In the current bear market that is still going on, stable coins are an interesting alternative to regular cryptocurrencies. But Tether has well-known issues. And if you believe in cryptocurrencies because you think there are fundamental problems within our monetary system, you will likely find that Tether’s rival TrueUSD is not a true alternative as well. although it seems more trustworthy not compelling at all. Maybe gold-backed currencies could be an alternative, as gold served as a currency for thousands of years. But how do you find out which gold-backed cryptocurrencies qualify for investment?
Value backed gold cryptocurrencies are midgets compared to the general crypto market
A reasonable rule of thumb in investing is to set a limit in the market cap in a specific market. It is usually more recommendable to invest in major companies than in penny stocks. There is simply much more information available. Even insider information will likely leak to the public sooner or later. It gives you the advantage of focussing on just a few possible investments and saves you a lot of time. You can research these projects more intensively. Whether you rely on the fundamental analysis or the technical analysis. In the general crypto market, a market cap of $500,000,000 USD seems reasonable as a limit. Currently, you would see only 21 cryptocurrencies as relevant. While during the peak of the recent rally, this limit would have indicated that 25 cryptocurrencies are relevant. A good result.
However, this approach is useless in the special case of gold-backed cryptocurrencies. Only a few of them have their market cap viewable on coinmarketcap.com. Even fewer reach a market cap of over $1,000,000 USD. And then there are some tokens or coins that have a decreasing value over time. Although their issuers claim that they are backed by gold or that they will be backed by gold in the future. A few of these shady tokens should be named here before presenting the legit ones.
The fake gold of the crypto space
Aurumcoin launched its funding on Indiegogo, the campaign was closed, their website has awfully catchy phrases to describe its project and advertises with high profits as it will back the coin in the future. Bullion calls itself the digital precious metal and wants to make it seem like their currency is value-backed, but ultimately they do not claim that. Bullion’s price chart is corresponding with Bitcoin’s chart (the general crypto chart). Goldmint’s price is steadily declining with its own falling market cap.
But let’s move on to the two legit gold-backed cryptocurrencies that are available on exchanges.
Digix Gold Token (DGX) – a DAO token on Ethereum’s network
DGX s a gold backed token that is based on the ERC-20 standard. It was issued by the first DAO (Decentralized Autonomous Organization) on the Ethereum network which calls itself DigixDAO. DGX is often confused with DGD which was also issued by DigixDAO. But of course, both tokens belong together and play a different role in DigixDAO’s concept.
A DGX token represents exactly 1 gram of gold. Consequently, the price of one DGX is currently about $41 USD. The market cap sits currently at about $2,000,000 USD and is slightly rising ever since Coinmarketcap.com is tracking its price. DGX tokens can always be redeemed for gold. However, you have to have 100 DGX tokens to change them for a 100g bar. The gold is held by a custodian, The Safe House Singapore. To redeem your tokens you have to contact DigixDAO.
What is interesting about Digix, is its reward concept via the sister token DGD. Holders of DGD are rewarded quarterly for participating in decisions and projects of the DAO. The rewards represent a share of the transaction fees of DGX.
Dignity (DIG) – pegged to both gold and the US-Dollar
Dignity is the biggest Gold cryptocurrency by market capitalization. It runs on its own blockchain and coin was once called Unity Ingot (UNY). But the issuer Crypto Bontix decided to conduct a coin swap that occurred between the 13th February and the 20th February 2018. Crypto Bontix conducted it to reduce the supply of the coin from 10,000,000 to 3,000,000. Because the new coin was to be covered by gold. According to Cryptobontix, one coin, represent 1$ in gold. So the price is dependent on both the dollar’s and gold’s value. Consequentially, the price of DIG is more volatile than the gold price itself.