Many blockchain investors are unaware that there is a gold rush currently happening in the crypto market. At this time, there are dozens of gold-backed cryptocurrencies via for market share and new projects entering service monthly. However, it was a long road to get to this point.
Since the earliest days of the cryptomarket, people have sought out ways to digitize gold. These efforts have helped drive more interest in the market and have provided a variety of different gold-backed stable coin strategies. Here are some of the most notable projects to date.
What is a Gold-Backed Cryptocurrency?
A Gold-backed cryptocurrency is a token or coin that represents a value of gold. These tokens can be pegged to the value of gold directly, or utilize another mechanism that allows the token to remain the same value as the precious metal. Notably, physically-backed gold tokens are the most popular form of gold stablecoin available to investors today.
A Brief History of Gold Coins
Interestingly, the history of digital gold begins before the advent of blockchain technology. It was in 1996 that the concept of digital gold first entered the market. At that time, a firm by the name of E-gold emerged. This platform promised to streamline international gold transfers via the use of a digital gold token pegged to actual gold.
E-Gold represented the first time in history that gold was pegged to a digital asset. Of course, at that time, the processes were still getting worked out. For example, to participate in E-Gold, you needed to first mail the gold backing your token to the firm. After E-Gold received your bullion, it would issue e-gold credits to users. Uniquely, you backed your token’s value directly in this concept.
Things Start to go Awry
The project went great for a decade until, in 2006, the company began to notice a pattern of misuse forming among top members. Certain individuals began to use the international transferability of the e-gold tokens to conduct large money-laundering operations. Sadly, these users started to dominate the daily transactions of the network. Eventually, it got to the point that the firm’s CEO, Douglas Jackson, was forced to release this statement:
“e-gold operates legally and does not condone persons attempting to use e-gold for criminal activity. e-gold has a long history of cooperation with law enforcement agencies in the US and worldwide, providing data and investigative assistance in response to lawful requests.”
Regulators Halt Operations
In 2007, regulators stepped in and stopped all E-Gold operations and indicted the firm’s founders, Dr. Douglas Jackson, and Barry K. Downey. The court documents showed that regulators were not satisfied with E-Gold’s lackluster enforcement policies. Specifically, the indictment pointed to the lack of KYC and AML requirements of the network.
Specifically, since all users were in essence anonymous, they could simply reopen new accounts if their old ones were flagged due to suspicious behavior. After only a couple of weeks, the project’s founders were both found guilty of conspiracy and operating a money transmission business without a license.
Luckily, the regulators took note of the unique circumstances surrounding the project and decided on a lenient sentence. In the end, E-Gold was permitted to re-open. Impressively, the firm is still in operation today, albeit in a much smaller capacity.
In April 2019, Anthem Vault Inc released one of the first gold-backed cryptocurrencies into the market. The protocol differed from its predecessors in some vital ways. For one, 1 token equaled 1 gram of gold. This simplified accounting and allowed new investors to better manage the transition into the decentralized market.
Notably, AnthemGold saw success because it was among the first platforms to leverage the transparent nature of blockchain technology to provide a new level of clarity to investors. The network regularly conducted third-party audits of their gold reserves and published the results on the blockchain for all users to see.
Gold Coin (GLC)
Another early project that helped to shape today’s stablecoin market was Gold Coin (GLC). This token was the first Ethereum-based gold stablecoin to enter service. Ethereum operates as the largest Dapp and token ecosystem. Notably, GLC users gained access to this robust network while investing in the project.
Another unique aspect of GLC is the fact that each token only represented a fraction of one gram of gold. The developers felt that this approach was more effective at removing the financial barriers usually associated with gold investments. Now, anyone could join the decentralized gold market.
Tether Gold XAUT
It wasn’t long before the world’s largest stablecoin, Tether USDT, wanted in on the action. Tether was able to leverage its popularity and reputation to successfully launch Tether Gold (XAUT). Like earlier projects, every XAUT token was equivalent to one troy ounce of gold.
The project employed some advantages that made it stand out from the competition. Primarily, the network’s auditing services were handed over to Swiss vault operators. This decision brought with it a new level of transparency. For example, all XAUT holders have the option to search for the serial numbers of the gold their tokens represent directly.
Today, XAUT operates as one of the most successful gold coins in the market. The developers have even expanded the platform to not support both TRON and Ethereum’s blockchains. In this way, XAUT serves a crucial role as one of only a few multi-blockchain gold-pegged stablecoins in operation today.
META 1 Coin
The META 1 coin takes all the latest advancements in cryptocurrencies and combines them to create a unique gold-pegged token, unlike anything launched prior. All META 1 coins are backed by a mix of assets including in ground, above ground, and gold bonds. The assets are assigned to the META blockchain which comprises the asset value of the coin. Users can easily track, send, and receive, gold transactions globally in seconds utilizing the network’s proprietary blockchain.
Notably, the META 1 coin is the first self appreciating gold-backed stablecoin to hit the market. The platform introduces an elastic coin supply to enable better value control. Additionally, the protocol introduces a now loss mechanism that prevents META 1 token holders from selling their coins for less than market value. In this way, the META 1 coin project represents the peak of gold-pegged stablecoin evolution thus far.
The Future of Cryptocurrencies Looks……Stable
It only takes a brief glimpse through the history of gold-backed digital currencies to realize how far the market has come since E-Gold. Today, projects such as META continue to drive innovation to new heights. Stablecoin users now enjoy more transparency and control. You can expect to see the market continue to evolve as more projects and features become available.