Let's Talk About Backed (And Not) Stablecoins - GOLD Token 100% Backed By Gold
Simply stated 2019 was a stabelcoins year, so I thought it would be good to know more about them.
StableCoin is a cryptocurrency pegged to another asset, designed to minimize the volatility of the price of the stablecoin, relative to some "stable" asset or basket of assets.
IMPORTANCE OF STABLECOINS
Without both short-term and long-term stability, it is considered extremely risky for the mainstream public to adopt cryptocurrencies as a direct replacement for fiat or traditional assets.
Larger mass adoption will always require some form of stability. From a consumer perspective, it’s risky and impractical to use cryptocurrencies for daily use. A volatile medium of exchange can compromise users' purchasing power.
Many people think about stablecoins that they are the crypto equivalent of fiat currency because of Tether (USDT) the first stablecoin which is pegged (1:1) to a dollar. This is not true because stablecoins can be pegged to a cryptocurrency, fiat money or to exchange-traded commodities (such as precious metals or industrial metals).
I have to mention that there are also not backed stablecoins and I will explain it better later in the article.
Commodity-backed
Stablecoins backed by commodities such as precious metals (gold, silver, etc.) are much less likely to be inflated than fiat-backed stablecoins. It is harder to mine gold or silver than it is to "create money out of thin air."
Holders of commodity-backed stablecoins can redeem them at the conversion rate to take possession of real assets. The cost of maintaining the stability of the stablecoin is the cost of storing and protecting the commodity backing.
The best example for commodity-backed stablecoin is GOLD (token) from the Digital Gold.
GOLD is an Ethereum-based ERC20 token, convenient and instant way to store, buy, sell or transfer investment-grade gold. GOLD token is exactly what you need to purchase gold and store it digitally with complete anonymity and guaranteed protection of your assets from high volatility and loss of value. Each GOLD token is 100% backed by physical gold stored in a secure vault. Amounts of physical gold stored can be verified at any time.
The Digital Gold Marketplace guarantees GOLD token's liquidity. An unlimited amount of GOLD can be purchased/redeemed on the Digital Gold Marketplace website instantly 24/7.
No fees on transactions. Make as many payments as you like. GOLD can be used as part of your daily routine or regular business transactions.
Low service costs compared to the cost of storing gold at a bank, with no hassle of actually dealing with precious metals storage-related issues. Own GOLD while remaining private. All other gold ownership options involve disclosing your identity at the time of the purchase or redemption. To purchase or sell any amount of GOLD, you just need to provide a destination wallet address.
GOLD token can be bought and sold instantly on a number of exchanges. This enables GOLD token holders to be in and out of positions in a matter of seconds, a feat that is impossible to accomplish with physical gold located in a secure vault. Now you may store value in something that has a thousand year long track record while staying firmly in control.
To achieve the high market liquidity GOLD token representatives from Digital Gold hold significant positions as market makers on major exchanges around the world. Such a strategy allows our customers to buy and sell large amounts of GOLD with guaranteed low spread and no slippage.
FIAT-backed
This is the common form of stablecoins. Fiat-backed stablecoin are fully backed by fiat money 1:1, meaning $1 of stablecoins is equivalent to $1 of fiat money. The idea is that their stablecoin is ‘backed’ by real fiat in real bank accounts.
This category of stablecoins is indeed the most simple but also the most centralized. The best example is of course Tether (USDT) but today there are literally dozens of Fiat Backed stablecoins on the cryptomarket. Almost every infrastructural blockchain have issued their own stabelcoins already.
Cryptocurrency-backed
Stablecoins issued with cryptocurrencies as collateral, conceptually similar to fiat-backed stablecoins. However, the significant difference between the two designs is that while fiat collateralization typically happens off the blockchain, the cryptocurrency or crypto asset used to back this type of stablecoins is done on the blockchain, using smart contracts in a more decentralized fashion.
In many cases, these work by allowing users to take out a loan against a smart-contract via locking up collateral, making it more worthwhile to pay off their debt should the stablecoin ever decrease in value. To prevent sudden crashes, a user who takes out a loan may be liquidated by the smart contract should their collateral decrease too close to the value of their withdrawal.
A prominent example of a crypto-backed stablecoin is MAKERDAO (DAI), project that has 2 separate coins: MKR & DAI. We will focus on DAI since it is a stablecoin-backed by other cryptocurrencies. Unlike other stablecoins, DAI does not rely on a centralized entity or third party since it lives completely on the blockchain. DAI is a decentralized, cryptocurrency-backed coin with a face value that is pegged to the US dollars.
ALL KINDS OF STABLECOINS
Source : https://hackernoon.com/2019-complete-stablecoin-guide-0n9es3zab
I think that not many of you know that there are also not backed stablecoins which are worth to be mention here.
NOT BACKED STABLECOINS - redeemable in currency, commodities, or fiat money are said to be backed, whereas those tied to an algorithm are referred to as seigniorage-style (not backed).
Seigniorage-style coins - that utilize an algorithmically governed approach to expand and contract a stablecoin money supply, just like how a central bank prints or destroys money. As the total demand for the coins increases, new supply of stablecoins are created to reduce price back to stable levels. The main objective is to get the coin’s price as close as possible to USD $1.
A prominent example of a seignorage-style coin is BASIS.
Previously known as ‘Basecoin’, Basis is a stablecoin that peg its value to the USD through algorithmic adjustments of the coin’s supply. Price stability is achieved through the monitoring of various external exchange rates that are verified by an oracle system.
If Basis is trading above USD $1, new stablecoins are created and distributed. If, however, Basiscoin is trading for less than USD $1, Base Bonds – which is another separate currency – are created and sold in an open auction to take coins out of circulation.
Hybrid StableCoin - is two or more of the crypto categories, (Fiat, Crypto, or Metal Collateralized and Algorithmic StableCoin Model) applied to one token.
Hybrid StableCoin Model holds value partly being both the asset and algorithmic modeled.
Why not have a look at the DigitalGold Marketplace and purchase in order to have a first-hand experience of how it works. You can also find out more about Digital Gold by reading the Whitepaper, or join the online community on Telegram
This article published by fauzan123
Ethereum Address : 0xcAD9187D8fB2528e2e464d49d3e11c4848821741