Gold and cryptocurrencies have been considered safe havens against inflation in recent years. Both assets are characterized by limited supply and consequently scarcity due to their attractiveness to investors during turbulent economic times.
Blockchain technology and cryptocurrency applications in the gold sector have been continuously explored since the cryptocurrency boom. Many concepts have emerged, from gold-backed stablecoins to various other applications that can touch every aspect of the entire gold supply chain.
Here are the tried and tested, as well as the potential yet unexplored synergies between gold, cryptocurrencies and blockchain technology.
Blockchain enables new ways to invest in gold
Until about 20 years ago, retail gold investors were limited to coins with high dealer fees. The introduction of the exchange-traded fund (ETF) in 2003 allowed small investors to participate more profitably, essentially opening up the market and making it somewhat more widely available. Gold was sold as a stock, and although the fees were still somewhat high, it was available to anyone who wanted to get on board.
Fast forward 10 years and we have bitcoin adoption, albeit still in its infancy. The term blockchain technology is starting to surface more often, and industry experts are offering solutions for gold investment that take advantage of the new technology trend. Gold transactions can be transparently and efficiently settled on the blockchain network, but the transaction costs of the first blockchains were still quite high and the adoption level was low.
Despite the restrictions, many providers such as Bitgild, Vaultoro and Bitgold have started accepting payments for gold in Bitcoin in addition to fiat. While cryptocurrencies still make up a fraction of the total transaction times, many have proven that buying gold with cryptocurrencies has many advantages – from the ease of use of the process to verifiable ownership that is immutable on the blockchain ledger.
Today, blockchain solutions are more sophisticated and cost-effective. Thanks to improved TPS (transactions per second), transactions take just a few seconds, dramatically reducing transaction costs to a few cents. This could potentially bring gold investing to a whole new level of accessibility for retail investors who will no longer have the limitations of fees and the hassle of traditional gold investment options.
One of the most popular uses of gold in the blockchain sector is gold-backed cryptocurrencies, also known as gold-backed stablecoins. These cryptocurrencies maintain a certain ratio between the gold reserves held by the custodian (bank or company) and the total supply of tokens in order to ensure a fixed price that does not change, like most assets in the cryptocurrency market. The exact ratio can change, which affects the price of the stablecoin, but must be kept constant throughout the transaction period.
Stablecoins are useful because they allow for more efficient payment instruments due to their stability, as well as store of value. Gold is particularly well-suited for this purpose because its price is relatively stable over the long term and there are few assets, making it less likely to fall in the future. In addition, they allow investors to own an intangible asset representing the precious metal, which eliminates holding costs. A person acquiring a gold-backed stablecoin receives a serial number tied to the amount of gold their currency represents, confirming ownership and that their token is actually gold-backed.
Finally, depending on the gold-to-currency ratio, an investor can buy several stocks worth a few dollars and still be able to access the gold market, thereby incurring no capital requirements. This is known as fractionation and is one of the most popular benefits of tokenizing various fixed assets, from real estate to precious metals and more.
Improved supply chain management
Blockchain technology has long been suggested to be incredibly useful in supply chain management and logistics, with many corporations already implementing similar solutions for other industries since 2018. If applied to the supply chains of mining companies and other stakeholders in the gold industry, blockchain can provide greater transparency for all parties involved, including the end customer. It can potentially address some of the problems that lie alongside the supply chain, such as illegal mining, laundered gold, counterfeit bullion and human rights abuses of workers.
Meet Easygold Token
Easygold Token is a newly established cryptocurrency project in the gold sector, creating the first Security token that offers dividends of up to 50% of the net profit of Hartmann & Benz, the company behind it. The project buys large quantities of raw gold directly from suppliers, refines it into high-quality gold bars and sells it in the open markets at a margin of 20% to 30%. The income is then reinvested in the same process, with investors rewarded annually with dividends. The company behind Easygold Token has been in the market for over 3 years and has an established customer base as well as numerous partners across two continents.
If you’re interested in learning how Easygold and the project are using blockchain technology and security tokens to bring a whole new world of opportunities to gold investors, their website. Early adopters will be able to get a special discount on their investment during the private sale, which is scheduled to start on January 1.