Tokenization of Gold: A New Paradigm for On-chain Assets

I. Introduction: The Return of Hedging Demand

Since 2025, geopolitical conflicts have been frequent, inflationary pressures have not subsided, and major economies are experiencing weak growth, leading to a renewed demand for safe-haven assets. Gold, as a traditional "safe asset," has once again become the focus, with gold prices hitting new highs and breaking through the $3000 per ounce barrier, becoming a safe haven for global funds. At the same time, as the integration of blockchain technology with traditional assets accelerates, "tokenized gold" has emerged as a new trend in financial innovation. It retains the value-preserving properties of gold while offering liquidity, composability, and smart contract interaction capabilities as on-chain assets. An increasing number of investors, institutions, and even sovereign funds are beginning to incorporate tokenized gold into their investment strategies.

2. Gold: The "Hard Currency" of the Digital Age

Despite the fact that humanity has entered a highly digitalized financial era with various financial assets continuously emerging, gold maintains its status as the "ultimate store of value" due to its unique historical depth, value stability, and cross-sovereign currency attributes. Gold is referred to as "hard currency" not only because of its natural scarcity and physical non-falsifiability but also due to the long-term consensus of human society that it embodies over thousands of years. In any macro cycle where sovereign currencies may devalue, fiat currency systems may collapse, and global credit risks accumulate, gold is always regarded as the last line of defense and the ultimate means of payment under systemic risk.

In the past few decades, especially after the collapse of the Bretton Woods system, gold was once marginalized, with its role as a direct settlement tool replaced by the US dollar and other sovereign currencies. However, it has proven that fiat currencies cannot completely escape the fate of cyclical crises, and gold's status has not been erased; rather, it has been re-assigned the role of a value anchor during each round of currency crises. The global financial crisis of 2008, the wave of global monetary easing after the 2020 pandemic, and the high inflation and interest rate shocks since 2022 have all led to a significant rise in gold prices. Especially after 2023, multiple factors such as geopolitical frictions, the risk of US debt default, and persistent global inflation have combined to push gold back to the important threshold of $3000/ounce, triggering a new wave of global asset allocation logic shift.

Central bank actions are the most intuitive reflection of this trend. According to data from the World Gold Council, global central banks have continuously increased their gold holdings over the past five years, with notable activity from "non-Western countries" such as China, Russia, India, and Turkey. In 2023, the net purchase of gold by global central banks exceeded 1,100 tons, setting a historical record. This round of gold repatriation is essentially not a short-term tactical operation but is driven by deep considerations of strategic asset security, the diversification of sovereign currencies, and the decreasing stability of the dollar system. Against the backdrop of ongoing restructuring in global trade patterns and geopolitical dynamics, gold is once again viewed as the reserve asset with the most trusted boundaries. From the perspective of monetary sovereignty, gold is replacing U.S. Treasury bonds and becoming an important anchor point for several countries' central banks in adjusting their foreign exchange reserve structures.

More structurally significant is that the safe-haven value of gold is being re-recognized by global capital markets. Compared to credit assets like U.S. Treasury bonds, gold does not rely on the issuer's repayment ability and is free from default or restructuring risks. Therefore, in the context of high global debt levels and expanding fiscal deficits, gold's "no counterparty risk" attribute is especially prominent. Currently, the debt/GDP ratio of major global economies generally exceeds 100%, with the U.S. exceeding 120%. The growing questioning of fiscal sustainability makes gold increasingly attractive in an era of weakened sovereign credit. In practice, large institutions such as sovereign wealth funds, pension funds, and commercial banks are raising their allocation to gold to hedge against systemic risks in the global economy. This behavior is changing gold's traditional role as a "counter-cyclical + defensive" asset, positioning it more as a "structurally neutral asset" in the long term.

Of course, gold is not a perfect financial asset; its trading efficiency is relatively low, physical transfer is difficult, and it is hard to be programmed, which reveals its inherent flaws, making it seem "heavy" in the digital age. However, this does not mean it is being eliminated; rather, it is prompting gold to undergo a new round of digital upgrade. We observe that the evolution of gold in the digital world is not a static preservation of value, but an active integration of financial technology logic towards "tokenized gold". This shift is no longer a competition between gold and digital currencies, but a combination of "value anchoring assets and programmable financial protocols". The on-chain nature of gold injects liquidity, composability, and cross-border transfer capabilities, making gold not only a carrier of wealth in the physical world but also a stable asset anchor in the digital financial system.

It is particularly noteworthy that gold, as a store of value, has a complementary rather than absolutely substitutive relationship with Bitcoin, the "digital gold". Bitcoin's volatility is much higher than that of gold, lacking sufficient short-term price stability, and in an environment with high macro policy uncertainty, it is more likely to be viewed as a risk asset rather than a safe-haven asset. Gold, with its vast spot market, mature financial derivatives system, and widespread acceptance at the central bank level, still maintains the threefold advantages of being counter-cyclical, low volatility, and highly recognized. From the perspective of asset allocation, gold remains one of the most important risk hedging factors in constructing a global investment portfolio, holding an irreplaceable underlying "financial neutrality" position.

Overall, whether from the perspective of macro financial security, the reconstruction of the monetary system, or the restructuring of global capital allocation, gold's status as hard currency has not weakened with the rise of digital assets. Instead, it has been further enhanced by the strengthening of global trends such as "de-dollarization," geopolitical fragmentation, and sovereign credit crises. In the digital age, gold is not only the stabilizing force in the traditional financial world but also a potential value anchor for future on-chain financial infrastructure. The future of gold is not to be replaced, but to continue its historical mission as the "ultimate credit asset" through tokenization and programmability, bridging the old and new financial systems.

