XAUt is an ERC-20 token based on the Ethereum, which was introduced by Tether Gold to digitize the value of gold. The token is gold-backed and joins the list of other gold-backed tokens such as DGX. The token was launched in January 2020.
The token was designed by Tether, the company headquartered in Hong Kong that has created a popular stablecoin USDT. Though the project was developed by the same team, the coin itself is issued by TG Commodities Limited, which was founded in 1998 in England. This is a private limited company that specializes in the wholesale of metals and metal ores. The issuer won’t be able to control the storage, and another entity will be responsible for it.
Consumers’ demand for stability and quick transfers of money around the world made the company create Tether. It happened on October 6, 2014. The capitalization of this stable coin has exceeded 4 billion USD at the time of writing. This is an undisputed global leader in fiat-backed stablecoins. While Tether belongs to fiat-backed stablecoins, Tether Gold belongs to gold-backed ones.
Real gold still remains a safe haven for many people. Though it’s monetary role subsided over the years, this is still a reliable investment asset that never loses its value. The liquidity of this asset is high. It is often acquired by banks and investors to be added to the investment portfolio for diversification of assets and as a hedge against financial instability.
Tether Gold was created with the main goal to represent this precious metal in the world of cryptocurrencies. Just like other Tether coins, it belongs to a new type of cryptocurrencies called stablecoins. Their purpose is to tackle the problem of cryptocurrencies’ volatility. Such coins have minimum possible inflation as they are pegged to the underlying asset which is gold in the case of XAUt.
The holders of XAUt can take advantage of a digital coin backed by a physical asset. It’s easy to trade it and move it effortlessly around the world which is much more convenient than physically cumbersome gold. Users get direct access to gold via Tether Gold, which is more preferable to holding physical gold thanks to lower storage and transaction costs. Taking into account high transactional utility, this choice is more preferable than other traditional alternatives such as Gold ETFs (exchange-traded fund). Also, this option considerably lowers entry barriers for non-institutional authorities to gold markets.
Tether Gold (XAUt) token
1 XAUt token represents 1 troy fine ounce of London Good Delivery gold (about 31.103 grams) held in a vault in Switzerland. It can be fractionalized up to six decimal places thus providing small increments of 0.000001 troy fine ounce. There is always an opportunity of redeeming tokens for the associated physical gold that can be delivered to a required place in Switzerland. Instead, holders can make arrangements to sell their assets and take the proceeds from the deal. One troy ounce of gold is going for about $1,560 at the point of writing.
It’s possible to buy XAUT on Bitfinex and RenRenBit, or directly via TG Commodities Limited with a minimum purchase amount of 50 tokens, which is equal to 50 fine troy ounces. XAUt is based on the TRON blockchain and is a TRC-20 token. It’s possible to exchange tokens for physical gold in case you have enough tokens for that. Those who want to purchase Tether Gold should have verified accounts with TG Commodities Limited.
Specific gold bars are associated with definite on-chain addresses holding XAUt tokens. During an on-chain transaction, XAUt is transferred from one on-chain address to another. In some cases, the physical gold purchased with XAUt can be consolidated. If it happens the reallocation will follow. The competitive edge of the company is that it refused to charge a custody fee to the holders of its cryptocurrency.
Tether Gold platform and technology
The team employs the technology and functionality of Tether’s fiat-based stablecoins to physical gold. The cryptocurrency was created to mobilize gold markets and give any person a chance to participate in the process. XAUt resembles Tether’s products a lot though there are things making the coin stand apart. It refers first of all to the company that issues the coin. It’s not the same entity that releases Tether. Still, it’s a sibling of the popular and trusted cryptocurrency which can be considered as a benefit of the asset. It’s availability on multiple blockchains and the lack of custody fees are also huge advantages of the project.
The picture with the gold bars under Tether Gold control can be found in the social media account of the project. The name of the supplier is not revealed and its logo was closed on pictures for security reasons.
The exchanges that trade Tether Gold include DiveriFi, the first custodial exchange listing XAUt. Bitfinex also launched margin trading for this gold-backed stablecoin, where it is traded in pairs with USD, Tether and Bitcoin. The margin will require initial equity of 20% and offer up to 5x leverage.
Tether is supported by Ethereum, EOS, Liquid Network, Omni, TRON and has also expanded to Algorand blockchain, which is the first permissionless blockchain platform. Thus, it can employ Algorand Standard Asset (ASA) technology, enabling the tokenization of any type of asset on the Algorand network.
Tether Gold team
Tether Gold is a product developed by Tether Limited with Jean-Louis van der Velde at its head. Giancarlo Devasini is the Chief Financial Officer of the company who serves at the same time as a chief executive officer of Bitfinex. It’s an obvious conflict of interests and causes much controversy.
Tether claimed before that the dollar-pegged stablecoin issued in 2015 is entirely backed by fiat money, i.e. by the US dollars. However, after accusations in price manipulation scheme and allegations initiated by CFTC (Commodity Futures Trading Commission), the Tether’s lawyer has admitted that the stablecoin is only 74% supported by cash, not 100% as it was asserted by the company previously.