Stablecoins have emerged as the most successful tokenized real-world assets on the blockchain. Digital coins like ADA, BTC, and ETH hold real-world value. Stablecoins demonstrate that it’s possible to transfer real-world value onto the blockchain. Now, the crypto industry is approaching another significant milestone: the tokenization of gold. Cardano is making strides in this area with at least two representatives. The Finest platform, which recently sold tokenized granite, is nearing the minting of tokenized gold. Additionally, EMURGO has announced a collaboration with Kinka to bring Kinka Gold tokens to Cardano.
Real-world Utility
USD-backed stablecoins are essentially replicas of the USD fiat currency, and thus, they are subject to inflation. While stablecoins on Cardano share technical properties with native coins like ADA or BTC—such as the inability to freeze accounts or prevent owners from spending coins—they still face inflation issues, particularly for Western users.
Tokenized gold offers a solution to this problem, acting as a modern return to the gold standard. Blockchain technology enables the digital division of a physical ounce of gold into thousands of smaller units suitable for payments. Gold is significantly less volatile than cryptocurrencies and is regarded as the most time-tested store of value globally.
Tokenization allows users to pay with gold while simultaneously owning a store of value assets directly in their wallets.
Many non-blockchain companies have recognized that they can create similar solutions. All they require is a trusted gold repository and electronic banking-like tools. These services will be custodial, whereas tokenized gold on the blockchain offers the advantage of self-custody. Cryptocurrency enthusiasts will likely prefer the self-custody method, as it allows them to use tokenized gold in DeFi. This innovation could attract new users and liquidity to the blockchain industry.
People can already purchase ‘paper gold’ through ETFs. However, these ETFs are limited in functionality, as they can typically only be held and sold. Most people simply hold onto ETFs for a period and then try to sell them at a higher price.
If tokenized gold achieves success similar to stablecoins, the network effect could grow substantially. Currently, stablecoins account for the majority of transactions across all blockchains. While people are likely to view tokenized gold primarily as a store of value and may not use it frequently for payments, it is well-suited for DeFi services that offer yields for locking up gold.
Cardano stands out as one of the most suitable platforms for tokenization due to its native asset feature, high degree of decentralization, and robust network, which, as of now, has not experienced any major DeFi hacks. Unlike other platforms, Cardano does not require smart contracts to transfer tokens and store them in the ledger; it handles minted tokens similarly to ADA coins. Built as a mission-critical project, Cardano aims to securely tokenize real-world assets on a large scale.
In my opinion, tokenizing gold or other real-world assets on Layer 2 solutions cannot match the level of reliability, security, and sovereignty that Cardano offers.
Cardano isn’t the only platform where tokenized gold is emerging. Across the crypto industry, numerous projects are pursuing the same goal. This is promising, as it ensures that the tokenization of real-world assets is becoming a reality now, not in another five years. It’s happening here and now. Welcome to the future.
