The Top 9 Benefits of Tokenized Gold and Silver Compared to ETFs
Dec 6, 2024
Tokenized gold and silver are gaining interest as a way to better control and purchase real world assets. Investing in gold and silver has long been a trusted strategy for preserving wealth and diversifying portfolios. However, the methods of investing in these precious metals have evolved dramatically. Today, tokenized gold and silver are emerging as innovative alternatives to traditional options like exchange-traded funds (ETFs).
While ETFs offer convenience and accessibility, tokenized assets backed by gold and silver provide distinct advantages that address some of the limitations of ETFs. In this article, we’ll explore the top benefits of tokenized gold and silver compared to ETFs, highlighting why this modern approach to investing might be the future of precious metals ownership.
In a year where gold has appreciated 28% YTD, it is remarkable that three gold EFTs have actually lost money this year. With few exceptions, of those ETFs in the black, most are at or above the actual metal appreciation with one seeing over a 50% increase this year.
In this article we compare tokenized gold and silver to ETFs which are primarily invested in gold. Please do your own research as this isn't investment advice but rather a comparison and some reasons why STBL might be the right opportunity for you.
1. Direct Ownership of the Underlying Asset
One of the key benefits of tokenized gold and silver is that investors typically gain direct ownership of the physical metal. For example if you buy one STBL Silver token, you own the 1 ounce of silver backing it and can even redeem it for the actual metal.
How ETFs Work: When you invest in a gold or silver ETF, you own shares in a fund that holds the metal. However, you don’t actually own any of the physical gold or silver—it’s held by the ETF provider.
How Tokenization Differs: With tokenized assets, each token is backed by a specific, verifiable amount of gold or silver stored in a secure facility. As a token holder, you effectively have a claim on the underlying physical metal, giving you a level of ownership that ETFs cannot offer.
This direct ownership offers greater security and transparency for investors who want to know their investment is tied to tangible assets.
2. Transparency and Verifiability
Blockchain technology, which powers tokenized assets, offers unparalleled transparency.
ETFs and Opacity: With ETFs, investors must trust that the fund provider is accurately managing the underlying assets. Verifying the precise amount of gold or silver held by the fund often requires reliance on third-party audits.
Blockchain-Based Verification: Tokenized gold and silver leverage blockchain ledgers to record every transaction and provide real-time proof of asset backing. Investors can trace their holdings back to specific reserves of physical metal, ensuring complete transparency.
This level of verifiability builds trust and reduces the risk of discrepancies or mismanagement by intermediaries.
3. Lower Fees and Costs
Tokenized gold and silver often come with lower fees compared to ETFs.
ETF Management Fees: ETFs charge annual management fees, which can erode your returns over time. These fees typically cover the cost of storing and insuring the metals, as well as the administrative expenses of running the fund. You generally pay them whether the fund has appreciated or depreciated.
Tokenization Reduces Middlemen: Tokenized assets eliminate many of the intermediaries associated with traditional financial products. By directly connecting investors to the physical asset, tokenization reduces overhead costs, often resulting in lower fees for buyers.
Lower costs make tokenized assets an attractive option for investors looking to maximize their returns.
4. Enhanced Liquidity
While ETFs are known for their liquidity, tokenized gold and silver offer even greater flexibility and ease of transfer.
ETF Liquidity: ETFs are traded on stock exchanges, meaning investors can buy or sell shares during market hours. However, these trades are subject to market conditions, trading fees, and settlement times.
24/7 Trading with Tokens: Tokenized assets operate on blockchain networks, potentially enabling 24/7 trading. Investors can buy, sell, or transfer their tokens instantly, without being restricted by market hours or the operational timelines of traditional exchanges.
This around-the-clock liquidity is particularly beneficial for global investors and those who want to respond to market changes quickly.
5. Borderless and Decentralized Access
Tokenized gold and silver are inherently global, allowing investors from anywhere in the world to participate where legal.
Geographic Restrictions with ETFs: ETFs are tied to specific stock exchanges and may be unavailable to investors in certain countries.
Global Accessibility: Blockchain-based tokenized assets operate without the constraints of traditional financial systems. Investors can access and trade tokens seamlessly across borders, often using nothing more than a smartphone or computer.
This borderless nature expands opportunities for investors in regions with limited access to traditional precious metal investments.
6. Greater Control and Security
Investors in tokenized gold and silver often retain greater control over their assets compared to those in ETFs.
ETF Custodianship: When you invest in an ETF, the fund provider or custodian controls the physical metal. Investors have no say over how it’s stored or managed or traded.
Personal Wallets: Tokenized assets are typically stored in digital wallets controlled by the investor. Blockchain technology ensures secure ownership, and private keys give investors full control over their holdings. Owners can buy, sell or trade according to their research and needs.
This decentralization removes reliance on third parties and reduces the risk of losing access to your investment.
7. Real-Time Settlement and Accessibility
Blockchain transactions settle almost instantly, offering a stark contrast to the settlement times of traditional financial products.
ETF Settlement Delays: Trades on ETFs typically take two business days to settle, during which time the investor doesn’t have full access to their funds.
Instant Blockchain Settlement: Tokenized gold and silver transactions settle in real time, giving investors immediate access to their assets or proceeds from a sale.
This speed enhances financial flexibility and ensures that investors are never caught waiting during critical market moments.
8. Resilience Against Market Crises
Tokenized assets can offer advantages in times of financial instability.
ETF Vulnerabilities: ETFs are tied to the broader financial system, relying on intermediaries like banks and exchanges. In times of crisis, these institutions may face disruptions that impact ETF availability or liquidity.
Decentralized Security: Blockchain technology ensures that tokenized assets remain accessible, even if traditional financial systems encounter issues. This resilience provides an added layer of security for investors.
Tokenized Gold And Silver
While ETFs have long been a popular choice for investing in gold and silver, tokenized assets offer a modern, innovative approach with distinct advantages. From direct ownership and transparency to lower fees and 24/7 liquidity, tokenized gold and silver redefine how investors can access and benefit from these timeless stores of value.
At STBL, we’re proud to offer a cutting-edge platform for tokenized precious metals, giving investors an opportunity to embrace the future of wealth preservation. Whether you’re looking to diversify your portfolio, reduce fees, or gain greater control over your assets, tokenized gold and silver offer unmatched benefits in today’s rapidly evolving financial landscape.