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Those who have kept tabs on the ever-evolving cryptocurrencies will know that there have been many modifications since this digital currency first came into existence. It started off with the highly volatile Bitcoin. Subsequently, individuals took it to themselves to create their own cryptocurrencies in order to profit from the fluctuation of prices.

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A key characteristic of cryptocurrencies is their volatility and this particular aspect has scared off many investors. In response to this, stablecoins entered the volatile market of cryptocurrencies and completely reconstructed its working.

Stablecoins, as the name suggests are a stable version of cryptocurrencies, resistant to market volatility and fluctuation. By creating a balance between cryptocurrencies and fiat currencies, these stablecoins let users enjoy the best of both worlds - the digital and real.

 

What are gold-backed cryptocurrencies?

Stablecoins are generally backed by fiat currencies, but at times backed by real-world assets like gold and oil whose values are measured in fiat currencies. Gold backed cryptocurrencies are basically backed by gold and therefore benefit from the revolutionary features of blockchain and the universally-valued precious metal.

 

How do they work?
An issued coin or token represents a certain value of gold. These tokens can be traded with other users. The popularity of the cryptocurrency coin can also affect the price of gold. If it is well circulated in the market, then the value of gold consequently increases. The advantage of gold-backed cryptocurrencies is that a downslide in its rate will not affect the value of the asset that backs it. Gold’s value will still be determined by the market’s circumstances and not by the cryptocurrency that it acts as collateral for.

The market for these gold-backed cryptocurrencies is booming. Nevertheless, it is important to exercise caution when investing. Careful and in-depth assessment of the involved third-party is a necessary step before moving forward. If you are one of the many who wants to build their own cryptocurrency that is backed by gold, then go ahead and have a look at reputed blockchain developers who have experience in this field. Blockchain App Factory is a top software company that deals with cryptocurrency development. They can guide you through the whole process and help you enjoy futuristic business.