Tokenised gold involves creating crypto tokens backed by a proportional amount of physical gold, which is held in custody by the issuing authority. These tokens are minted and managed on a blockchain, with most being built on the Ethereum blockchain using smart contracts.
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The technology behind these tokens offers several benefits. It eliminates storage costs and provides a secure way to hold the asset. Additionally, it allows for fractionalised ownership, which means people can buy gold in smaller amounts. This is an appealing alternative to buying a physical kilogram bar, which can cost over ₹1 crore.Gold tokens are fully transferable and can be traded on both centralised and decentralised exchanges. Some platforms even offer the option to redeem the tokens for physical gold or convert them into traditional currencies.
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The two largest gold-backed tokens are Tether’s XAUT and Paxos’ PAXG. With a market capitalisation of about $1.3 billion, XAUT is the biggest token in this category. PAXG has a market capitalisation of around $983 million. Other tokens on the market include Quorium Gold, Kinesis Gold, VeraOne, Novem Gold, and Gold DAO. As gold prices continue to climb, these gold-backed tokens are also performing well.
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