Physical gold as a commodity to back tokens is not a new idea by any stretch, but Tether will be the largest player to get involved with it to date. Gold and cryptocurrency have plenty in common for many people, who believe that both serve as good reserve assets for times of trouble in regular markets.
Geopolitical Need for An Alternative Financial System
This has proven true more than once. Some had attributed parts of the recent bull activity in Bitcoin to the Iran conflict.
XAU₮ tokens will be worth one troy ounce of gold. The value of this fluctuates a bit less than Bitcoin, and a bit less wildly. At one point in history, it would have taken a lot of Bitcoin to buy an ounce of gold. Now things have changed, and one BTC will buy you quite a bit of gold.
That doesn’t mean they’re necessarily redeemable. The ounce might belong to a large bar that contains numerous claims. But the value of the gold ounce is what’s important – owning the token gives you that liquidity.
The tokens will come out on both the Ethereum and Tron blockchains, which is not a first for Tether. Tether also issues its USDT token on both blockchains, as well as on Bitcoin.
Speaking for Tether, someone reportedly told CoinDesk:
Tether Gold is launching in response to the growing demand for a digital asset that provides exposure to the world’s most enduring asset and a geopolitical need for an alternative financial system.
Tether’s gold reserves are to be stored in a Swiss vault. Tether says that its method of owning gold is the best option.
According to a press release:
Building on a track record for product innovation, each XAU₮ token represents ownership of one troy fine ounce of physical gold on a specific gold bar. XAU₮, which is available as an ERC-20 token on the Ethereum blockchain and as a TRC20 token on the TRON blockchain, can be transferred to any on-chain address from the purchasers’ Tether wallet. Furthermore, Tether Gold (XAU₮) is the only product among the competition that offers zero custody fees and has direct control over the physical gold storage, safely held in a Switzerland vault, adopting best in class security and anti-threat measures. Today, Tether Gold (XAU₮) is the best way to hold Gold.
Being able to hold it on Tron, for sure, makes it such that you could potentially trade gold bars for tokens, and vice versa, on the decentralized exchanges that populate the Tron ecosystem.
Both Tron and Ethereum have decentralized marketplaces and models, but Tron certainly has faster and more prevalent ones.
These exchanges are easy to use with your TronLink wallet installed, and then you just make the trades directly. You don’t have to deposit your crypto, and you don’t have to withdraw it. You still pay the exchange a fee for setting up the trade, but never take the risk of an exit scam. It’s one more problem that on-chain solutions have solved in chains like Tron.
For gold holders, this means access to a range of assets with every gold bar, and vice versa. Being able to cash out other assets into gold is perhaps even more exciting.
Tether might not be the first to offer gold as a service, but it’s probably the biggest.