Introduction
The investors of today are standing at an important crossroads. The clash between DeFi and TradFi has created a conflict among investors about going with cryptocurrencies or sticking with traditional options such as commodities and stocks.
Traditional investors argue that commodities like Gold have been around for thousands of years and will remain valuable entities for years to come.
On the other hand, blockchain proponents posit that cryptocurrencies are the face of the future and they are the next step in financial network evolution. Among these clashing points and ideologies, PAXG is a hybrid product that can offer consumers the best of both worlds.
What is PAX Gold (PAXG)?
PAX Gold or PAXG is a token that represents the ownership of real gold reserves present in Brink’s vault. The gold reserves are provided courtesy of London Good Delivery Services, which supplies standardized gold bars to the Bank of England, miners, exchanges, and all international major gold traders.
London Good Delivery Bars own around 400 troy ounces of fine gold. One PAXG token represents the value and ownership of one troy ounce of gold. It is important to note that one troy ounce is around 31.1035 grams of gold.
The London Good Delivery Bars have a purity of a minimum of 995.0 parts or 999.0 parts per 1000 gold bars. Unlike traditional cryptocurrencies, the value of the PAXG token does not depend on market speculation or the intrinsic utility of the token. The ownership of the PAXG represents the ownership of the real gold commodity.
At the same time, rather than purchasing the gold directly, the users can maintain ownership using PAXG tokens with the same speed and easy transfer options.
Origin of PAXG
PAXG is founded by a Trust called the Paxos Trust Company. The financial institution that also ventures into technologies hails from New York City. The company created a blockchain called PAX Gold. The firm was founded by Charles Cascarilla and Richard Teo.
Both founders of the company were formerly attached to Cedar Hill Capital Partners and Goldman Sachs respectively. Cascarilla and Teo founded the Paxos Trust in 2012.
In addition to the PAXG token, the company has also initiated other cryptocurrency projects. Another noteworthy product of the same organization is PAX Dollar or USDP, a stablecoin that is tied to USD.
During the funding events, Paxos was able to raise around $500 million and got a considerable warm reception from several commercial enterprises. Some of the most noteworthy investors of Paxos are Mithril Partners, PayPal, and OakHS/FT among others.
How does PAXG Work?
PAXG does not have a native blockchain yet. The project was created on the Ethereum network. Therefore, PAXG is an ERC20 token which means that it is compatible with several digital wallets, exchanges, and DEX platforms.
In addition to benefitting from the gold price appreciation in the international markets, the owners of PAXG also earn by staking and redeeming in exchange for real gold bars. All the gold bars representing the value of PAXG are under the ownership of Paxos Trust. Furthermore, these gold bars are accredited by London Bullion Market Association.
PAXG is backed by one to one ratio with the gold reserves that are pegged to it. Therefore, the circularity supply of the token keeps changing frequently depending on the number of new investors and the PAXG gold reserves changes.
In contrast to traditional cryptocurrencies, PAXG allows investors to purchase gold without having to worry about storing it. Each PAXG token represents the ownership of real gold for the investors. Rather than purchasing one whole gold bar, users can purchase the gold in fractions which is ideal for trading strategies such as cost averaging.
The PAXG owners can look up the gold bar, its physical characteristics, and its serial number under their ownership using PAXG lookup using their Ethereum wallet address.
PAXG’s Connection with Ethereum
As mentioned before, PAXG is not a native coin of a direct blockchain. The token project is hosted by the Ethereum network. Ethereum blockchain allows developers to host different decentralized applications.
The native token for Ethereum is ETH but PAXG is one of the several other tokenization projects present on the Ethereum network. Ethereum projects require complying with the DeFi requirements to get qualified for a verified project such as the ERC20 token standard. PAXG is compliant with the ERC20 token standard.
Therefore, it offers several benefits for the investors such as considerable compatibility with a wide array of third-party cryptocurrency platforms.
Key Differences Between PAX Gold and Gold ETFs
Due to the nature of PAXG, many people are unable to differentiate between Gold ETF and Paxos Token. However, there are very distinct differences between the two options mentioned as under:
Pegged Reserves
The gold reserves that back PAXG are present in a professional and certified value by Brink. The users can view their gold bar serial number and check its physical attribute at any given time by visiting the official website of Paxos.
