Finance

What is a Gold-backed Cryptocurrency?

Today, many gold-backed digital assets are available in the crypto market. However, this idea is not new to the digital world. Back in 1996, the very first gold-backed currency, E-Gold, came out on the internet. The company had over 5 million accounts by 2009 before it was shut down for legal reasons. In 2006, the e-gold system was processing over US$2 billion per year.

Many other attempts were also made after the huge success of this operation. However, they were before the age of blockchain technology. Blockchain technology’s decentralized nature and advanced methods now allow companies to offer coins and tokens that are backed by gold.

Gold-backed Cryptocurrency

The fundamental concept behind the idea is compelling: a digital asset that represents the value of gold (let us say, 1 gram of gold is equal to 1 coin). The gold that the user intends to invest can be stored with a trusted custodian, i.e. a third party, and then the trader can go to an exchange platform and trade it with other coin holders.

No matter what, the price of one coin of that digital currencies will be equal to the gold rate at the time. Once the trend catches up, the value of the digital currency will increase, higher than the value of gold kept with the custodian. Even if the currency doesn’t increase in value, the gold will keep the value of the coin equivalent to the current gold rate. Hence, a gold-backed currency is like a built-in stop-loss.

This idea can make the already secure blockchain technology even more attractive and secure for the investors. Marketscap.com is one such platform that pays the utmost attention to the security of digital assets. You can trade over 800 digital currencies with a​ ​margin​ ​loan​, i.e., with 300% increased buying power.

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Gary Johnson

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