How Chainlink Enables High-Integrity Tokenized Gold Markets


Tokenized gold is physical gold bullion that has its ownership rights stored as digital tokens on a blockchain.

The future of finance is being built using blockchain technology by cutting-edge researchers, innovative startups, and leading financial institutions. Beyond offering greater access to financial products and services, it’s set to provide unparalleled transparency, deepen liquidity of previously illiquid assets, increase market resilience, and reduce operational costs.

Fundamental to this economic shift are tokenized assets; digital tokens stored on a distributed digital ledger representing real-world assets, such as currencies, bonds, or gold. Gold has been foundational to our monetary system since the earliest days of commerce and is often sought out by investors to protect their wealth during times of crisis.

At a time when both tokenization and gold are seen as viable ways to restore confidence in the global financial system, it’s no surprise that markets are seeing a growing demand for gold-backed, on-chain tokens. Recently, the total value of tokenized gold surpassed $1B.

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What Is Tokenized Gold?

Physical gold is tokenized and traded on-chain.
Diagram showing how physical gold is tokenized and traded on-chain.

Gold tokenization involves minting digital tokens on a blockchain to represent ownership rights of physical gold bullion or coins, which are typically custodied in a vault by a third party. For example, one on-chain token can represent one gram of physical gold stored off-chain.

As the next-gen solution for gold ownership, tokenization provides:

  • Greater accessibility—Fractionalized ownership through tokenization enables smaller-value purchases, such as a fraction of a gram, which makes gold-based financial products more accessible to billions of people across the globe.
  • Enhanced transparency—Storing immutable ownership records on a blockchain ledger enable provenance tracking and auditable data trails to verify authenticity and eliminate the need to trust custodians with holding paper certificates.
  • Increased efficiencies and reduced costs—Streamlining backend processes with programmable smart contracts speeds up verification and reduces settlement costs. For example, atomic settlement eliminates the need for T+2 settlement by syncing payment with asset delivery.
  • Deeper liquidity—Interoperability across various blockchain-based markets and composability of tokenized financial products within a blockchain ecosystem make it easier for tokenized gold products to achieve far greater liquidity than is possible if they were siloed across fragmented markets.
  • Unlock innovation—Combining a high-quality asset with the power of blockchain technology helps unlock exciting new financial products that better serve everyone, from underserved investors to leading institutions.

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Why Tokenized Gold Projects Need Chainlink Web3 Services

Chainlink Web3 services are necessary for building secure, efficient, reliable, liquid, and transparent Web3 platforms. As the industry-leading oracle network, Chainlink securely delivers data and computation on-chain, enables seamless and secure cross-chain communications and token transfers, and provides a secure gateway on-chain—critical for individual DeFi developers and major enterprises alike.

Chainlink Proof of Reserve

Diagram shows how CACHE Gold uses Chainlink PoR to help secure the minting of CGT.
CACHE Gold uses Chainlink PoR to help secure the minting of CGT.

Projects can achieve unparalleled levels of transparency and security by using Chainlink Proof of Reserve (PoR) to provide reliable and timely monitoring of off-chain gold reserves. For example, CACHE Gold is using PoR to help enable users to quickly verify on-chain that their tokenized gold products are fully backed by gold reserves custodied in off-chain vaults.

“Chainlink Proof of Reserve has enabled us to bring increased transparency to our platform.”—Brian Hankey, Co-Founder, CACHE Gold

Chainlink Price Feeds

Hyper-reliable, accurate, and decentralized Chainlink Price Feeds are critical for creating secure on-chain markets around tokenized assets, including tokenized gold products. Thanks to the PAXG Chainlink Price Feed for Pax Gold—a tokenized gold token redeemable for one fine troy ounce of gold stored in LBMA vaults in London—projects are able to more safely incorporate PAXG into lending/borrowing platforms, DEXs, and more.

“Chainlink oracles will accelerate the adoption of Paxos’ USD and gold-backed tokens in DeFi.”—Walter Hessert, Head of Strategy at Paxos

Chainlink Functions

Chainlink Functions is a Web3 serverless developer platform that enables users to fetch any data from any API and run custom compute on the highly secure Chainlink Network. Making it easy to bring real-world data on-chain opens the landscape for exciting new on-chain financial products underpinned by tokenized gold.

“To enable I-ON’s vision, we needed to create a secure, robust, and hyper-scalable infrastructure that could support asset digitization and tokenization so we could fractionalize the ownership of gold and other assets. Smart contracts, Chainlink’s secure communication, and Space and Time’s decentralized data warehouses allowed us to deliver the advanced auditing capabilities, scalability, and robust security that I-ON required for their institutional-grade framework.”—Austin Przybysz, CTO, Instruxi

Chainlink CCIP

Cross-Chain Interoperability Protocol (CCIP) provides a universal, open standard for developers to build secure services and applications that can transfer tokens, send messages, and trigger actions across multiple networks. For example, Golteum, a platform for fractionalized NFTs backed by physical gold bars and other metals, is planning to use CCIP for cross-chain communications, which will help future-proof their platform, avoid vendor lock-in, and increase liquidity for their tokens.

“Chainlink Price Feeds, Proof of Reserve, and other Chainlink services are all paramount for strengthening the security assurances of our fractionalized NFTs backed by precious metals and gaining rapid user adoption.”— Alex Bowman, Co-Founder, Golteum

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Future of Tokenized Gold

Blockchain technology is emerging as the next generation of financial infrastructure to underpin global markets. As one of the most foundational monetary assets, and with an increased current interest in gold given inflationary pressures, tokenized gold is set to play an important role in this transition to on-chain finance. Underpinning this economic shift is the Chainlink Network, which provides the secure, reliable, and performant Web3 services needed to unlock advanced tokenized gold solutions.

If you’re ready to explore a tokenized gold solution, talk to an expert today.

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