PAX Gold (PAXG) Fees and Charges
PAXG has a different fee model than many other cryptocurrencies, as it is designed for the tokenization of a physical asset (gold). Fees can be divided into several types:
Creation and Destruction Fee (On-Chain Transaction Fee):
This is a fee charged directly on the blockchain for each PAXG transaction.
The PAXG transaction fee is set at 0.02% of the transferred amount. For example, if you send 10 PAXG, the fee would be 0.002 PAXG. This fee is deducted from the amount being transferred.
This fee goes to the issuing company, Paxos, and is what allows the system to function, as it covers the costs of auditing, storage, and security of the underlying physical gold.
Ethereum Network Gas Fees:
PAXG is an ERC-20 token, which means it runs on the Ethereum network.
Therefore, each PAXG transaction, like any other transaction on Ethereum, requires a "gas" fee (paid in ETH) to be processed by the network miners.
This fee is not from Paxos, but from the Ethereum network, and its cost can fluctuate significantly depending on the network congestion at that time.
Exchange Fees:
When you buy or sell PAXG on a cryptocurrency exchange (such as Binance, Kraken, Coinbase, etc.), the exchange will charge its own fee for the transaction.
These fees vary greatly from platform to platform and are usually a percentage of the transaction amount. Some exchanges also have different fee tiers based on your trading volume. It is crucial to review the specific fees of the exchange you use.
Custody and Storage Charges:
One of the great advantages of PAXG is that it does not charge annual custody or storage fees for the gold backing it, unlike many investment funds or physical gold custody services. The storage and insurance costs are covered by the small transaction fee.
What is "token burning" in PAXG?
Token burning is a common mechanism in many cryptocurrencies to reduce the circulating supply and, in theory, increase the scarcity and value of the remaining token. However, in the case of PAXG, "token burning" operates in a very specific way and is directly related to its nature as a tokenized asset.
Burn mechanism: In PAXG, the burning of tokens occurs when an investor decides to redeem their PAXG tokens for the underlying physical gold. When an investor requests the redemption, Paxos takes the corresponding amount of PAXG tokens from the investor and removes them from circulation (they are "burned").
Purpose of "burning" in PAXG: The main goal is not simply to reduce supply to inflate the price, but to maintain the 1 to 1 link with the physical gold in the vaults. If a PAXG token is redeemed for an ounce of gold, that token must be destroyed to ensure that the amount of tokens in circulation always equals the amount of physical gold that Paxos has in custody. It is a redemption process, not a strategic deflationary burn like those seen in other cryptocurrencies.
Reverse process (mining/creation): Similarly, when an investor buys PAXG through Paxos, new tokens are "mined" or created and delivered to them. This token creation process only occurs when physical gold or its equivalent in dollars is deposited in Paxos' vaults.
In summary, PAXG fees are quite transparent and are designed to cover the costs of the physical asset, and the "token burning" is a redemption process to maintain parity between the token and the physical gold. This makes it a unique cryptocurrency, different from most projects in the market.
