PAXG (Pax Gold) is a gold-backed cryptocurrency issued by Paxos Trust Company, where each token represents one fine troy ounce of a London Good Delivery gold bar stored in professional vaults. Launched in September 2019, PAXG operates on the Ethereum blockchain as an ERC-20 token. It aims to make gold trading more accessible, combining the stability of physical gold with the flexibility of digital assets.

How PAXG Works

PAXG’s value is directly tied to the market value of physical gold, with each token representing one ounce of gold stored in Brinks vaults in London, custodied by Paxos Trust Company. Users can check the serial number and physical details of their gold via an Ethereum wallet. PAXG can be redeemed for physical gold, fiat currency, or other digital assets, with near-instant transactions, bypassing the slow settlement of traditional gold trading. Paxos conducts monthly third-party audits to ensure the token supply matches gold reserves.

Advantages and Limitations of PAXG

PAXG offers stability and accessibility. It lowers the barrier to gold investment by allowing fractional ownership without the storage or transport costs of physical gold. As an ERC-20 token, PAXG integrates with DeFi platforms for staking or lending. However, redeeming physical gold requires a minimum of 430 tokens, which may exclude smaller holders. Additionally, while blockchain technology is secure, personal wallets or platforms may still be vulnerable to cyberattacks.

Use Cases of PAXG

PAXG has diverse applications. In investment, it provides a digital way to hold gold, ideal as a hedge against inflation. In DeFi, PAXG can be used as collateral for lending or yield farming, enhancing returns for holders. Its global tradability also makes it a convenient tool for cross-border gold transactions, enabling value transfer without physical movement.