Kai C.Chng, is founder and CEO of Digix, an asset tokenisation company incorporated in Singapore in 2016.

From fruit and vegetable sellers on the streets of Venezuela, to plumbers and electricians in Zimbabwe, workers trying to make a living in countries plagued by hyperinflation are struggling to survive.

Just minutes after exchanging their goods or labour for their native currencies, the payment is virtually worthless.

That’s why digital currencies like Bitcoin, Ether and Dash are gaining traction amid market turmoil. According to reports, Dash – an open-source cryptocurrency with low fees and nearly instant transactions – is seeing a huge surge in new merchant sign-ups and wallet downloads in Venezuela as hyperinflation in the country runs wild.

Related: Should you be investing in digital forms of currency such as Bitcoin?

Cryptocurrencies are being turned to because of their ease of transfer, cross-border reach, and the freedom to store value without government intrusion. Digital tokens appear in online wallets within seconds and can be easily sold on for currencies such as the US dollar.

The volatility of crypto

Compared with a failing currency like Venezuela’s, which has an inflation rate above 15,000%, cryptocurrencies like Dash, Bitcoin or Ether offer rock-like stability. But compared with the US dollar they’re perilously flaky. Consider the price of Bitcoin: it’s dropped from a market high of around £15,000 to £5,000 in less than a year.

Economists argue that viable forms of currency should provide a reliable means of payment, a unit of account, and store of value. The fluctuating value of cryptocurrencies means they’re not a good store of value and their purchasing power is unstable. It follows that they’re unattractive as units of account. They’re not a great medium of exchange at the moment either, because relatively few people or businesses accept them in return for real-world goods.

That’s why there is so much excitement in crypto circles about the potential of what are known as “stable coins”.

Real-world assets

The value of stable coins are pegged to real-world assets. The most popular stable coins are backed by traditional fiat currencies such as the US dollar, British pound or Euro. They offer tranquil stability to people in Zimbabwe or Venezuela. But even the stability of stable coins can be called into question amid increasing trade wars, conflicts, and rapid political change.

That’s exactly why the emergence of a new form of cryptocurrency, which is pegged to the value of gold, is set to become a compelling investment and alternative to fiat currency.

The importance of gold

Let’s briefly consider the importance of gold to the world economy. For hundreds and even thousands of years, gold has been a crucial store of wealth for people – especially in times of turmoil. It’s the quintessential safe haven asset with a price performance that is broadly independent from stock or equities market.

The problem with gold is its relative illiquidity, Yes, gold can be bought in the high street and there are also exchange-traded gold funds. But there is usually a hefty difference between the price at which people buy gold, and the price which dealers sell it for.

It’s certainly not practical for the Venezuelan fruit seller or Zimbabwean plumber to use gold as a store of value or currency.

Historical stability

A stable coin cryptocurrency pegged to the value of gold, however, combines the historical stability of gold, with the modern efficiency of digital currency. It can be moved from smart wallet to smart wallet in seconds all around the world. And because gold in the form of tokens is such a liquid asset, buyers aren’t hit by unfair prices and fees that come with moving physical gold around.

Gold is a forerunner in an emerging era in which real-world assets – from property to art – will be tokenised and traded as financial products on the blockchain.

It’s worth reminding ourselves at this point that blockchains are shared digital ledgers that record every transaction ever made on them. So assets (like gold or property) can be divided into shares represented by tokens, and blockchains like Ethereum can keep track of the ownership of those tokens.

Secure vaults

The most reliable gold-backed tokens are minted on a proportional basis. That means one token will always be equivalent to one gram of physical gold held in a secure vault. It’s important that the gold held in the vault is subject to verifications at the point of deposit as well as at quarterly reviews by independent auditors. Tokens that aren’t proportionally backed can be subject to sell-offs if trust in them diminishes.

For ultimate reliability, gold-backed cryptocurrency should never mint more tokens created than the total weight of physical gold bullion backing them.

The utility of gold-backed stablecoins

Crypto markets need tokens that behave like gold. They provide the foundation on which a stable decentralised economy can be built. Gold-backed tokens can also diversify portfolios and can act as almost a reserve currency.

They can be used as collateral for lending and other financial products too. For example, if a cryptocurrency loan was set up using a smart contract in Ethereum, it could be insured with gold-backed tokens. So if the debtor doesn’t repay in time, the interest could be calculated on the basis of a relatively stable store of value.

Gold-backed tokens represent a bridge between the real world and virtual world by bringing a safe haven store of value onto the blockchain.

To ensure their ultimate success as a cryptocurrency, people should be able to spend gold-backed tokens freely. Currencies should exist in an easily accessible e-Wallet. And in time, they should be connected to debit cards so they can be used in stores and withdrawn from virtually any ATM around the world.

A new era for cryptocurrencies

In many ways, digital gold takes us back to times when currencies were linked to the price of gold. Digital gold combines the historical safety of gold, with the efficiency of digital currency. It can move around the world at speed for free, while stabilising other cryptocurrency transactions.

That’s why it’s fast emerging as the foundation on which the future of cryptocurrencies will be built.