Are Gold-Backed Cryptocurrencies a Worthwhile Investment?
November 23, 2020 (Investorideas.com Newswire) Cryptocurrencies are meant to be an evolution of money. They're intended for those looking to trade value anywhere in the world without worrying about intermediaries, fees, or timing.
However, with the blockchain technology introduced by the first-ever cryptocurrency, Bitcoin, many have come up with other use cases. A notable use case is that of physically-backed cryptocurrencies. In other words, assets pegged to the value of a real-life asset like fiat currency or gold, like Tether or Goldcoin.
For some, this defeats the point of cryptocurrencies in that they rely on an intermediary to work. After all, many like the idea of blockchain as it replaces the need for a human-controlled group. But this doesn't mean gold-backed currencies are useless.
On the contrary, tying a cryptocurrency to a physical asset's value is actually quite useful for multiple reasons. In this article, we'll go over gold-backed cryptocurrencies and why you might want to consider one.
Why You Should Consider Investing in a Gold-Backed Cryptocurrency
Investing in gold can be scary for some. Those who already invest understand that keeping such a valuable asset safe is expensive. It's important to find a secure place to store it, which can add tons of costs to the already exorbitant asset.
That's not to mention that those interested in diversifying their portfolios might want to put money in Bitcoin or another cryptocurrency but aren't fans of the risk and volatility that might come with that.
A gold-backed cryptocurrency solves both of those problems. As mentioned, a single cryptocurrency is tied to the value of gold. The amount of gold differs based on the project you invest in, of course, but the point still stands.
Examining Goldcoin
For this example, we'll use the Goldcoin project. Goldcoin is an Ethereum-based cryptocurrency that's tied to the value of gold bars. Each purchased crypto-asset is the value of 1/1000th of an oz. of a bar of pure gold. This means you can purchase as little or as much as you'd like. When purchasing real gold, that option isn't readily available to you.
That gold is stored in a secure vault with "the highest security measures," meaning the security side of things is already handled within your initial investment. Also, considering Goldcoin is built on Ethereum, all purchases are automatically handled on the blockchain via smart contracts, meaning no intermediary can get in the way and deny your purchase, add extra fees, or do anything else to mess with it.
In fact, even logging in to view your Goldcoin is protected by various security measures, such as two-factor authentication. The company also provides a 24/7 live stream of the vault for those who want to check on the bullion and even carries out third-party audits via GDA Capital to prove the physical assets are actually equal to the purchased Goldcoin.
Interested users can also redeem their Goldcoin for physical bullion equivalent to the value they've invested. However, in doing this, one must provide their personal information to validate themselves. That way, Goldcoin can be sure the person requesting such gold is actually the owner of it. When going to the vault to pick up the gold, one must bring with the purchase redemption number. This security is vital in preventing theft, and the option is useful for those who may need it.
It's also worth noting that when buying traditional gold, you need to prove your identity and go through various amounts of paperwork, which can be off-putting for some. With Goldcoin, there's no such need unless you want to physically take the gold for yourself. Having the option is what's important here.
Along with the general benefits of cryptocurrency, the platform allows you to purchase Goldcoin anonymously, keeping yourself anonymous in the process. This can be a massive benefit to those who value their privacy.
Not Your Traditional Cryptocurrency
However, while buying a gold-backed cryptocurrency is ideal for those wanting to get into gold investments with fewer hoops, one must be aware that this isn't a traditional cryptocurrency investment.
As mentioned, physical-backed cryptocurrencies are only as valuable as the asset they're tied to. Those looking to make significant money off of something like Goldcoin shouldn't go in expecting the volatility and short-term profits one could potentially see with Bitcoin.
So, while gold-backed cryptocurrencies aren't necessarily ones that will give you significant profits in the short-term, they bring a lot of value for those interested. The ability to anonymously buy gold without a ton of steps involved is a valuable one, and there's even the option to physically acquire that gold if you so desire.
Plus, the company manages to store that gold for you and even provides a live-stream to check in on it, as well as audits to prove they have the physical bullion they claim.
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