On the other hand, the Gold ETFs do not allow the owners to gain real gold ownership rights for their purchases. ETFs are more like mutual funds and they only represent the value of the gold commodity in the international or national market.
Denomination
PAXG holders can legally claim ownership of real gold under their possession. The PAXG token is only a digitized and cryptographic representation of the real gold purchase. On the other hand, the Gold ETFs only track the spot prices or the underlying value of the Gold as a commodity.
Availability
PAXG is present on the Ethereum blockchain in the form of an ERC20 token. Meanwhile, Gold ETFs are paper-based contracts that represent the value of gold and are distributed by a stock exchange or derivatives exchange.
Furthermore, gold ETFs are also regulated by the respective financial regulator authority such as the Commodity and Futures Trading Commission in the USA.
Utility
PAXG allows investors to purchase other goods and services online. At the same time, the token is also useful for staking, lending, redeeming, and trading. In contrast, the main purpose of gold ETFs is that the users can cash them out for money.
How does PAXG Make Profits?
Before venturing into any cryptocurrency project, the investors should also worry about its earning model. Learning about the business model of a company can give insight into its credibility and performance.
PAXG is a product of Paxos Trust that generates money by charging a premium in the lieu of its gold reserves. The second method for PAXG to earn money is to use charge a tokenization fee when the users are purchasing the token for the first time.
The tokenization fee depends on the amount of the PAXG purchase quantity. The users who are purchasing less than 1 ounce of gold have to pay 1% as a fee.
One important factor to note here is that Paxos does not charge any custodial fees from the investors. However, there is a 0.02% charge for the consumers every time they purchase or sell the currency on a blockchain.
How to Earn Profits Using PAX Gold?
Now that it is clear that PAXG is a reliable and trustworthy project, the best question to ask is how to make money with PAXG. The first option is holding the PAXG token which allows it to gain more value as the prices of the gold commodity increase in the marketplace.
However, the PAXG owners can also stake the token to earn interest income. Many custodial services allow PAXG holders to pledge their tokens to earn interest. However, the rate of interest varies from one investor to another.
Investors who are looking to purchase PAXG can look to any major cryptocurrency platform in the region such as Kraken, Coinbase, Binance, KuCoin, and others. The investors should consider that when they are staking their tokens they have to wait for a specified period and cannot utilize the token for any other usage.
For purchasing a new PAXG token, the investors have to create a new account on any cryptocurrency exchange in their region such as Coinbase. Account for the Ethereum transaction fees.
Purchase some ETH coins or transfer them from already existing digital wallet addresses. Now, they can obtain new PAXG tokens in exchange for ETH on Coinbase or any exchange of their choice where PAXG is listed.
Key Features of PAXG
Goodwill
One of the most important factors for the success of a cryptocurrency project is its goodwill in the market. The Paxos Trust is a registered and regulated organization under the New York State Department of Financial Services or NYDFS.
Furthermore, it also solves the very important reservation of the investors about picking between old and new modes of investment. PAXG is like purchasing real gold and it is present in the most secure and trusted vaults in the world.
A national auditor examines and publishes a report about the supply of PAXG tokens in the market and its underlying gold reserves proportions.
Accessibility
Unlike real gold, PAXG tokens can move within a second from one corner of the world to the other digitally. The currency is secure and safe from the danger of manipulations or hacking. It is one of the most efficient and secure ways to own highly regarded and accredited gold offered by LBMA.
Redeemable
Most people in the world have unwavering faith in the utility and value of gold because it is always in demand. Other than PAXG no other cryptocurrencies are pegged to the value of LBMA gold reserve.
Additionally, it allows the investors to purchase a very small fractional quantity of gold which is not possible with real gold. There is also an option for consumers for redeeming USD in exchange for their PAXG tokens. PAXG holders can also exchange their PAXG reserves for real Loco London Gold.
Low Transaction Fees
Another major factor visible in PAXG tokens is low transaction fees. The transaction fee can range from 0.03% to 1% based on the volume range. This volume range represents the creation or redemption of PAXG tokens from the Paxos main wallet.
On the other hand, Paxos does not charge any custodial fee for the real gold or the PAXG token reserves. The Ethereum transaction fees applied on the token are also low around 0.02%. Just like all ERC20 tokens, all on-chain transactions require a very nominal amount of gas fees for PAXG.
