Concept

Tokenized gold is a gold amount that is represented as a token on the blockchain. The process involves converting physical gold into a digital asset. Particularly, it involves converting physical gold bullion in a digital form- where its ownership rights are stored as digital tokens on a blockchain. Gold tokenization is the process of minting digital tokens on a blockchain to represent ownership rights of physical gold bullion or coins, which are typically held in custody by a third party. For example, one onchain token may represent ten grams of physical gold stored offchain. This way, market participants can invest in gold without physically owning, storing, or securing the metal. Instead, investors can hold digital tokens on a blockchain, which track and provide an evidence of ownership of the gold represented by each token.

Tokenization

Tokenization of real-world assets (RWAs)- such as gold- enables holders of such assets to have them in a digital format and trade them on decentralized platforms. This technique bridges the gap between the traditional financial system and the expanding world of decentralized finance (DeFi) platforms, a mixture that provides increased liquidity, transparency, and accessibility. The tokenized assets have significant value and can be used as a form of collateral or investment in both traditional financial markets and the newly emerging blockchain-based markets. Backed by traditional assets, real-world assets can form sustainable and reliable digital asset classes that capitalizes on decentralized finance as a direct competitor to traditional finance. Moreover, real-world assets are recognized and valued in the real-world economy, and their integration into blockchain networks opens up new avenues for value creation in areas such as finance, investment and trading.

Broader category

Tokenized gold represents fungible tokens or fractionalized non-fungible tokens (NFTs) backed by physical gold bars and/ or coins. Such digital representations of gold are designed to provide greater accessibility, security, and transparency to the gold industry. Each token corresponds to a specific amount of gold, usually standardized as one gram or one ounce, allowing fractional ownership and further improving tradability and transferability.