On February 26, the Sudan Gold Coin project started selling its gold-backed SGC tokens in an initial exchange offering (IEO) campaign launched on the ChainX trading platform. The blockchain project’s uniqueness lies in the combination of advanced gold mining technologies, reserve being stored with an independent third-party company, and transparency in tokenomics of SGC coins guaranteeing an increasing value of the digital currency. Read more about how the project operates in DeCenter’s latest material.
Representatives of the traditional financial world have repeatedly criticized top cryptocurrencies such as Bitcoin. The reason is that such assets are not backed by anything, and their development depends completely on decentralized peer-to-peer networks. In response to criticism, new cryptocurrencies secured with physical assets started appearing in the cryptocurrency market. These cryptos are backed by reserves that consist of real assets—real estate, oil, energy, minerals, and even precious metals such as gold.
How Gold-Tied Cryptocurrencies Work
Cryptocurrencies tied to gold are digital assets whose value is linked to the asset in their reserve. They combine advantages of the cryptocurrency market—running on top of a distributed ledger—and the conventional financial market, guaranteeing a stable internal value; something that classic, highly volatile cryptocurrencies cannot boast of.
So, for example, a certain blockchain-powered X coin may have an intrinsic value equal to the price of one gram of gold. In this case, an independent third party will be responsible for handling the gold reserve, the size of which will directly correlate with the supply of X coins. Holders of such digital assets will be able to exchange their X coins for gold at any time.
The price of such coins will always be identical to the exchange rate of gold at a given point. This means that even if there is a low demand for a digital asset, its price will never be lower than the value of the gold in its collateral. On the other hand, if demand for such a crypto asset grows, its price will exceed the value of the underlying asset.
Gold-Pegged vs. Other Cryptos: What’s the Difference?
In addition to a stable price, cryptocurrencies backed by gold also have a higher entry threshold for investors. For example, at the initial stages, many crypto investors bought popular assets at low prices, sometimes paying only a couple cents apiece. With coins pegged to gold, however, the minimum investment should be equal to the current rate of gold.
We can see that the key difference between these two types of cryptocurrency is the fluctuation of their value. While rates of popular cryptocurrencies such as Bitcoin and Ether are subject to sharp jumps and high volatility, gold-tied digital assets have a “built-in stop-loss” mechanism.
For this reason, the value of such assets cannot fall below the current gold rate. And when such cryptocurrencies begin to attract investor interest, which is supposed to increase over time, their price will supposedly grow along. But even with a decrease in demand for an asset, its value will never fall below the current gold rate. SGC launched by the Sudan Gold Coin project is one of such assets.
Sudan Gold Coin: A Look Inside
Sudan Gold Coin is one of the few projects that produce tokens actually backed by gold reserves. The project embodies advantages of the blockchain technology and the cryptocurrency market as well as utilizes cutting-edge gold mining technologies.
The SGC token itself seeks to solve the problems caused by the lack of clarity across the broader cryptocurrency market and the complexity of the technologies on which the modern crypto industry is built.
In addition to launching a gold-pegged token, the Sudan Gold Coin project invests in gold mining in North Sudan, offering users of its open platform the opportunity to acquire assets mined in the region.
Moreover, Sudan Gold Coin provides its investors with the opportunity to participate in the development of a project that unites real physical assets and digital currencies into a single SGC token, providing the right to purchase a fixed amount of the underlying asset—gold.
More on SGC Tokenomics
SGC tokens were originally issued as the digital equivalent of .002g of pure gold (at a market price of ~$.1). The total supply is 999,999,999 SGC tokens.
On a quarterly basis, 30% of all gold mined by the project will be evenly distributed between SGC tokens in circulation. So, for example, if 200,000,000 tokens are in circulation and 5,000kg of gold was mined that quarter, each token will “get heavier” by .0075g:
5,000,000*30% = 1,500,000;
1,500,000/200,000,000 = .0075
As a result, each SGC token will become equivalent to .0095g of pure gold.
When SGC tokens are swapped for gold, digital assets are burned, reducing the total supply and increasing the mass fraction of gold in each token for the next quarterly distribution.
In addition to the increase in the mass of gold represented by the SGC token, one should also take into account the several-year growth trend in the market price of this precious metal.