The synergy effects between blockchain technology and the gold industry

Gold and cryptocurrencies have been considered safe havens against inflation in recent years. Both assets are characterized by their scarcity due to their limited supply and the resulting attractiveness to investors in turbulent economic times.

The applications of blockchain technology and cryptocurrencies within the gold sector have been continuously explored since the rise of cryptocurrencies. Several concepts have emerged, from gold-backed stablecoins to various other applications that could touch every aspect of the entire gold supply chain.

Here are some of the proven, as well as potential but unexplored synergies between gold, cryptocurrencies and blockchain technology.

Blockchain enables new ways to invest in gold

Until about 20 years ago, retail gold investors were limited to coins with high dealer fees. In 2003, the introduction of the exchange-traded fund (ETF) allowed smaller investors to participate in a more cost-effective manner, essentially opening up the market and making it widely available to some extent. Gold was traded as shares, and despite the still somewhat high fees, it became possible for virtually anyone who wanted to get on board.

Fast forward 10 years and we’ve already had Bitcoin by adoption, although still in its infancy stages. The term blockchain technology is starting to appear more often and industry experts are coming up with solutions that use the new technology trend for gold investment. Gold transactions can be settled on a blockchain network in a transparent and efficient way, but the transaction costs of the first blockchains were still quite high and the level of acceptance low.

Despite the limitations, many providers such as Bitgild, Vaultoro, and Bitgold began accepting payments for gold in Bitcoin in addition to fiat. While crypto still accounts for a fraction of their total transaction time, many testified that buying gold with cryptocurrencies has a wide range of benefits – from the ease of use of the process to the verifiable ownership that is immutable on the blockchain ledger.

Today, blockchain solutions have become much more sophisticated and cost-effective. Transaction costs were dramatically reduced to just a few cents, with settlements taking just a few seconds due to the improved TPS (transactions per second). This could potentially bring gold investing to a whole new level of accessibility for retail investors, who will no longer have the limitations of fees and clumsiness of the traditional gold investment options.

Gold Backed Cryptocurrencies

One of the most popular use cases of gold in the blockchain sector is gold-backed cryptocurrencies, also known as gold-backed stablecoins. These cryptocurrencies maintain a specific ratio between gold reserves held by a custodian (a bank or a company) and the total supply of tokens in order to ensure a stable price that does not fluctuate like most assets in the cryptocurrency market. The exact ratio may vary, influencing the price of the stablecoin, but it should be kept constant throughout its operating cycle.

Stablecoins are useful, because they allow for more efficient payment tools due to their stability, as well as a store of value. Gold is particularly suitable for this purpose, because its price is relatively stable over the long term, and the asset is also scarce, making it unlikely to decline in the future. Furthermore, they allow investors to own an intangible asset that represents the precious metal, which removes storage costs. A person who acquires a stablecoin backed by gold receives a serial number linked to the amount of gold their currency represents, confirming ownership and that their token is indeed backed by gold.

Last but not least, depending on the gold-to-currency ratio, an investor can buy just a few shares worth a few dollars and still tap into the gold market, thus not being confronted with capital requirements. This is known as fractionalization and is among the most popular benefits of tokenizing various hard assets – from real estate to precious metals and many more.

Improved supply chain management

Blockchain technology has long been suggested to be incredibly useful in supply chain management and logistics, with several companies already implementing similar solutions for other industries since 2018. If implemented in the supply chains of mining companies and other stakeholders in the gold industry, blockchain could provide a much higher degree of transparency for all parties involved, including the end customer. It could potentially address some of the underlying problems along the supply chain, such as illegal mining, laundered gold, fake bars and human rights abuses of workers.

Meet Easygold Token

Easygold Token is a newly founded cryptocurrency project in the gold sector that creates the first security token that provides up to 50% dividend of the net profit of the company behind it, Hartmann & Benz. The project procures large quantities of raw gold directly from suppliers, processes it into high-quality gold bars and sells them on the open markets at margins of 20% to 30%. The income is then reinvested again in the same process while investors are rewarded with dividends every year. The company behind Easygold Token has been on the market for more than 3 years and has an established customer base, as well as several partners on two continents.

If you are interested in learning more about Easygold and how the project leverages blockchain technology and security tokens to offer a whole new world of opportunities to gold investors, visit their website. Early adopters will be able to get a special discount on their investments during the private sale, which is scheduled to start on January 1.