Paxos’ Pax Gold vs. Traditional Gold Investments

PAXG: Paxos’ Gold-Backed Crypto

Pax gold (PAXG) is a popular solution for investors who want flexibility, trust, accessibility, and low fees for their gold ownership experience. Leveraging a blockchain-based cryptographic asset via the Ethereum blockchain, Paxos’ crypto solution seeks to lower the barrier to entry for gold investment while helping ensure that gold ownership can utilize favorable characteristics from both the digital and the physical world.

What Is Pax Gold’s Regulatory Structure?

In 2015, the Paxos Trust Company became the first company in the world to be approved by the New York State Department of Financial Services (NYDFS) for offering fully regulated crypto assets. Paxos adheres to strict compliance and regulatory practices — including monthly, quarterly, and annual audits to help ensure transparency of all asset amounts. The NYDFS also regulates individual Paxos products (including PAXG) to ensure greater protective measures and operational efficiency.

Paxos designed its business model with an eye toward maximizing investor protections. As a  state-chartered trust company, Paxos maintains a bankruptcy-resistant structure with respect to customer assets — meaning they are stored separately from the company’s assets. In the event of Paxos’ insolvency, customers’ gold would remain safe. Further, Paxos has established foundational relationships with industry-leading crypto exchanges, wallet services, and custody providers across the globe, and has also developed partnerships with large institutions in the gold market to help ensure trust and credibility with their customers. Check out our Paxos overview article for more information on the various facets of this company.

Redeemability of Pax Gold

Through the Paxos crypto platform, the pax gold token is redeemable, meaning that it can be converted into fiat currency, physically allocated gold, and unallocated gold. PAXG can be instantly bought, sold, and traded for other cryptocurrencies on numerous crypto exchanges, offering a high degree of accessibility for global users. Further, customers can exchange PAXG tokens into full-sized London Good Delivery gold bars on the Paxos.com website. Through a variety of partner gold retailers around the world, customers can also convert PAXG into smaller amounts of physical gold.

When a PAXG token transaction occurs on the Ethereum blockchain, a Paxos transaction fee of 0.02% is charged to the user, as well as the standardized Ethereum gas fee that is typically a few cents per transaction. In contrast, transaction fees via traditional gold dealers can cost anywhere from 0.5% to 35% of the purchase amount. Paxos charges no storage or custody fees, and its minimal creation/destruction fees are tiered based on volume.

Accessibility and Decentralized Structure of PAXG Token

The process of tokenization allows anyone in the world to own fractional amounts of gold via PAXG with a minimum purchase of 0.001 troy ounce (t oz), or about $20 USD at time of this writing. This methodology substantially reduces the barrier to entry by making gold ownership more accessible — especially for retail investors and those unable to purchase entire gold bars. Tokenization helps democratize access to gold and mitigate many of the fundamental challenges within the global gold market.

Pax gold is designed as an Ethereum-based asset that adheres to ERC-20. This means it is compatible with all Ethereum wallets and gives practically anyone with access to a mobile phone the ability to hold PAXG in a permissionless environment, with reduced risk of seizure or theft. Additionally, PAXG and other Paxos crypto assets are easy to buy, sell, and trade across a variety of exchanges around the world.

Programmability and Flexibility of Pax Gold

As an ERC-20 stablecoin, pax gold is programmable within the Ethereum ecosystem. Customers are able to use the PAXG asset in a manipulation-resistant environment governed by an algorithmic blockchain-based network. PAXG tokens benefit tremendously from Ethereum’s broad market utility, widespread adoption, and widely used smart contract standard.

Typically, gold ownership can be quite complex because it can be expensive to transport and store physical gold bars due to their size and weight. It can also be difficult to reliably buy and sell gold — with counterfeiting and purity dilution presenting continued challenges to the gold industry. With its digital representation of gold, Paxos’ crypto PAXG seeks to address these challenges. Not only does PAXG provide users with a highly simple and flexible purchase, sale, and ownership experience — it also helps ensure the underlying gold’s purity by allocating tokens down to individual serial numbers from each gold bar. When you send PAXG, the allocated ownership moves with the transfer.