Tokenized Gold And Blockchain, Nexo Finance Filling The Gap With Gold Backed Lending - Visionary Financial (2024)

Even though the inherent value of Gold remained unaffected by the failing innovation, there still remained a hole to be filled. Innovators argued that if their projects were successful, transferring, accounting and recording the passage of Gold will be much easier than traditional hand-to-hand transfer.

Then came Bitcoin and history knows the rest. Eventually, people figured out that the scarcity of Bitcoin can be used to replicate it elsewhere. And thus, the advent of Digital/Tokenized Gold.

Tokenized Gold is the process of substituting Gold on the Blockchain. Tokenized Gold providers claim to hold physical Gold in their reserves and give out virtual tokens in exchange for the users to store, transfer and track. Several Dozen projects have come up since the idea was conceptualized, but the coin metrics of Paxos and its tokenPAX Goldhave taken up most of the highlight.

Nexo and Pax Gold

PAX Gold (PAXG) is a token issued in the Paxos network. PAX Gold is a digital asset wherein each token is backed by one fine troy ounce (t oz) of a 400 oz London Good Delivery gold bar, stored in a physical location – Brink’s vaults. By holding a PAXG Token, one claims the right to the underlying physical gold, held in custody by Paxos Trust Company. PAX Gold is the only gold token that you can redeem for LBMA-accredited Good Delivery gold bullion bars.

Recently, almost $5 million worth of PAXG was bought byNexo Finance. Nexo Finance is a Decentralized finance organization that leverages blockchain to provide banking based services, among other things. Nexo also allows users to start acredit lineby borrowing more than 45+ fiat currencies and allows you to earn interest on idle crypto holdings. Nexo Finance, being an established financial institution for more than 10 years, claims to be the first provider of cryptocurrency backed loans.

As it is a Regulated entity, Nexo has the ability to provide a wide range of services with the utmost trust from its customers. Nexo has been known to be the leading DeFi (Decentralized Finance) organization with the highest customer satisfaction.

In order to fulfill the needs of the customer, Nexo moved to partner with Paxos. Due to the increase in demand from their customers, Nexo purchased more than $5 million worth of Gold through the PAXG token initiative. That’s because the flexibility of trading and investing in gold via the blockchain is quickly bringing back the asset’s popularity. Investors, especially young ones, are enticed by traditional assets as they are making a comeback via the blockchain.

Nexo, not wanting to fall back on their customer’s needs, went all-in on the proposal. “The gold bug and crypto enthusiasts mentalities have always been similar. It comes as no surprise that some of our 500k+ users are quite fascinated by the concept of tokenized physical gold, so we are glad to address their needs together with Paxos.” said Antoni Trenchev, Managing Partner at Nexo. Users at Nexo can now use the PAXG to getcredit linesor use it to earn interest among other things.

Closing Thoughts

It remains to be seen the effect tokenization will have on the traditional asset Gold. Over the 5000+ year-old history, Gold has always been a physical and tangible asset, bought and sold without hindrance. But now it’s all set to change. Tokenized Gold could be a welcome innovation in the cryptocurrency space. As young investors such as millennials and Gen-Z are more likely be attracted towards cryptocurrencies, this will also allow them to look at traditional assets and commodities like Gold. It could also reduce the friction of transfer as it takes all but a few clicks to send and receive or it could go wrong in a million other ways. Only time will tell how a traditional asset and a modern technology will mingle.