Comprehensive overview of STABLECOINS — PART 2

Fiat collateralized Stablecoins

CP Processor TEAM
May 23, 2018 · 4 min read

This is a FULL centralized approach to stablecoins wherein a central entity holds money as collateral and issues a token that represents the money held by the entity. This is probably the most straightforward method of creating a stablecoin.

Fiat collateral for creating a token represents reserves held by a central entity.

How it works: The mechanics for implementation are fairly straight-forward. A third party takes deposits in US Dollars (or another desirable fiat currency) and issues a unit of stablecoin for every dollar deposited. To cash out a unit of stablecoin, the third party wires US Dollar to the holder and burns a unit of the stablecoin.

  • Pros:
    *
    Easy to conceptualize
    * Value will match USD with certainty if properly implemented (digitized dollars without capital controls)
  • Cons:
    * Must trust third-party to hold fiat collateral
    * Need additional third-party for audit to make sure appropriate collateral is being held and units of stablecoin match deposits
    * Expensive and slow to audit

Projects with this structure:

  1. Tether,
  2. TrueUSD,
  3. DigixDAO,
  4. Globcoin,
  5. AAA reserve,
  6. Stably,
  7. X8 currency

TETHER — Claiming that every USDT has one USD as reserve stored in Tether’s bank account. This guarantees Tether’s ability to redeem the legal currency at any time. Yet the model is 100% centralized because the company is in full control of the money supply and reserves. Because its US dollar reserve must be stored in regulated bank accounts, it is subject to government regulations. https://tether.to/

TrueUSD — TrueUSD is a USD-backed ERC20 stablecoin that is fully collateralized, legally protected, and transparently verified by third-party attestations. TrueUSD uses multiple escrow accounts to reduce counterparty risk, and to provide token-holders with legal protections against misappropriation. TrueUSD is the first asset token built on the TrustToken platform. https://www.trusttoken.com/trueusd/

DigixDAO — The overall project will allow users to buy gold through owning an ERC20 token called DGX. For every DGX a person owns, they own 1 gram of 99.9% LBMC approved gold which is stored in a Singapore vault. DGX is created on their market place and they are accredited and a key player in the gold . This means that DGX is completely stable and will not move unless the price of gold does. Therefore 1 DGX is capped to the price of 1 gram of gold. https://digix.global/dgd/

Globcoin — Globcoin’s GLX are ERC-20 tokens that function as a store of value and a medium of exchange. Every token represents 1 unit of a basket — the GRCI® basket — consisting of the national currencies of the 15 largest economies and Gold, as measured by GDP, adjusted by PPP. GLX token smart contract will be deployed in Spring 2018 and will be 100% backed on a 1 X 1 ratio. The assets will be in custodian with a Prime Bank meaning that for every GLX issued there will be the collateral in fiat currencies and Gold held at the Bank. GCP Utility Token will be the privileged access to exchange GLX for fiat currencies. https://globcoin.io/

AAA Reserve — AAA coin is an asset-backed cryptocurrency — collateralised by cash, gilts and AAA-rated credit investments. Proceeds from the issuance of AAA coins are placed into Arc Fiduciary Ltd — a ring-fenced Jersey-registered company — and invested into cash, gilts (government-backed bonds) and fixed income; across multiple fiat currencies to support the value of AAA coins. https://www.aaareserve.com/

Stably — Stably is a reserve-backed stablecoin that is designed to work across multiple blockchain protocols which will initially include Ethereum and Stellar. Stably will utilize a proven centralized model to fully back every token issued with an equivalent unit of hard currency (e.g. Canadian or US dollar) in a transparent reserve managed by Stably, Inc., the central issuer of Stably tokens. https://www.stably.io/

X8 Currency — X8 Project developed two Ether Tokens: X8Currency (X8C) that is fully backed with 8 fiat (cash) currencies + gold and X8X Utility Token, that is used as a key to issuing and exchange process of X8C with 0% fee at a fair value. Cash & gold assets, used for backing of X8Currency are activelly managed by AI propriety software, that was tested and approved. X8X Utility Token is offered on Whitelist pre-sale and will enable early contributors to obtain their own X8Currency with no additional costs at the issuer, a Swiss based and legislation complient company X8 Capital AG. X8Currency is not backed with only one fiat currency, but uses a combination of 8 fiat currency baskets and gold. It is stable and exchangeable directly at the issuer, offering distributed exchanges a suitable solution for fiat exit point. X8X is a pure utility token, a key to access the X8Currency exchange services. Dual Token Model separates the value preservance role of X8Currency and utility role of X8X. https://x8currency.com/#product

Dear readers, hope you enjoyed reading the SECOND part of COMPREHENSIVE OVERVIEW OF STABLECOINS. Part 3 will soon be published! Stay tuned :)

For those of you who missed it, here is a link to Part 1 :)