Shubh Patni
Shubh Patni

Shubh Patni

Should You Invest in a Crypto Backed by Gold?

This token gives you the best of both worlds and can save you from inflation

Shubh Patni's photo
Shubh Patni
·Sep 21, 2020·

5 min read

Should You Invest in a Crypto Backed by Gold?

After the crypto bubble of 2017, I was worried about storing my wealth in the form of cryptocurrencies. Every day some news would break out about some latest crypto scam or that some government outlawed cryptocurrencies.

It felt like the 90s all over again. Not that I was alive back then, but stories suggest no one knew what they were investing in. Everyone wanted a piece of the pie, everyone wanted to ‘get rich quick’. This hype around crypto gave birth to a lot of fake coins, Ponzi schemes, and crypto scams.

Fast forward 3 years and governments are embracing cryptocurrencies. India’s Supreme court overturned the crypto ban by the Reserve Bank of India. The Commercial Court of Nanterre, in France, ruled that Bitcoin is a legal form of currency.

One such crypto that caught my eye is PMGT, Perth Mint Gold Token. It is a stable coin, backed by the government, and thus trustworthy.

The Perth Mint Gold Token (PMGT) is the first digital gold token on a public blockchain ultimately backed by government-guaranteed gold.-PMGT

What Are Stable Coins and Why They Exist

Cryptocurrencies are highly volatile, for instance, in three months from October 2017 to January 2018, the volatility of the price of bitcoin reached nearly 8%.

If you store your wealth in an asset like that, it's hard to get a good night's sleep.

A stable coin is a cryptocurrency backed by another asset, this asset can be anything from precious metal to fiat currencies.

Stable coins float around the price of the asset it is pegged to. Some famous stable coins are Tether, backed by USD; DAI backed by Ethereum, Yes! crypto can also peg to another crypto; JPM (JP Morgan Coin) backed by USD.

Why should I buy a stable coin, not the asset it is backed by?

Stable coins have certain benefits that do not exist with traditional assets and even some cryptocurrencies.

  • They allow you to safeguard your wealth without worrying about price fluctuations.

  • Most of the stable coins have faster transaction speeds and low transfer fees. This could be very useful for a large value transfer.

  • crypto-to-crypto exchanges do not accept fiat currencies, so transactions can only take place using cryptocurrencies or stable coins.

  • Stable coins are backed by physical assets, but they do not have any physical existence, thus can be traded around the globe.

  • Stable coins are a good hedge against inflation. Citizens of several developing countries use stable coins to save their wealth from high inflation of their national currency and to resist financial surveillance.

  • They give you the flexibility to redeem the actual asset they are backed by. If 1 stable coin is equivalent to 1 USD, following 1:1 ration, you can redeem USD for the equivalent stable coin.

Stable coins give you the best of both worlds. They give you the same flexibility, low fees, transparency, and privacy of cryptocurrencies with the trust and stability of fiat currencies or physical assets.

Here is a good read by Kyle Ellicott, to know more about stable coins:- An Overview of Stablecoins Stablecoins have become an increasingly important category within the blockchain / DLT landscape.medium.com

Just to make it clear, I am not affiliated in any way with PMGT. I came across the token a few weeks ago and did my own research. Please do your own research before investing.

What is Perth Mint Gold Token

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While you can invest in various stable coins for the reasons mentioned above, PMGT is particularly interesting.

Gold has been around for thousands of years and was once the ‘*gold standard’. We consider gold a ‘traditional trade haven*’ which has passed the test of time.

The Perth Mint is Australia’s largest precious metal refinery. They recently launched PMGT jointly with a Fintech startup, Infinigold. The token is backed by physical gold reserves and maintains a 1:1 ratio guaranteed by the Western Government of Australia.

PGMT is backed by the government and guaranteed by Gold — PGM*T*

Before PMGT, the only way to buy gold using digital technology was to use Gold Pass, an app created by Perth Mint which allowed the digitization of gold. The app issues digital certificates to transfer the ownership of gold to the investor.

PMGT is the tokenized version of Gold Pass on the Ethereum blockchain as an ERC-20 token. This gives the cryptocurrency abilities such as security, transparency, faster transaction speeds, and anonymity to gold.

You can use the Gold Pass account to exchange your certificate for PMGT and vice versa. You can also redeem your token for bullion, or fiat currency at its current market price. This gives PMGT its uniqueness and power of liquidity for even big transactions.

We can buy PMGT using the Kucoin exchange, they are the suggested exchange on PMGT’s website. You can also use Australia’s trusted cryptocurrency exchange Independent Reserve.

I will highly recommend you to learn more about crypto scams before investing in any crypto. Here is the link to my article about the biggest crypto scam in history- Crypto Scam Worth $15 Billion, Shook the Whole Industry How a Ph.D. fooled the entire worldlevelup.gitconnected.com

During these times, when the entire world economy is on a roller coaster ride, it is wise to safeguard your wealth in the form of some stable asset. Stable coins are one of the easiest and widely used methods available.

However, not all of them can be trusted. The Crypto space is popular for Ponzi schemes and scams. In such a situation, PMGT provides a more trusted and powerful solution.

 
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