This article compiles the issuance and redemption methods, advantages, and risks of Tether Gold (XAUt), a gold token under the leading stablecoin company Tether, for readers to understand this unique asset linked to physical gold.
Table of Contents
What is Tether Gold (XAUt)?
How does Tether Gold (XAUt) work?
Advantages of Tether Gold (XAUt)
Potential risks of Tether Gold (XAUt)
Market value of Tether Gold (XAUt) and where to buy
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Stablecoin leader Tether officially launched its “Alloy by Tether” platform on June 17th, with the first product allowing users to use Tether’s gold token Tether Gold (XAUt) as collateral to mint new synthetic US dollar stablecoin aUSDT. In less than a day, it reached a market size of 8.02 million US dollars, attracting market attention.
This article comprehensively summarizes the issuance and redemption methods, advantages, and risks of Tether Gold (XAUt) used as collateral in this process, to help readers understand this unique asset.
What is Tether Gold (XAUt)?
XAUt is a gold-backed stablecoin, unlike other stablecoins pegged to the value of various national currencies, the asset backing the value of XAUt is gold, which has long been considered a safe-haven asset.
XAUt is a collaboration between Tether and UK precious metals trader TG Commodities Limited, first launched in January 2020, allowing holders to exchange 1:1 with physical gold. In addition to providing the benefits of owning the same physical gold, such as preserving purchasing power and potential risk hedging, XAUt is based on ERC-20 tokens issued on Ethereum (also issued TRC-20 tokens on the TRON chain), making it easy to trade or transfer gold in token form on the chain.
Currently, XAUt can be bought and sold on major cryptocurrency exchanges and can be converted into physical gold according to Tether’s requirements, although Tether charges a small fee for the redemption process.
How does Tether Gold (XAUt) work?
Issuing XAUt
The operation of XAUt is similar to most fiat-backed stablecoins. When investors seek to purchase XAUt, Tether will purchase or allocate the corresponding physical gold for each XAUt token at a 1:1 ratio. These gold reserves, representing customers, are stored and safeguarded in secure vaults, and the corresponding number of tokens is issued to buyers.
Redeeming XAUt
Holders can exchange their XAUt for physical gold or have TG Commodities Limited sell it on their behalf for cash, but each process will incur transaction fees.
Advantages of Tether Gold (XAUt)
1. Stability
Unlike traditional cryptocurrencies that are prone to volatility, XAUt is backed by physical gold held in Tether’s reserves, making it less susceptible to sharp price fluctuations.
2. Owning real gold
XAUt allows investors to own the value of gold without worrying about how to store it. Additionally, XAUt holders can identify detailed information through unique serial numbers.
3. Liquidity
XAUt can be easily traded on cryptocurrency exchanges, providing investors with liquid asset options. In times of significant risk, such as war, holders can conveniently store and move assets across borders, providing investors with a convenient way to invest in assets.
4. Security
The gold reserves of XAUt are securely stored in trusted Swiss vaults, ensuring the security of investors’ investments.
5. Transparency
Tether regularly provides ownership certificates and audited reports to prove the legitimacy and transparency of its gold reserves.
Potential risks of Tether Gold (XAUt)
1. Regulatory issues
The regulatory environment for cryptocurrencies and digital assets is still evolving, and XAUt may face regulatory pressure in certain jurisdictions.
2. Market competition
There are other gold tokens on the market besides XAUt, such as PAX Gold (PAXG) and DigixDAO (DGD), which also put pressure on XAUt.
3. Gold price fluctuations
Although gold is considered the best hedge asset, its price can still fluctuate, which may affect the value of XAUt and lead to losses for investors.
Market value of Tether Gold (XAUt) and where to buy
According to CoinMarketCap data, at the time of writing, XAUt was priced at 2,330.35 US dollars (linked to the basic and per ounce US dollar), with a circulating supply of 246,524 coins and a total market value of 573 million US dollars.
Currently, XAUt can be traded on exchanges such as OKX, Gate.io, Bitfinex, and more.