfer of gold to the licensed Participant in the deposit. With a mark of acceptance and receipt of the GSC.
4. GSC assessment with LME price. Accounting prices when buying/selling from a licensed participant – are set by the system (LME + %). The price of the GSC itself is supply and demand in BC.
5. For GSC exchange operations with gold, a commission is paid to the GSC according to paragraph 4 (which become the property of the BС). According to the gold deposit, income is accrued at the end of the month in the GSC, from the number of BС received. For the transfer of the GSC from the account of one participant to the account of another Participant, a commission is paid for the transaction (the amount is set by the BС, debited in favor of the BС in the GSC).
Thus, participants using the GSC can at any time compare its price with the LME and make up a settlement equivalent in USD for themselves, while their GSC reserves remain tied to physical gold. BС exists on commission. Gold owners receive income from providing gold as collateral.
Islamic Coin project has recently became the owner of a prestigious award in the field of digital finance – Gulf Excellence Award. The project has a Fatwa and the leaders of the Islamic financial market take part in the work on it.