*obligatory not financial advice*
What is PAX Gold?
PAX Gold is a cryptocurrency that is backed by real physical gold. This works similar to most stablecoins that have their value linked to a fiat currency, where an institution that mints the tokens holds dollars and guarantees to exchange 1 dollar for each 1 stablecoin if wanted. PAX Gold does the same thing but with gold. Each PAX Gold token is essentially an ownership certificate for one fine troy ounce (t oz) of a 400 oz gold bar, stored in a vault.
PAX Gold is being handled by Paxos, which is located in New York and is being strictly regulated and monthly audited. So at the very least it is far safer than Tether.
It is important to understand that investing in PAX Gold is not really a cryptocurrency investment, but a gold investment because the token solely serves as an ownership certificate and its value is based on it. However, it can be used like a cryptocurrency.
Why would you buy tokenized Gold?
One reason why is that it is far easier to trade gold when it is tokenized. There is no need for a lot of paper work and you don't depend on the business hours of a bank, you can just send it to a wallet. It is also easier to start investing with little money because you don't need to buy an entire gold bar, like with most tokens you can buy small fractions of it.
The biggest advantage however, is that makes it possible to use gold directly on DApps on networks like Ethereum. You could for example hold your gold in a liquidity pool on Uniswap so you can earn trading fees with them. Most lending protocols, like Aave or Compound, don't currently support tokens like PAX Gold, but they could add it in the future. Some centralized lending platforms like Celsius already support it and they offer a pretty nice return of 5% per year, so you can grow your gold holdings even further by hodling it there.
Gold has been an accepted store of value since forever, and it will likely stay that way. Blockchain technology can give us new ways of trading and using gold. Anyone looking to diversify their crypto portfolio a little bit could add some gold tokens to it and use them to earn interest.
