What are gold-backed stablecoins, and how do they work?
Gold-backed stablecoins are digital currencies pegged to physical gold reserves and designed to maintain a stable value. The concept of gold-backed digital currencies dates back to the early days of cryptocurrency, with developers aiming to create a reliable store of value.
Each gold-backed stablecoin represents a specific quantity of gold. For instance, one token might be linked to 1 troy ounce of gold. A troy ounce is a unit of weight used explicitly for weighing precious metals like gold, silver and platinum; it is equal to 31.1034768 grams.
A third party typically holds the gold reserves to ensure security and transparency. The issuing entity is responsible for maintaining an equivalent amount of physical gold for every token in circulation.
The token’s price remains closely aligned with the market value of gold. Buyers pay gold’s spot price