What Is PAX Gold (PAXG)?

Launched in 2019 by blockchain solutions company Paxos, PAX Gold is a gold-backed token based on an ERC-20 contract on the Ethereum blockchain network. 1 PAX Gold equals 1 troy oz of the highest quality gold, held in professional gold safes in London.

How Does Pax Gold Work? The Benefits of Holding PAXG

PAX Gold works on the Ethereum network like any other token in ERC-20 protocol. One token represents the ownership of one troy ounce of a London Good Delivery gold bar, stored in professional vaults in London and held in custody by Paxos Trust Company. The value of PAX Gold tracks with the real-time market price of gold.

Gold is humanity’s oldest store of value. Since the first records of the use of gold as an item with a linked value (such as coins, jewelry and valuable objects of art) gold has already had an appreciation of more than 300%. In fact, the value of fiat currencies until the end of the 20th century was based on a representation of the value of gold, called the gold standard.
Store and protective assets, such as gold, tend to be more sought after in times of global crisis and therefore become more valued in this period. However, because it is expensive to own and store, gold is difficult to trade as a physical asset. It can be traded like wholesale, unallocated gold, gold ETFs or gold futures which are all derivatives or securities, but not to have the ownership of the underlying gold. The product is considered synthetic gold value and the price of liquidity and fungibility for gold investors is the lack of ownership in the real, physical asset. PAX Gold works as an innovative solution. It is a digitized version of real, London Bullion Market Association-accredited London Good Delivery gold bars held in secure vaults.

How to Redeem Pax Gold?

The redeemability of the pax gold token involves its exchange for fiat money, physical gold, and unallocated gold. PAXG can also be traded for other cryptocurrencies on numerous crypto exchanges, providing high levels of accessibility for users worldwide. The process of redeeming PAXG for physical gold involves converting the digital token back into physical gold bullion. This can be done by sending the PAXG tokens to the issuer and requesting a redemption for the corresponding amount of physical gold. It is worth noting that the process of redeeming PAXG for physical gold may involve additional fees, such as shipping and handling charges, and may require compliance with certain regulations and procedures.

Key Features of PAX Gold

These are some of the features listed by PAX Gold’s whitepaper:

Source: PAX Gold Whitepaper

Pros and Cons of PAX Gold

Every asset has its pros and cons. It takes an understanding of the investment you are making and your goals with it. Here we list some of the main pros and cons of buying and trading PAX Gold. For more detailed information, find the whitepaper of this token on the Paxos Trust Company website.

Pros:

1. Because it is backed by gold, PAXG has the main economic characteristics of gold: its intrinsic value, the non deterioration of the asset and the scarcity. In addition, unlike other digital products today, it is not expected to lose value over time due to the regulation of fees.

2. PAXG allows the user to purchase smaller fractions of gold, which is impossible to achieve with the physical metal. Currently, gold has its market fraction defined as 1g. Now imagine how hard it would be to divide and store smaller portions like 0.0002g? As a digital item, PAXG solves this dilemma and allows access to gold fractions of up to 18 decimals of 1 troy ounce.

3. Like any digital asset, it can be traded at any time and not just during business hours.

4. Paxos does not charge custody or storage fees. All transaction fees are the well-known Ethereum network gas fees.

Cons:

1. Being a token, PAX Gold has the same risks of attacks and digital thefts as any other cryptocurrency. Other risks are damage to hard drives and forgetfulness of wallet passwords that may contain the information of your crypto assets.

2. PAX Gold is a stable coin. Its price varies within a very narrow range, with no higher valuation peaks. Investments in stable currencies are for asset security and not for profit in transactions. Even in times of crisis, where there is greater appreciation of PAX Gold, the price variation is around 10%. In addition, the valuation context of this asset may mean a devaluation of other assets in your portfolio, with a profitability that does not compensate for this loss. Find out more about how to use gold as an emergency reserve and about hedge funds to better understand how to invest in gold and PAX Gold.

3. PAXG is maintained with an ERC-20 token, based on the Ethereum blockchain. This is not exactly a con, but we know that not every blockchain environment has all the advantages in a unified way. The best solution is to understand your investment profile and how each blockchain environment behaves, thus finding what best applies to your goals.

Is PAXG a Good Investment?

Gold meets some characteristics to be considered a good hedge fund asset. Among these characteristics we can list scarcity, non-deteriorable, its ability to be traded in the global market, having a long history of acceptance and having an intrinsic value.
PAX Gold is a stable coin backed by physical gold reserves and has the same characteristics as the gold it represents, with the additional advantages of buying smaller fractions, fungibility and tradability. This has made investment in gold more accessible to investors seeking a store of value that has proven itself throughout history in a modern and digital way.

How to Own PAXG?

You can own PAXG via a crypto centralized exchange, so you can begin by creating a Gate.io account. Once the account is verified and funded, find out the steps to buy PAXG. In a nutshell, you can do this via flash swap, trading the spot market or even using leverage.

News on Pax Gold

According to a recent study, gold-backed cryptos have performed very well in 2022, with their market cap reaching $1B for the first time, growing by 60%. As investors “diversify inflation bets” inside the cryptocurrency sector, PAX Gold (PAXG), Tether Gold (XAUT), and comparable precious metal-backed digital assets have seen an increase in value, and PAXG has even outperformed bitcoin. In particular, PAXG was the asset that most contributed to the success of this particular type of stablecoins. Suffice it to say that Tether Gold, its main rival, only experienced modest growth.

Useful References

For the latest updates about Paxos Gold, you can visit:

• The official website
• Twitter
• Medium
• Facebook
• GitHub