Project of the Week: The Gemini Dollar

Gemini, the digital asset exchange and custodian, recently launched what it promotes to be “the world’s first regulated stablecoin” in the Gemini dollar, which will allow people to send and receive U.S. dollars on the Ethereum cryptocurrency network.

In our Project of the Week analysis, we provide key facts, commentary and a full set of links to the whitepaper, code reviews and further learning materials for the project.

For our readers based in Hong Kong, sign up for a chance to learn more about the project with Gemini co-Founder Tyler Winklevoss this Wednesday (Sep 19).

Key Quick Facts:

  1. The Gemini dollar (ticker symbol: GUSD) is issued by Gemini, a New York trust company.
  2. It is strictly pegged 1:1 to the US dollar, giving it the creditworthiness and price stability of the dollar.
  3. The U.S dollars that correspond to the Gemini dollars issued and in circulation will be held by State Street. State Street will hold the dollar reserves in an FDIC-insured account. San Francisco-based audit firm BPM will conduct an audit every month to ensure that each Gemini Dollar is backed by a dollar in reserve (reports here).
  4. It is built on the Ethereum network based on the ERC20 standard for tokens. It has also hired security firm, Trail of Bits to identify any issues with the code (reports here).
  5. It is regulated by the New York State Department of Financial Services (“NYDFS”).

Comments:

  1. Gemini proposes to avoid the controversy which has plagued competitor Tether and has cited their partnerships with State Street, audit with BPM and the regulatory backing from NYDFS as their core competitive advantage.
  2. It is worthy to note that on the same day as the Gemini announcement, Paxos also got the green light from the NYDFS to launch Paxos Standard Coin (PAX), which is similarly backed by one U.S. dollar, reserved by four different banks. This has definitely become a space to watch out for and regulators has demonstrated both initiative and active involvement, underlining the potential importance and implications of stablecoins for the development of the cryptocurrency market.
  3. Some potential benefits of the GUSD is that it provides (i) a stable option to hedge the volatility in the crypto market without having to convert to fiat (ii) an alternative to traditional investors to get involved in the crypto-space.
  4. On the flip side, it is not ‘decentralised’ so to speak as the peg essentially leads to control of central bank and it may be prone to manipulation. As stated in the whitepaper, your GUSD can be frozen, reversed and blocked at any time as it reuires an offline custodian for approval for every transaction. For further reading, you can refer to the code review article link below.
  5. The fact that Gemini opted to issue GUSD as an ERC20 token, instead of on Ripple and Stellar (who are designed specifically for similar applications), may be an indicator of how far ahead EThereum is as a digital asset issuance platform.

#Yournextstep

You can learn more about the project with the following references:

The Gemini Dollar: Whitepaper

Launch Announcement by Cameron Winklevoss

GUSD Code Review — Gemini can make GUSD non-transferable at any moment?

An Introduction to Stablecoins