Cryptocurrency Backed by Real Assets: Understanding the Concept of RWA Tokens
The cryptocurrency world is rapidly evolving, with new innovations and applications emerging regularly. One such development that has gained significant attention is the concept of asset-backed tokens. Unlike traditional cryptocurrencies, which derive their value primarily from supply and demand dynamics, asset-backed tokens are tied to real-world assets (RWA). In this article, you will learn about asset-backed tokens, and Pundi X’s role in pushing RWA token adoptions.
What Are RWA Tokens?
RWA tokens represent ownership in real-world assets, bringing a new layer of stability and tangibility to the cryptocurrency market. The value of an asset-backed token is directly linked to the value of the underlying asset, which can include real estate, commodities like gold or oil, stocks, bonds, or even intellectual property. By tokenizing these assets, issuers can create a digital representation that can be traded on blockchain platforms. Hence, 3rd party recognition/verification on real-world asset tokens are essential for the holder’s confidence. For example, some RWA tokens such as stocks, bonds, gold or stable coins are issued by the regulated organizations, ensuring ownership rights are enforceable and prevents issues like fraud and money laundering.
The commonly seen RWA tokens are stablecoins such as Tether (USDT), USD Coin (USDC), and Dai (DAI). Gold-backed tokens are another asset-backed token that is growing strong in the crypto market, including Tether Gold (XAUT), Paxos Gold (PAXG), and more. The positive year-to-date growth of gold itself increases the attractiveness of gold-backed tokens to crypto holders.
https://coincodex.com/crypto/gold-24-carat-oz/?period=YTD
As of today, the gold-backed tokens have reached over a $1.5 billion market cap, a 50% growth since breaking through the $1 billion market cap in March 2022.
https://www.coingecko.com/en/categories/tokenized-gold
Digital Ownership of Physical Gold with PAXG
PAXG, a digital asset issued by Paxos Trust Company, is backed by physical gold stored in LBMA vaults and audited monthly. Built on the Ethereum blockchain, each PAXG ERC-20 token is 1-to-1 backed by 1 troy ounce of London good delivery physical gold. Regulated by the New York State Department of Financial Services, Paxos provides trust and security for individuals’ investment in digital gold assets.
In addition, PAXG offers the advantage of digital ownership with the security and tangibility of physical gold, as well as the ability to redeem tokens for gold bars.
Pundi X Facilitates the Adoption of PAXG
In January 2024, Pundi X announced its collaboration with Paxos by integrating PAXG into the crypto point-of-sales solution XPOS. Individuals can now purchase PAXG directly from XPOS at the physical locations. Among these, the Scoin shop in South Africa is the place to go for the nature of its business type — the physical gold exchange store.
The South African Gold Coin Exchange (SAGCE) & The Scoin Shop have over 50 years in the industry, bringing gold coins and collectibles to South Africa. Through the collaboration with Pundi X and Paxos, individuals can purchase physical gold coins and digital gold tokens via XPOS, while redeeming the PAXG tokens for physical gold at any Scoin store, demonstrating the 1-to-1 backing of PAXG and the interoperability between the physical and digital space.
Bridging Digital and Physical Realms Through Asset-Backed Tokens
Tokens backed by real-world assets represent a significant innovation in the cryptocurrency space, and gold-backed tokens provide a way to trade gold digitally, combining the stability of a traditional asset with the efficiency and flexibility of blockchain technology.
With Pundi X’s crypto point-of-sales device, XPOS, we provide easy access to gold-backed tokens such as PAXG. Customers can enjoy a seamless transaction experience at physical locations, redeem for physical gold, and purchase digital gold directly through the XPOS device, a real use case of bridging the gap between the digital and physical realms.
