What is Gold-Backed Stablecoin and What Led to its Popularity
Stablecoin is a form of cryptocurrency whose value is pegged to a real-world asset such as a precious metal, oil, fiat currency, real estate, and money. Ideally, stablecoins are viewed as a solution to the constant high price volatility of crypto assets.
Let us understand the two broad classifications of stablecoin.
- Asset-backed stablecoin: This form of stablecoin derives its value from a tangible asset. If you are looking for asset-backed stable coin development, then you must have an asset that will be able to control the supply, demand, and pricing of asset-backed stablecoin.
- Algorithmic stablecoin: Another form of stablecoin is algorithmic stablecoin that works on the basis of a certain algorithm. It works on the imbalance that is created between the demand and supply. For instance, a stablecoin is valued $1 and if it drops to $0.85, then automatically a buy order is pushed into the market to make it stable.
In the blog, we will discuss in detail one of the most popular asset-backed stablecoins — which is gold-backed stablecoin. Though all types of stablecoins have gained significant adoption in the industry, gold-backed stablecoins have taken the lead.
What is a gold-backed stablecoin?
Gold-backed stablecoins are backed by a tangible asset that is gold. The value of a gold-backed stablecoin is tied to gold, instead of any fiat currency like USD or Euro. Each stablecoin is a representative of a significant unit of gold — generally, one stablecoin equals one gram of gold. The main advantage of a stablecoin is that it remains highly stable and reliable than any other cryptocurrency.
History of gold-backed stablecoin
The concept of gold-backed cryptocurrency dates back to 1996. The first-ever gold-backed digital asset, named E-gold was launched by Douglas Jackson and Barry Downey. These two individuals created an irreplaceable asset in that era that nearly disrupted all the conventional assets. It made use of electronic commerce to facilitate transactions and to make a valid mobile payment service platform.
Initially, the physical gold was stored in a bank safe deposit box in Florida. As the number of users grew globally, so did the network to store gold. Also, the scams, hacks, system failure, and frauds started emerging, leading to the overall shut down of the company in 2009.
What makes gold-backed cryptocurrency popular?
The year 2020 started off as a rift in the global political environment, leading to increased tension between the USA and Iran. Global investors are looking for profitable business opportunities to invest their fiat currency. Cryptocurrencies seemed to be a good choice but they are highly volatile. Therefore, something traditional combined with modern technology was required and the focus shifted towards gold-backed cryptocurrency.
Indeed, gold-backed assets are becoming more popular than ever and leading to frequent developments of such stablecoins. If you are one of the crypto enthusiasts who want to tap into the crypto market, then stablecoin development services are definitely for you.
At Antier Solutions, we can not only provide stablecoin development solutions, but also drive your stablecoin launch journey — from white paper creation and coin deployment to marketing.
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