Opinion: Kevin Rusher, founder of Luck
It’s a volatile world out there. This year, I’ve seen stocks get wild as gold was pumped up and the code was filmed somewhere in the middle. Investors dumped risky assets and fought for safe shelters. Money leads the fees.
Gold is safe, but not so hardworking. Unlike cash and the Ministry of Finance, yellow metals do not generate income. Now, more than ever, investors need to be able to earn returns on money. Especially in the Decentralized Finance (DEFI) sector.
The only way to make money from money is to buy low and sell high. Most investors don’t tend to buy this kind of money. There is a good reason for this. In the long run, as we’ve seen recently, Gold’s performance is usually consistent.
For example, after the 2008 financial crisis, gold prices rose 148%, but remained stagnant for nearly a decade before the Covid-19 pandemic caused another rally. It remains a great hedge, but Gold’s long-term track record is not about growth.
Investors prefer US treasury or high-yield savings accounts as part of a balanced portfolio. Gold can be better than these assets in uncertain times, but it provides a long-term balance of security and predictable income.
defi solution
This is where Defi is innovating in the world’s oldest asset. Defi can significantly modernize gold investments, providing the speed and transparency of blockchain-based transactions, as well as the ability to gain returns.
However, most tokenized gold is currently roughly the same as holding it in a fund (ETF) traded on an exchange. Stablecoin giants like Tether and Paxos say they are fully backed by physically audited gold reserves, but they don’t have yields.
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Most Defi investors like assets that can be traded in liquids such as cryptocurrencies and Stablecoins, which can produce attractive returns. For example, you want to buy and wager Tether’s USDT (USDT) Stablecoin to earn rewards while maintaining ownership.
Perhaps this is why the market capitalization of gold support tokens remains modest. Tether Gold, the world’s most important gold token, is a market capitalization of just under $835 million, compared to Paxos Gold, for example, at around $799 million. Together, this represents just 1% of USDT’s market capitalization.
Unlock income from the world’s oldest assets
To fully unlock gold’s potential, tokenization needs to be taken a step further by creating a defi ecosystem in which tokenized gold is actively functioning.
One possibility for companies such as Gold Miner is to issue a spare tokenized version. Litigation mechanisms allow for Stablecoins and Real-World Asset (RWA) token trading protocols, allowing holders to take advantage of additional yield opportunities across the Defi Ecosystem.
Beyond the benefits of yield opportunities, blockchain technology means that tokenized gold investors can benefit from the flexibility of 24-hour trading, near-real-time price discovery and proximity settlements without compromising the stability of their assets.
The future of gold investment
Perhaps ironically, as governments around the world are beginning to mark digital finance with approval, gold is once again becoming a highly desirable commodity. As the government essentially ratifies digital finance, public interest in it increases. At the same time, our appetite for gold during these uncertain times increases.
Defi can combine these trends and kickstart the natural evolution of gold ownership that provides a solid bridge between traditional finance and digital finance. Gold within traditional markets attracts investors for stability, but Defi offers new, unique yield opportunities, thus providing opportunities that do not compromise on its stability.
Gold has captivated humanity for thousands of years. It is the foundation of myths, the standards of wealth, and the ultimate hedge against uncertainty. However, in today’s financial world, upgrades are necessary.
By integrating gold into the defi ecosystem, it was able to unlock its true potential, not just as a valuable repository, but also as an income-generating asset. The world’s oldest safe haven assets are finally on the brink of digital evolution.
Opinion: Kevin Rusher, founder of Luck.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
