RWAs leverage covered-call vaults to enhance tokenized gold income
Active Strategies
Enhanced has launched the PAXG Volatility Income/Yield Vault, an on-chain structured product designed to generate income from tokenized gold. By depositing PAXG, a gold-backed token issued by Paxos, users participate in an automated covered-call strategy that sells bi-weekly out-of-the-money options to institutional market makers. This process targets annualized returns between 4% and 14%, distributing premiums in USDC every two weeks. The vault aims to solve the traditional issue of gold being a non-yielding asset, effectively turning a store of value into a productive investment. By utilizing smart contracts and a competitive request-for-quote auction, the protocol reduces costs to approximately 0.5% annually, undercutting traditional financial products like the GLDI ETF. This development is significant for the $5 billion tokenized gold market, as it provides a transparent, accessible way for investors to monetize their holdings during periods of moderate volatility. While the strategy caps potential upside during sharp rallies, it offers a new mechanism for compounding gold positions through automated premium reinvestment.
Key points
- ▸Enhanced launched a PAXG covered-call vault targeting 4-14% annualized yields.
- ▸The vault automates bi-weekly option sales via an on-chain request-for-quote auction.
- ▸Protocol fees are approximately 0.5% annually, lower than the 0.65% GLDI ETF expense.
- ▸The strategy allows users to compound gold holdings by auto-swapping USDC premiums.
Background
Tokenized gold represents physical gold bullion held in vaults, represented by digital tokens on a blockchain where each token is typically backed 1:1 by the underlying metal. PAXG, issued by Paxos, is a prominent example that allows investors to own fractional amounts of gold with the ability to redeem for physical bars. These tokens enable gold to be used as collateral or traded within decentralized finance ecosystems.
Relevance
7.5/10