Blockchain technology allows an investor to add a physical metal to their investment portfolio, with the right—but not any requirement—to receive a delivery.
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Blockchain technology can be used to enable easier transactions, settlement, and ownership of the precious metal. This is how blockchain works for gold investment.
Transparency: Blockchain technology supports electronic distributed ledgers, which are generally permissionless and can be viewed by anyone. Blockchain technology can provide information about physical gold supply chains and provides transparency in physical gold transactions and ownership.
Security: The electronic ledgers enabled by blockchain tech are distributed, meaning that every participant in the blockchain network retains a copy. The distributed nature of electronic ledgers can make them more secure.
Efficiency: By enabling electronic ledgers, blockchain technology can support digital purchases and sales of physical metals. Investors can digitally buy and sell gold using blockchain technology, which may increase the efficiency of the physical gold market. Buying and selling gold on a blockchain may increase the market’s liquidity and potentially lowers the costs traditionally associated with physical gold transactions.
This is how blockchain is used for gold investment:
Direct ownership without physical possession: Investors in physical gold can leverage blockchain technology to directly and fully own the physical metal without being obligated to personally take possession. Investors retain the titles to their gold holdings and can, at any time, independently verify ownership or instruct physical delivery if desired. The need for an intermediary trust or fund is eliminated with the use of blockchain technology.
Increased data accuracy: Blockchain technology is used to more accurately register the investment grade of the physical gold owned by an investor. Blockchain tech can also be used to increase the accuracy of the data collected and reported by the supply chain.
Real-time tracking: Blockchain technology can enable real-time updates that are widely distributed to every member of a blockchain network. Investors can use blockchain-enabled platforms to track in real time the movements of their physical gold.
Advanced security through encryption: Blockchain cryptography is used to secure investors’ titles to physical gold. Cryptographic signatures are required from all transaction participants to prove a transaction’s authenticity. Registration of physical gold must be cryptographically signed by the entity entrusted with physical storage, such as the Royal Canadian Mint.
Improved audits: Blockchain technology can be used to conduct transparent audits of physical stores of gold. The ability of blockchain technology to efficiently generate and distribute information can increase auditors’ abilities to monitor physical gold supplies.
Reduced fees: Physical gold investment platforms using blockchain technology can be more cost efficient for investors. Blockchain-based platforms are generally more automated, which lowers the platform’s operational costs and eliminates any need for commission-driven sales representatives. While the fee structure of every platform is different, many do not charge management or storage fees.
Increased accessibility: Blockchain technology can make owning physical gold more accessible to more investors. Not only does blockchain tech eliminate the need to take physical possession and potentially lower investors’ fees, but the technology also enables ownership of physical gold in any amount.
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