07 Feb 2022
Gold-backed tokens are growing faster than the overall crypto market
Commodity-backed tokens are growing in popularity. So far, primarily gold-backed tokens have attracted investment, but other commodities may soon follow.
Just like stablecoins track the price of a currency, commodity-backed tokens follow the price of a commodity. The physical commodity should fully back them to track the price.So far, the only commodity-backed tokens gaining traction are the gold tokens Tether Gold (XAUT) and PAX Gold (PAXG). XAUT has a market cap of $409M, while PAXG has a market cap of $358M.Tokenized gold vastly improves gold's liquidity by enabling investors to own fractionalized parts of physical gold bars. Tokenized gold is different from gold ETFs since, with tokenized gold, investors own specific parts of an allocated physical gold bar. The tokens are also instantly redeemable for physical gold.Several projects have tried creating tokens backed by other commodities than gold, such as silver or palladium, but have met various obstacles along the way.The Russian nickel and palladium giant Nornickel just got approval from the Central Bank of Russia to issue commodity-backed tokens through its subsidiary Atomyze. It will be interesting to see how that plays out.The gold-backed token market has increased by 360% since the beginning of 2021, while the overall crypto market has grown 150%. Will the gold-backed tokens' rapid growth continue into 2022?