Trading precious metals is a very profitable industry. This is because the demand for these metals has increased over the years. Some trade precious metals on financial markets, but there is no direct ownership of underlying assets. Others trade with physical precious metals, which creates a range of other challenges.
Transactions and transports of precious metals are a problem because they are not easy to store and difficult to transport.
Physical precious metals are a lot more difficult to transport than paper currency. The gold and silver bars are heavy and hard to store securely. There are also strict regulations on how much precious metal a person can move across borders and other security measures that need to be taken into account.
The transportation of physical bullion is a complex process, which can be expensive and time-consuming. Many brokers and dealers are using the services of freight forwarders to ship precious metals from one part of the world to another. Freight Forwarders are also responsible for arranging insurance, storage, and customs clearance for the shipment. The industry needs new ways to move this precious metal efficiently and securely.
When you decide to trade and store your precious metals physically, you need to find a safe place to keep them, such as in a vault or secure safe deposit box. The problem with physical storage is that it can be challenging to transport gold or silver should you need to move it from one location to another, for example, in a sale. Online storage is an easy solution for storing your gold or silver at home. You can purchase an allocated amount of gold or silver stored for you at a central location. These companies often also offer to buy it from you again when you decide to sell it.
You may have heard of the term “paper gold.” This is when someone buys or sells precious metals without having the physical metal in hand. The transaction is done by simply exchanging paper certificates representing a certain amount of gold or silver.
Paper gold can be a great way to invest in precious metals, but there are some downsides to this kind of trading. When you buy paper gold, you trust that the person on the other side of your trade will deliver on their promise and send you what they promised.
Blockchain technology consists of an immutable public ledger that records transactions between two parties in a verifiable and permanent way.
The blockchain can be used for more than just currency trading. Blockchain technology is being applied to precious metals transactions, traditionally conducted through a centralised system of brokers and exchanges. In this case, the added benefit of blockchain technology is that it offers increased transparency, safety, and efficiency.
The blockchain can help with precious metal storage by providing a ledger that records the transactions and ensures that all ownership is recorded transparently. This, in turn, can decrease fraud risk and even create a historical record of ownership of a specific gold bar, which can support anti-money laundering practices.
This can be done by issuing digitised tokens that represent the value of the metal. These coins are called ‘NFTs’ or non-fungible tokens, and they are stored on the blockchain network.
At LifeHash, we use our extensive blockchain knowledge to build innovative technical solutions for your organisation. If you would like to discuss how we can help your organisation, please contact us!