Gold-backed cryptos crop up as investments that hedge against inflation

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Gold bars and Bitcoin cryptocurrency financial concept

As the crypto market continues evolving, developers are increasingly coming up with hybrid projects to address the pain points of cryptocurrencies such as Bitcoin (BTC). Over the years, financial watchdogs have voiced concerns over the volatility and speculative nature of cryptocurrencies. Others have cautioned investors against buying digital assets because they do not have an intrinsic value.

To address these challenges, project developers have created gold-backed cryptocurrencies. Such digital assets tap the hedging capabilities of gold and combine it with the flexibility, scarcity, and upside potential of conventional cryptocurrencies. Through this synergy, gold-backed digital currencies offer crypto adopters looking to make retirement investments a safe way out.

At the moment, there are several gold-back cryptocurrencies in the market, including Paxos Gold (PAXG), Perth Mint Gold Token (PMGT), Digix Global (DGX), and Tether Gold (XAUT), among others. In this article, we focus on the AABB Gold token (AABBG), the latest entry to the growing list of commodity-backed cryptos.

AABBG properties

Created by Asia Broadband, inc., AABBG is an ERC-20 token that launched in March this year. However, unlike other gold-backed cryptos, AABBG has several unique properties. The digital asset is not a stablecoin, but each token is pegged to the spot price of 1 gram of gold. This feature helps minimize investment risk, seeing as gold is relatively stable compared to cryptocurrencies. 

To ensure the coin’s backing is provable, Asia Broadband sold its mining operations in the Guerrero gold belt in Mexico for $82 million. The company then set aside $30 million in gold bullion to back AABBG. However, if demand exceeds this allocation, the company intends to source more gold from third parties. 

For the massive gold bullion that the company has, it only intends to mint 5.4 million AABBG tokens to ensure the price always appreciates. With analysts predicting that an ounce of gold will be trading between $2,000 and $3,000 over the next two years, AABBG holders get an effective inflation hedge. 

The AABBG wallet, which is available in Android, iOS, and desktop versions, ensures token security and seamless transfers. The app does not collect user data to ensure anonymity. It also features a referral program and iTransfer, a feature that allows token transfer through email, SMS, and select social media platforms. This functionality allows a sender to lock the sent tokens with a password that the receiver must enter to get the funds. 

Asia Broadband seeks to launch a proprietary exchange in September this year. This exchange will help address the liquidity problem found in other gold-backed tokens, seeing as they are not listed on many exchanges. On top of this, the exchange will allow AABBG holders to trade the token for cryptocurrencies such as BTC, Ethereum (ETH), and Litecoin (LTC) seamlessly. 

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Jinia is a fintech writer based in Sweden. With years of experience, she has written about cryptocurrency and blockchain for renowned publications such as Cointelegraph, Bitcoinist, Invezz, etc. She loves gardening, traveling, and extracting joy and happiness from the little things in life.

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