3. Tokenization of Gold: On-chain Representation of Assets

Tokenization of gold is essentially a technology and financial practice that maps gold assets into encrypted assets on a blockchain network. It transforms the ownership or value of physical gold into on-chain tokens through smart contracts, allowing gold to move beyond the static records of vaults, storage receipts, and banking systems, and to circulate and combine freely on-chain in a standardized and programmable form. Tokenized gold is not the creation of a new financial asset, but rather a reconstruction method that injects traditional bulk commodities into the new financial system in digital form. It embeds gold, a hard currency that spans historical cycles, into the "decentralized financial operating system" represented by blockchain, giving rise to a completely new value-bearing structure.

This innovation can be understood macroscopically as an important part of the global asset digitalization wave. The widespread adoption of smart contract platforms like Ethereum provides a programmable foundation for the on-chain expression of gold; meanwhile, the development of stablecoins in recent years has validated the market demand and technical feasibility for "on-chain value pegged assets." Tokenization of gold, in a sense, is an extension and elevation of the stablecoin concept, which not only seeks price anchoring but also has real, non-credit risk hard asset support behind it. Unlike stablecoins pegged to fiat currency, gold-backed tokens naturally escape the volatility and regulatory risks of a single sovereign currency, possessing cross-border neutrality and long-term anti-inflation capabilities. This is particularly important in the current context where the dollar-dominated stablecoin landscape increasingly raises regulatory and geopolitical sensitivity issues.

From a microscopic mechanism perspective, the generation of tokenized gold typically relies on two paths: one is the custody model of "100% physical collateral + on-chain issuance", and the other is the protocol model of "programmable mapping + verifiable asset certificates". The former usually involves physical gold custody institutions that ensure each token corresponds to a certain amount of physical gold and undergoes regular audits and off-chain reporting. The latter attempts to enhance the verifiability and liquidity of tokens by binding programmable asset certificates to gold batch numbers. Regardless of the path taken, the core goal is to construct a mechanism for the credible representation, liquidity, and settlement of gold on-chain, thereby achieving real-time transferability, divisibility, and combinability of gold assets, breaking the traditional gold market's issues of fragmentation, high barriers to entry, and low liquidity.

The greatest value of tokenized gold lies not only in the technological advancement it represents but also in its fundamental transformation of the functionality of the gold market. In the traditional gold market, the trading of physical gold usually comes with high transportation, insurance, and storage costs, while paper gold and ETFs lack true ownership and on-chain composability. Tokenized gold attempts to provide a new form of gold that is splittable, can be settled in real-time, and is capable of cross-border flow through on-chain native asset forms, transforming gold from a "static asset" into a dynamic financial instrument characterized by "high liquidity + high transparency." This feature significantly broadens the available scenarios for gold in DeFi and the global financial market, allowing it to not only exist as a store of value but also to participate in multi-layered financial activities such as collateral lending, leveraged trading, yield farming, and even cross-border clearing and settlement.

Furthermore, tokenized gold is driving the shift of the gold market from centralized infrastructure to decentralized infrastructure. In the past, the value circulation of gold heavily relied on traditional centralized nodes such as the London Bullion Market Association, clearing banks, and vault custodians, leading to various issues like information asymmetry, cross-border delays, and high costs. Tokenized gold, as a carrier of on-chain smart contracts, has constructed a system for the issuance and circulation of gold assets that requires no permission and no trusted intermediaries, making the processes of ownership verification, settlement, and custody of traditional gold transparent and efficient. This significantly lowers the market entry threshold, allowing retail users and developers to equally access the global gold liquidity network.

Overall, tokenized gold represents a profound value reconstruction and system integration of traditional physical assets in the blockchain world. It not only inherits the hedging attributes and store of value function of gold but also expands the functional boundaries of gold as a digital asset in the new financial system. In the context of the global trend towards financial digitization and the multipolarity of the monetary system, the reconstruction of gold on-chain is destined to be not just a temporary attempt but a long-term process accompanying the evolution of financial sovereignty and technological paradigms. Those who can establish a tokenized gold standard that combines compliance, liquidity, composability, and cross-border capabilities in this process are likely to gain the discourse power of future "on-chain hard currency."

4. Analysis and Comparison of Mainstream Tokenization Gold Projects

In the current cryptocurrency finance ecosystem, tokenization of gold has emerged as a bridge connecting the traditional precious metals market and the new on-chain asset system, resulting in a number of representative projects. These projects explore various dimensions such as technical architecture, custody mechanisms, compliance pathways, and user experience, gradually constructing a market prototype of "on-chain gold". Although they all adhere to the fundamental principle of "physical gold collateral + on-chain mapping" in their core logic, the specific implementation paths and focuses vary, reflecting that the tokenization of gold sector is still in a phase of competition and undefined standards.

Currently, the most representative tokenization gold projects include: Tether Gold, PAX Gold, Cache Gold, Perth Mint Gold Token, and Aurus Gold, among others. Tether Gold and PAX Gold can be regarded as the dual champions of the current industry, leading not only in market capitalization and liquidity but also occupying a dominant position in user trust and exchange support due to their mature custody systems, high transparency, and strong brand endorsement.

Tether Gold, launched by the stablecoin leader Tether, has the main feature of being pegged to standard gold bars in the London gold market, with each Token corresponding to 1 ounce of physical gold held in custody in Switzerland.