Explained: What are gold-based stablecoins; why are they outdoing other cryptos

cnbctv18.com:

Global inflation and geopolitical tensions are leading to the rising popularity of gold-backed stablecoins. The Russian invasion of Ukraine, and the prevailing inflationary headwinds have caused these gold-backed digital currencies to outperform the wider cryptocurrency market, which has had a rocky year so far.What are stablecoins?Stablecoins are cryptocurrencies backed by real-world assets such as commodities, fiat currency (issued by the government), gold, or sometimes other cryptocurrencies.

Stablecoins are named so because the value of stablecoins changes based on the underlying asset, currency, etc.This leads to lower volatility when compared to other cryptocurrencies like Bitcoin. The price function is closely made to mimic the value of the underlying asset through computer algorithms that function on its blockchain.

Most stablecoins are made on the Ethereum blockchain and exist as ERC-20 standard tokens, with the backing being held in banks or third-party institutions.Also read: Some stablecoins not completely pegged to US dollar, says US oversight councilThe biggest stablecoins are the USD Coin (USDC), which is not affiliated with any government of CBDC just to be clear, and Tether (USDT). The two stablecoins are linked to the US Dollar, and are two of the biggest cryptocurrencies in the world by market cap.What about gold stablecoins?Gold stablecoins are those backed by an amount of gold.

Each token, or fraction of a token, represents an equal real world value in gold. Investors are even able to receive the serial number of the physical gold bar that backs their holding of the stablecoin, in cases of reputed coins.Also read: Want to buy Sovereign Gold Bonds? Here’s how to do it through SBI OnlineGold