Since time immemorial, gold has been used as a financial asset to hedge against inflation and for investment purposes. Many investors preferred storing wealth in gold than in other financial assets like shares, and bonds.
Gold is one of the most valuable assets in the world today and owning real gold is considered a very good investment.
However, good is formally known to be a physical asset but the innovation of digital gold has the potential of altering the use cases of this asset.
Recall that the greatest drawbacks of physical gold are the inconvenience in storage and transport as well as theft.
With digitized gold as an alternative option to owning gold, the gold is stored on the blockchain, eliminating the problem of insecurity and inconvenience of storage and transport.
Context Gold is a project which combines the qualities of the blockchain and the advantages of gold to solve the problem of traditional gold usage and trading. The project offers a cryptocurrency backed completely by gold which can be held as gold and also exchanged for physical gold at the current international gold rate.
With CGO, retail investors need not store gold in physical form or visit local markets to purchase gold. It reduces the cost of storing and transporting gold for investors.
In this article, we will discuss the meaning of Comtech Gold and how it works.
What Is Comtech Gold?
Context Gold is a project built on the XinFin XDC blockchain network and is also a Sharia-compliant project. Before launching, it was authorized by one of the prominent Sharia scholars groups in the United Arab Emirates.
CGO has changed the idea of gold trading and storage from physical vault storage to issuing digital tokenized gold backed by complete physical gold.
CGO has eased the stress of investors and dealers transporting and storing large tonnes of gold by issuing a gold-backed token in exchange for physical gold. Also, gold investment has been fractionalized with this project to accommodate small investors with few resources to invest.
The CGO tokens held by investors are in the same percentage as the physical gold and each holder can lay claim of withdrawing a certain amount of gold which may not be the exact bars of gold they initially submitted.
This is similar to banking where a customer is handed a certain value of cash upon withdrawals but not the same bills they deposited.
Asset Backed With Physical Gold
A CGO token represents a gram of gold whose price is fixed to the current international gold rate. The standard size of a gold bar is 1kg and the tokens are backed by these gold bars which can be identified using their bar numbers.
In other words, anyone who owns CGO tokens can be able to convert the tokens to physical standard 1kg gold bars. An investor can only make a physical gold withdrawal request when he has CGO tokens of up to 1000 tokens which is equivalent to 1kg of physical gold bar.
As the CGO network grows, it is possible that people can buy the tokens and reclaim them in at retail shops in small fractions, anytime they wish to.
An Advanced Vault And Storage
The main problem attached to using and trading physical gold is the problem of storage and transport. It has always been an inconvenience to store gold safely, whether in the house or the bank.
In the Comtech Gold project, the physical gold bars which serve as security against the gold tokens are stored with a globally accepted vault called Transguard.
The audit trail under the users’ wallet account is complete and users can view their tokens and balance with their wallets. The wallets are highly encrypted and only the owner who has the passcode can have access to them.
With CGO, users can store gold in a digital form, and still, move around and trade anywhere without inconvenience.
A Tokenized Physical Gold
The tokenization of physical asset like gold is an ingenious idea which will attract more investors to the asset.
Gold has always been a valuable asset since the history of man and is also a huge form of investment. The value of gold is always given by its supply or scarcity which makes it highly expensive.
A large number of people cannot invest in gold due to its expensive nature but the tokenization of gold has created room for fractional investment into the asset. This has created an opportunity for people to buy gold as low as 1gram, hence, growing the scope of gold investors.
The minimum amount one can purchase on Comtech Gold is 0.01 grams but a user can only cancel their tokens for their physical gold equivalence at 1000 tokens (1kg gold).
A user can also deposit physical gold of a standardized 1kg bar and get its token equivalent.
How Does Comtech Gold Work?
Since the Comtech Gold protocol was built on the blockchain, it also features all the attributes of a decentralized space.
Users can manage their CGO tokens on the XinFin XDC Network blockchain through wallets that support the XRC-20 tokens.
The XDC Network allows users to view their token balance and also send tokens to the wallet address of the receiver. To confirm the transaction, users can use XinFin XDC network explorers and the good news is the speed and little transaction fees of this transaction.
Users are required to pay a standard gas fee and transfer fee when transferring CGO tokens.
For example, a user who wants to transfer 25 CGO from one XRC-20 address to the other may need to transfer 25.005 for these fees.
The fees are minimal and it helps in the management of the vault and the entire protocol.
Holding gold as an asset became easier with tokenization if compared to physical gold.
The price of CGO will always follow the international gold rates because it is backed by physical gold. Therefore, any market factor which affects the price of physical gold will also affect the CGO token.
Conclusion
The world is going more digital and everything around us is quickly getting digitized. People prefer to keep digital assets nowadays than physical assets because of the convenience they derive.
The innovation of Comtech Gold eliminates the problems of the traditional gold market which are, storage, transport and risk of theft.
By issuing a tokenized gold asset which is backed by physical gold, these drawbacks are eliminated.
Also, it will pave the way to fractionalize the asset and give more people the opportunity of investing with very little.
