Why does the world need another stablecoin?
by Maryna Trifonova, Head of Content at Jax.Network
Blockchain has made possible a wide variety of technological solutions that would be considered impossible even a few decades ago. Bitcoin has become a borderless digital payment method followed by USDT — its non-volatile peer. While one is considered a store of value and the other a unit of account, there seems to be no room for altcoins, is there?
What’s wrong with USDT?
Stablecoins have become an integral part of the digital economy, making international transactions and large payment settlements much easier and cheaper. Tether (USDT) was one of the first stablecoins that took the honor to be the world’s primary gateway into the cryptocurrency space. Based on the fiat-collateralization model, Tether promises that every USDT is backed by a real USD sitting in bank reserves. Well, there have been some doubts cast about that by the Security and Exchange Commission (SEC) multiple times, with the most recent one being in September.
Everything started around 4 years ago when the Commodity Futures Trading Commission (CFTC) sent Tether a subpoena to investigate its questionable reserves. Indeed, it seemed that Tether followed the lead of the notorious Federal Reserve and printed money out of thin air, meaning there were not enough reserves to cover the massive amount of USDT in circulation. The legal scrutiny continued over the years and ended with Tether being forced to pay a $41 million penalty over claims that USDT was fully backed by US dollars.
Apart from its potential lack of reserves, USDT is issued by a central authority, allowing space for manipulation. Thus, it defeats the purpose of a cryptocurrency, which was created to be a decentralized, peer-to-peer currency. The world doesn’t need another currency being printed at whim. We already have enough turmoil with the US dollar.
JAX as a universal quantification of economic value
What does the world need then? A coin that maintains its stability in the long run and doesn’t need to peg on an asset or fiat currency the way USDT does. We at Jax.Network take pride in designing such a stablecoin. Thanks to its unique mechanism, JAX is pegged to the computing power that secures and adds new blocks to our decentralized network. In a way, JAX is stable not in the relation to any world currency but to the energy cost for producing 1 unit of JAX.
In addition, JAX can boast all the benefits present within USDT while remaining completely decentralized, eliminating regulatory and price manipulation risks. Since JAX is tied to the energy cost, there is no need for an oracle to input data or a central issuer to create coins. Thus JAX becomes the go-to solution for various businesses and individuals who value decentralization, security, and cost-effectiveness.
The last but not least, JAX is a Layer-1 coin, which is at the basis of a basket of various Layer-2 derivatives localized for different countries. With the help of Jax.Money, users can issue localized derivatives soft-pegged to Wrapped JAX (WJAX). Thus, for example, people in India can enjoy all the benefits of JAX by using JAXRE in their everyday life. On top of that, localized derivatives have better exchange rates with local currencies, saving more money for their owners.
Stablecoins are definitely a marvelous solution to the various problems that fiat currencies currently face. However, the leading stablecoin USDT clearly has a lot of vague edges of its own. Under such circumstances, JAX becomes the best alternative for replacing USDT as a global digital currency.
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