Understanding cryptocurrency can seem daunting. Who needs a new form of money? What can cryptocurrency do and how can investors save and spend it? How do people know how much it’s worth? These questions apparently all have tangled and often technical answers.
However, there is a form of digital asset that is quite simple. Pax gold (PAXG) is a virtual currency whose value is indexed to the price of gold. If the value of gold fluctuates, so does the PAXG.
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What is Pax Gold?
Pax Gold is a stablecoin, i.e. a cryptographic token whose value is pegged to another asset, such as the US dollar. The stablecoin derives its value not from supply and demand, as other types of cryptocurrencies do, but from the price of the asset to which it is pegged.
Paxos also has a stablecoin similar to pax gold, known as pax dollar, which is pegged 1:1 to the US dollar. Since people cannot trade actual dollars on a crypto exchange, a dollar stablecoin is useful for traders who want to switch to a dollar-backed asset while trading on the exchange.
A stablecoin such as pax gold or pax dollar can be bought, sold and traded on blockchains. The owner needs to create an account with a crypto exchange and then create their digital wallet, payment app, or account where the crypto assets are secured.
The pax gold token is created and tracked on a digital ledger known as a blockchain. This means it can be bought, sold, and traded securely from home or office using a blockchain key, which is an access code that belongs to the owner.
If the PAXG owner wants physical gold, they can trade the tokens through a network of gold dealers. Each token is divisible up to 18 decimal places, so less than one ounce can also be invested or redeemed.
When Pax Gold tokens are created or terminated, transactions are subject to volume-based fees between 0.03% and 1%. Crypto exchanges charge on-chain fees to move the token on the blockchain.
PAXG appears on various crypto exchanges, including Binance and the itBit exchange operated by Paxos. At the start of September 2022, there were approximately 326,424 PAXG coins in circulation, with a market value of $555.16 million. At that time, around $5 million worth of PAXG was trading in 24 hours.
Is Pax Gold a good investment?
In some circumstances, there is a good reason to own pax gold instead of physical gold, shares of a mining company or gold mutual fund.
- Pax gold is denominated in tokens, each trading for one ounce of gold. This means that a PAXG token was worth $1,716 in the first week of September 2022 and $1,774 a month earlier based on the price of gold. PAXG can also be exchanged for other crypto assets such as Bitcoin and Ethereum.
- The physical PAXG gold backing resides in Brink’s bullion vaults in London, under the management of the Paxos Trust Company.
- There can never be more tokens than ounces of gold kept in this vault, and Paxos performs monthly audits to ensure this 1:1 relationship holds.
However, despite the relative stability of pax gold, cryptocurrency is still a risky investment – even stablecoins aren’t necessarily foolproof. Never invest more than you are willing to lose.
Pax Gold Security
Of course, the most compelling use case for pax gold or any other crypto asset is to overcome investor skepticism towards digital assets.
For an individual investor, trading PAXG on a crypto exchange is safer than holding and storing physical gold. Paxos is regulated by the New York State Department of Financial Services. Additionally, PAXG traders have round-the-clock access to the exchange to buy and sell, which isn’t always the case with stocks, funds, or options.
A gold-backed crypto asset is useful for anyone who invests in or uses cryptocurrency. Since PAXG is bought and sold on a blockchain, the owner of another crypto asset can easily convert other tokens into or out of PAXG. This is an attractive feature when the value of cryptocurrencies such as bitcoin and ethereum rises or falls rapidly, as many investors seek the stability of a gold-backed asset.
To buy pax gold, an investor can choose a crypto exchange and get a blockchain key. From there, investors can enjoy the convenience of round-the-clock access with the stability of a gold-backed currency.
Information is accurate as of September 8, 2022 and is subject to change.
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Pax Gold (PAXG): What It Is, Price & More
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