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What is a gold-backed token and how does it work? By Cointelegraph



What is a gold-backed token and how does it work?

A gold-backed cryptocurrency is a type of digital currency that is backed by physical gold. The currency’s value is based on the current market price of gold and can be used for transactions just like any other type of cryptocurrency.

Some cryptocurrencies are backed by gold in order to tie the derivative asset (crypto) to a tangible asset (gold), thereby preventing excessive fluctuations in price. Thus, gold-backed cryptocurrency is often more stable than other digital currencies. This is because the price of gold is generally less volatile than the prices of other assets, such as stocks or cryptocurrencies.

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