Comprehensive Guide to On-Chain Tokenized Gold Trading

Author: ian.btc | 0xWorkhorse, Compilation: Shao, Golden Finance

With daily discussions about price movements at the dinner table, crypto skeptics’ pessimistic forecasts on timelines, and reasonable debates among figures like @notthreadguy, Peter Schiff, and CZ, tokenized gold is becoming an increasingly important consideration as 2026 approaches—even for crypto forum founders to consider.

As interest grows, I receive daily questions about the best ways to acquire on-chain gold, how to use it, and where to get it.

Currently, the two most prominent options are $PAXG (Pax Gold) and $XAUT (Tether Gold)—both are digital representations of physical gold bars issued and managed via blockchain technology. Each token represents one ounce of pure gold, allowing investors to access gold’s value without the complexities of storage, transportation, or safekeeping.

Amid ongoing economic uncertainty, gold prices have continued to rise (once exceeding $4,000 per ounce), and these assets are gaining momentum as reliable stores of value within crypto portfolios. In fact, in October alone, the total market cap of tokenized gold surpassed $3 billion, with PAXG and XAUT accounting for about 89% of that share.

Conversely, gold’s proportion in my personal portfolio—and across the industry—is steadily increasing. Therefore, I’ve put together a comprehensive guide exploring what PAXG and XAUT are, how they work, their regulatory and security status, and how investors can use them—as long-term hedges or active tools within DeFi.

What Are PAXG and XAUT?

PAXG, issued by Paxos Trust Company and launched in 2019, is one of the first fully regulated digital commodities. Each PAXG token corresponds to a specific, serial-numbered London Good Delivery gold bar stored in vaults partnered with Brink’s. The gold is fully allocated and audited monthly to ensure a one-to-one backing—absolutely reliable.

Since PAXG is an ERC-20 token, it integrates easily into the broader Ethereum ecosystem and can be traded or used within DeFi applications just like other tokens. Its market cap is approximately $1.22 billion to $1.28 billion, with a circulating supply of around 307,000 to 310,000 tokens, and it enjoys ample liquidity on major exchanges like Binance, Coinbase, and Kraken.

XAUT, issued by TG Commodities, SA de CV—a company under Tether based in El Salvador—entered the market in 2020. It also represents ownership of one ounce of LBMA-standard gold stored in Swiss vaults.

Each token is backed by physical gold, with Tether providing daily reserve snapshots for transparency. The total supply is about 246,500 tokens, but it fluctuates with demand. By 2025, its market cap surged to around $1.5 billion, temporarily surpassing PAXG.

While PAXG is designed for ease of use and regulatory compliance, XAUT emphasizes institutional liquidity and is integrated into Tether’s broader stablecoin infrastructure.

How Do They Work?

Although both tokens are backed by physical gold, their issuance processes differ in scale and accessibility.

For PAXG, the process begins when a user exchanges USD or crypto for PAXG on the Paxos platform. Paxos then allocates an equivalent amount of gold from its reserves and issues tokens on Ethereum.

Using Paxos’s verification tools, each token can be traced back to a specific gold bar. The tool links blockchain addresses with serial numbers, allowing real-time tracking of gold and token movements on their website. The minimum purchase is just 0.01 ounces—roughly $40 at current prices—making it accessible to almost all investors.

XAUT employs a more exclusive approach.

Gold is supplied and stored by Tether’s Swiss partner, with full KYC verification required for purchase. A minimum of 50 XAUT (over $200,000) must be bought at once.

Tokens are minted after physical gold is acquired and deposited in a vault. Buyers pay a 0.25% fee on purchases and redemptions. While this higher threshold limits retail participation, it aligns with XAUT’s focus on privacy and liquidity for institutional and high-net-worth clients.

Redemption processes also differ.

PAXG holders can exchange tokens at market value for physical gold, unallocated gold (for institutional clients), or USD. The redemption process is flexible, low-cost, and allows physical delivery, though fees apply.

