You have probably heard about the boons associated with gold investments. From the early ages of currency, through to the current crypto-based variants, people have always revered and known the value of gold. This is the reason many people still use gold as a way to pass on wealth from one generation to the next. The original reason gold was loved so much was purely down to its scarcity and beauty. These days, gold is still loved for its beauty, but there are also many other reasons why many of us often look to gold as a stable investment.
Gold has always been a great way of hedging against inflation. This is mainly due to the fact its price generally seems to rise when the cost of living also goes up. You will often see purchases of gold rise immensely in countries that are witnessing their currency devalue, as people realise that their assets will remain in a far safer state this way. So how does all this relate to cryptocurrencies? Well, there is now crypto-backed gold, which should actually allow the currency to remain more stable.
The first digital gold rush
The origins of gold-backed digital currencies hark back to 1995, when E-Gold emerged on the scene, and was quickly snapped up by millions of early adopters until it was eventually shut down in 2009. These days, gold and silver-backed cryptocurrencies are far less vulnerable to the issues that e-gold suffered from, with blockchain technology established as a more secure accounting method than the likes of E-Gold was privy to. Because of this, we are starting to see a rise in interest surrounding gold and silver backed cryptocurrencies. Just as gold has always been a good investment, so will gold-based crypto be.
One of the many reasons investors are favouring gold-based cryptocurrencies is that at the minimum price, the crypto coin (or token) will always be worth the prescribed amount of gold. It is almost like a built-in stop-loss. The value can however always rise if the particular currency takes off. For example, if one crypto token is worth one gram of gold, the value will not be worth less than the one gram of gold at any point, but could potentially rise if the currency gains popularity.
The stability of a commodity
It is not just the silver and gold-backed cryptocurrencies that could end up benefiting from the stability these commodity-based cryptos either, as the sheer fact these particular ones will be more stable could even end up building trust in cryptos in general. Right now, those who know very little about the industry are sometimes reluctant to invest simply because of the volatility of this type of currency. A few stable alternatives in this space could end up changing the industry for the better and pushing it further into the mainstream.
Whereas E-Gold and other early gold-based currencies suffered from legal issues, hacks, frauds, and scams, the blockchain technology behind the latest batch of gold and silver-backed currencies will guard against such issues. The price for each token may vary, but seeing as gold has never been worth zero, and its value is generally seen as only going in one direction in the future, it will be an interesting few years ahead for these currencies and those who invest early. This could herald in a new era of cryptocurrency investing, and if it does indeed lead to a more stable era in the industry, we all know in which direction we should all be ‘tipping our cap’.
Those who enjoy lower risk trading should definitely look into this area, with one caveat. Making sure the gold that is used to back up the coins (or tokens) needs to be stored safely with a third party organisation. This is pretty much the only security issue associated with these currencies, and as such, when you find one that ticks all your boxes, you can trade away safe in the knowledge that you are investing in a cryptocurrency that should be far less volatile than others, and one that could indeed be the launchpad for many successful cryptos of the future. “There is gold in them hills”, or so they were told back in the late 1800s during the gold rush. It seems those hills are now virtual ones, and early pioneers are yet again set to be the biggest winners.