Digital Gold Passes Big Test, But Almost Nobody Uses It Yet

Imagine gold — the shiny metal people have trusted for centuries — turned into a digital token you can trade online. That's called tokenized gold, and a new report shows it recently survived a tough market test. But there's a catch: almost no one is actually using it.

What happened?

When prices swing wildly, digital assets used as collateral (something you pledge as a guarantee when borrowing money) can get "liquidated" — meaning they're automatically sold off to cover a loan. Tokenized gold faced a wave of these liquidations in late March on lending platforms like Morpho and Aave, and it held up well.

These platforms are part of DeFi (Decentralized Finance) — financial services like lending and borrowing that run on blockchain technology without traditional banks.

The big problem: barely anyone uses it

According to data firm RedStone:

• Less than 2% of all tokenized gold is being used as collateral in lending platforms
• Gold futures (contracts to buy or sell gold at a future date) have fallen more than 26% since peaking in January
• The drop was driven by expectations of higher US interest rates, which make non-yielding assets like gold less attractive (gold doesn't pay interest, so it looks worse when savings accounts pay more)

Tokenized gold is one piece of a booming trend called tokenized real-world assets (RWA) — turning physical or traditional assets like property, government bonds, and gold into digital tokens. Key figures:

• The RWA sector topped $43 billion in June
• The "crypto TradFi" market (blending traditional finance with crypto) reached $6.6 billion

Tokenized gold has proven it can handle stress and works reliably as digital collateral. The main challenge now is adoption — the technology works, but people simply aren't using it much yet. As the tokenized asset market grows, this gap between what's possible and what's actually being used is a key hurdle to watch.

This is an AI-generated summary. Read the original article at: https://cointelegraph.com/news/tokenized-gold-defi-stress-test-collateral-adoption-redstone?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound