The allure of gold has captivated humans for centuries, with its timeless value, beauty, and rarity, making it a safe haven asset for investors, traditionally. As the RWA industry continues to evolve and more players enter the market, the availability of new assets on chain is growing rapidly.
So who wants these assets and who is trading these today? In this article, we will discuss the use cases for gold on-chain.
- Who wants gold?
- Swarm’s approach to bringing gold on chain
Who wants gold?
Gold has long been considered the most reliable asset, providing stability and protection against economic uncertainty. In times of market volatility or geopolitical instability, investors often turn to gold as a means of preserving wealth. This is particularly true for any business that has a responsibility to protect and grow their clients assets.
Be it a traditional investment fund, a custodian, a stablecoin protocol, or even L1s treasuries, they all often allocate a portion of their portfolio to stable, low-risk assets. This strategy helps to balance the overall risk profile of the project and ensures that there is a reliable source of value preservation during unexpected market downturns.
Traditionally, these businesses have relied on a combination of fixed-income securities, such as government bonds. Government bonds are considered low-risk due to the backing of a sovereign nation, while gold has a long history of maintaining its value over time.
The main point here is that these businesses all need protection against downward market risk. Since Swarm already had tokenized bonds before, the next natural step was to tokenize gold — which perfectly fills this necessity.
Gold is emerging as an increasingly attractive option for diversification on chain. Due to the uncertain economic conditions worldwide, gold prices have seen a remarkable 26% price increase year-to-date.
Source: World Gold Council
By strategically allocating a portion of an on-chain portfolio to gold, investors and treasury managers can hedge against inflation, market volatility, and other systematic risks.
Bringing gold on chain is not new. However, the way it is brought on chain is evolving. As the RWA market matures, we are seeing demand for greater transparency over the assets people are choosing to hold on chain. In this next section, we discuss how Swarm’s approach to bringing gold on chain differs from existing tokenized gold products.
Swarm’s gold NFTs
The reason for bringing gold on chain via an NFT structure is the transparency of 1:1 mapping each token to a specific old kilobar or ounce. A common misconception with current tokenized gold offerings is that token holders do not have direct ownership of the underlying gold, but rather a claim on the nominal value of the gold as promised by the issuer.
These products have not been able to fully capture the essence of gold ownership on chain, as well as all the control, autonomy and transparency that should go along with it. They face limitations in terms of transparency and security, as the third parties issuing them have the full authority to alter the asset backing at their discretion.
We believe the tokenization of gold should involve the creation of digital tokens that represent direct ownership of physical gold, mapping the tokens one for one with the underlying physical collateral. This distinction is crucial and should be the standard in the industry.
For this, each of Swarm’s gold NFT is backed by a specific and verifiable amount of gold, allowing holders to have a direct claim on the underlying asset.
Yes, you read correctly. There is a corresponding, individually allocated gold bar stored securely in the vaults of our trusted partner, Brinks. Brinks is a global leader in secure logistics and valuables storage, with a long-standing reputation for safeguarding precious metals. This partnership ensures that the physical gold backing each NFT is held to the highest standards of security and integrity.
One of the key advantages of this is the ability for holders to redeem their tokens for the underlying asset. Should an investor choose to do so, they can redeem their NFT at any time and have the corresponding physical gold bar delivered directly to their address. This feature provides an unmatched level of flexibility and control.
Of course, they could also be used as collateral in various DeFi applications, such as lending and borrowing platforms, providing new opportunities to generate yield and access liquidity.
In fact, the features are so great that we would tire you out talking about them. Because of this, we highly recommend for you to go experience them now here and become part of this new RWA wave.
About $SMT
- You can buy and exchange $SMT on Uniswap (Ethereum and Polygon), MEXC, Gate.io, (under the ticker $SMTX,), BingX, Bitstamp, and Open dOTC.
- For tokenomics and distribution, visit the $SMT docs page.
- Visit CoinGecko for up-to-date $SMT stats and figures.
- Join the conversation on X and Telegram.
- For total circulating supply figures, use our API.