Flexibility
One important quality of a successful cryptocurrency is the available liquidity. The PAXG investors can not only trade it on all major cryptocurrency exchanges but they can also redeem it for real gold. There is also an option for converting PAXG tokens into fiat currencies or unallocated gold using the Paxos website.
At the same time, PAXG can be traded or used with all platforms wherever the ERC20 standard is applied. Since PAXG tokens are available on all major cryptocurrency exchanges, it means that the investors can exchange them for all major cryptocurrencies as well.
Advantages of PAX Gold
Reliable Foundation
Paxos Trust Company is founded by reliable and well-known founders. Therefore, the company does not pose a threat of financial scams or lack of trust.
Furthermore, the Paxos Trust is also working on its new stablecoin based on Paxos Standard. At the same time, there is also a new collaboration with Huobi in exchange for another stablecoin called HUSD.
Collateralized Tokens
Paxos Trust Company ascertains that the reserves in the Brink’s vault always remain in 1:1 proportion with the PAXG circulatory supply. The company also conducts a regulated audit to ensure this and published regular reports about the recent changes.
Easy Access
The minimum limit for the acquisition of PAXG is very small. Therefore, anyone hailing from any part of the world can purchase the token and enjoy ownership of real gold in a very small quantity.
At the same time, the prices for PAXG tokens are also economical and suited for retail investors who are operating in an individual capacity.
Interest Income
Some cryptocurrency exchanges like Crypto.com and NEXO allow users to use interest accounts for PAXG and earn interest income.
At the same time, there are also DeFi platforms that allow investors to draw short and medium-term loans using PAXG as collateral such as NEXO.
Micro Gold Purchases
Many people are unable to purchase a heavy amount of gold and they have no reliable way to ascertain the quality and value of the gold. At the same time, an average investor can’t store their gold reserves securely.
Therefore, purchasing PAXG solves all their problems in one go. Investors can easily own real gold using a digital token. The minimum limit for purchasing PAXG is currently 0.01 PAXG which is equivalent to $19.
Regulated Organization
Another noteworthy upside of the PAXG token is that is issued by a regulated company. The Paxos Trust Company is regulated by the NYDFS. Furthermore, the company publishes its latest audit reports, regulatory compliance documentation, and other important detail on its website for the benefit of all investors.
At the same time, the financial audits for the PAXG physical gold reserve are also performed by national auditing officers.
Limitations of PAXG
Account Verification
It is important to note that PAXG investors need to have verified accounts. It means that users who wish to purchase PAXG must create a verified account by completing the KYC requirements.
Therefore, there are some cryptocurrency investors and DeFi proponents who claim that PAXG KYC requirements are intrusive and breach the privacy of their data.
Decentralization
PAXG is an intrinsically decentralized token therefore it is not possible to impose the financial regulatory standards on the project that are issued by the state.
Therefore, the users have no control over their PAXG account status regarding freezing, unfreezing, and deleting their content and usage history.
Methods for purchasing PAXG
Spot Price Purchase
The official website of Paxos allows the investor to purchase the PAXG token on a spot price basis. The users can press the PAX Gold tab or click on the BUY button. There is an option for converting USD into PAXG.
However, the users must keep in mind that the investors have to account for the creation fees when they are on the Paxos website. Consumers can keep an eye on the creation fee percentage on the Quote Preview window.
Direct Purchase
Cryptocurrency investors can also purchase PAXG in exchange for USD or unallocated gold using the User Interface of Paxos’ official site.
Unallocated Gold
The users who have a Loco London account can transfer their unallocated gold reserves to Paxos. The Paxos Trust Company will convert this gold reserve into allocated gold bars and also tokenize them.
These tokens are then issued to the users on their Paxos accounts. Once the transaction is complete the Paxos Trust will start converting all the unallocated gold balances in your Loco London account according to the cut-off time interval in the UK into PAXG.
Conclusion
There are thousands of cryptocurrency variants present in the world at present. Therefore, investors can’t pick the best investment options.
At the same time, many investors are reluctant about investing in newly introduced investment options such as cryptocurrencies. Therefore, PAXG is an ideal platform for investors who want to take advantage of the benefits of cryptocurrency trading and at the same time also enjoy the reliability of commodities such as gold with the PAXG hybrid.
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