Paxos Gold's $500 million milestone highlights increasing TradFi interest in gold-backed crypto

Paxos Gold (PAXG) has quietly been stacking total locked value (TVL), recently surpassing the $500 million mark and now sitting at $508 million. This milestone comes a few months after its launch on July 9, when its initial TVL was $434 million.

For those unfamiliar, Paxos Gold is a digital token backed by physical gold. Each PAXG token represents one fine troy ounce of London Good Delivery gold stored in professional vault facilities. The token combines the stability of gold with the flexibility and accessibility of blockchain technology. Users can redeem their tokens for physical gold or trade them on various crypto exchanges. 

The steady growth of PAXG since its launch highlights a growing trend: Traditional finance (TradFi) investors are increasingly looking for ways to dip their toes into the crypto water, and gold-backed tokens like PAXG offer a familiar asset in a new digital wrapper, making them an attractive entry point for risk-averse investors.

This could signal potential partnerships between the TradFi and crypto worlds.

• Bridging between worlds: PAXG serves as a gateway, allowing traditional investors to engage with blockchain technology without fully departing from familiar assets.
• Increased liquidity: As more traditional assets become tokenized, it could lead to increased liquidity and trading opportunities in the crypto space.
• Legitimacy boost: The involvement of regulated entities like Paxos in creating gold-backed tokens lends credibility to the broader crypto ecosystem.

The success of PAXG could pave the way for more real-world asset (RWA) tokenization projects. As TradFi continues to show interest in crypto, we may see an acceleration in the development of products that bridge the gap between traditional and digital finance.

While PAXG's growth is impressive, the broader crypto market remains volatile. The steady rise of gold-backed tokens amidst this volatility could offer some stability within the crypto space.

This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry's most thought-provoking trends.