In contrast, XAUT redemptions are only available for full gold bars—requiring a minimum of about 430 XAUT to cover fluctuations—and must be delivered within Switzerland. Redeemed tokens are burned, and compliance checks may cause settlement delays.

Are They Safe?

Safety largely depends on regulation, custody, and auditing integrity.

PAXG benefits from a strong US regulatory framework. Paxos Trust is regulated by the New York State Department of Financial Services (NYDFS), which mandates monthly reserve reports and independent audits.

This structure places PAXG among the most compliant digital assets, significantly reducing counterparty risk.

XAUT’s regulatory situation is more dispersed. It is overseen by El Salvador’s National Digital Assets Committee (CNAD), with Tether operating some compliant entities in the country, while the gold is stored in Switzerland. The token undergoes quarterly audits, with Tether having completed SOC 2 Type 1 audits and planning Type 2 audits for further oversight. Chainalysis also monitors transactions.

Despite these measures, some analysts note that Tether’s governance offers less direct regulatory scrutiny compared to Paxos’s trust model, slightly increasing counterparty risk.

Ultimately, the safety of both tokens depends on the vaults and custodians holding the gold. Risks include gold price volatility, potential custody issues, blockchain vulnerabilities (like smart contract bugs), and regulatory changes affecting tokenized commodities.

In independent assessments, PAXG scores higher on transparency and regulation, while XAUT is valued for privacy and its integration within Tether’s liquidity network.

Both have demonstrated resilience during market stress, including liquidity crunches and gold price swings. In essence, both are equally secure.

How to Use PAXG and XAUT

Once you understand their mechanisms, buying, holding, and integrating tokenized gold into your portfolio becomes straightforward.

Holding these tokens allows integration into DeFi protocols. Platforms like Aave or Morpho enable you to lend out PAXG or XAUT to earn annual yields—typically between 3% and 20%. You can also use them as collateral to borrow stablecoins without selling your gold exposure.

They can also provide liquidity for trading pairs like PAXG/USDC or XAUT/USDT on platforms such as LFJ.gg on Avalanche or Uniswap on Ethereum, or through yield aggregators like Pendle for fixed income strategies. As always, yields depend on demand and incentive mechanisms—higher returns often entail higher smart contract risk. XAUT benefits from integration with the TON blockchain, enabling low-fee staking.

Which Is Better?

While both assets share the same fundamental concept, their design philosophies differ.

PAXG’s advantages lie in its regulatory clarity, transparency, and accessibility. It’s tailored for everyday investors seeking to invest in gold within a trusted, audited framework.

XAUT, on the other hand, emphasizes liquidity, privacy, and institutional influence, aligning more closely with Tether’s stablecoin model.

In practice, PAXG is easier to buy, with lower transfer costs and more convenient small redemptions. XAUT requires larger investments and offers less flexible redemption options but benefits from deep integration within Tether’s ecosystem and associated liquidity. Both track spot gold prices, are audited, and can be used in DeFi—though their target audiences differ.

For retail investors engaging in on-chain trading, these differences are often negligible. Both are highly liquid and easily tradable on decentralized exchanges, regardless of trade size.

Summary

PAXG and XAUT mark a new phase in gold’s evolution: a digital, portable, and programmable form. They enable investors to hold gold as easily as stablecoins while maintaining a direct link to verifiable physical gold reserves.

PAXG offers US regulatory protection, low entry barriers, and transparency—ideal for mainstream users. XAUT caters to those prioritizing privacy, larger asset holdings, and interoperability within the Tether ecosystem.

Both have established themselves as reliable, asset-backed representations of physical gold, meeting the growing demand for stability and liquidity. As tokenized commodities develop further, assets like PAXG and XAUT are poised—and should become—key components of diversified on-chain investment portfolios. They are, after all, the blockchain-native heirs of precious metals that have anchored value for thousands of years.

As for my current activities, I’m heavily mining coins. I’ve deployed significant funds into Avalanche and Ethereum mining pools, and I don’t expect much change in the short term.

While gold isn’t—and shouldn’t be—the core of my on-chain portfolio, it has now become an automatic part of my broader long-term strategy.