Stablecoins on RSK: The solution that an Argentinean startup found to address Bitcoin volatility
Investing in Bitcoin can be like riding a rollercoaster, some people enjoy the rush of adrenaline, others can’t withstand the mix of high speed with its highs and lows. For those who prefer to travel without rises, or sudden descents, Money on Chain startup will soon launch its decentralized stablecoins platform, which will feature products that they catalog as risk-free for Bitcoin users, such as its Dollar on Chain.
But is operating without risks possible in the cryptocurrencies world? The answer is no, because Money on Chain team is aware that risks will always be present in the financial world, however they believe they have found a solution to Bitcoin volatility.
As a solution to the volatility of Bitcoin, Money on Chain created an ecosystem in which their products interact with each other. The proposed model is based on the symbiotic relationship between users of DOCs, BitPROs, and traders who perform leveraged Bitcoin operations in their decentralized marketplace, through which they ensure it will provide stability to cryptocurrencies world.
The startup, created by a team integrated mostly by Argentineans, aims to level its project on a global scale and wishes to join soon the populous team of projects born in the South American country.
The company classified Bitcoin users into three different kinds: individuals who are averse to the risk of Bitcoin, risk-prone Bitcoin owners, and those seeking to maximize leveraged earnings.
For each type of user, the project created a product to meet their needs and expectations, as explained by Max Carjuzaa, CEO of Money on Chain, to Criptonoticias.
For the first group, who prefer to operate on a stable ground, the company created the Dollar on Chain (DOC). It is a stablecoin that follows the price of the US dollar, but with Bitcoin as collateral.
“The system uses an algorithm to calculate a level of Bitcoin collateralization, so for every dollar issued, there are actually 3, 4 or 5 additional dollars deposited in the system. So, regardless of the volatility of the price of Bitcoin, there will always be a guarantee with enough cryptocurrencies to support the value of DOC tokens”, says Max Cajurzaa.
Max notes that “this is a very important step towards a more open financial system”. Then he mentions use cases: “you can quickly send and receive any amount of DOC at any time of the day. The transfers of large amounts for business purposes become easier. Users can use MetaMask to access the web application and send DOC being sure that the value is stable”.
“The interesting thing about stablecoins with collateral in crypto is that they are free of counterparty risk, the whole solution is on the blockchain in a decentralized way and secured by the miners. Unlike other stablecoins that have collateral in fiat dollars, or in a bank account where they are exposed to the problems that banks may have, or possible government seizures, or the exchange vanishing overnight.”.
Although its whitepaper is not available to the public, Carjuzaa ensures that its products are easy to use. To acquire Dollar on Chain, for example, a person who sends 50 dollars in Bitcoin to the smart contract through its app will receive 50 Dollars on Chain.
“We mix the benefits of both worlds, fiat and crypto in a single platform. Our product is open source and the code will be published. Everyone will be able to review it. It has already had several audits that also will be published. That will encourage people specialized in technology or cryptocurrencies to use it first, and the rest of the people will slowly join”, says Max.
Profit with leverage in Bitcoin
Another Money on Chain product is designed for a group of users more prone to risk. This is the BitPro token, which will manage part of the volatility that bitcoin brings to Dollar on Chain.
BitPro will be more volatile than bitcoin, but it will have a passive income that will come from leveraged operations carried out by traders on the decentralized derivatives exchange.
“Our BitPro product (BPro) is a token designed for bitcoin holders, which are the ones that put the collateral in the platform to make it work. In return, they receive a small interest and a small free leverage. This means that when the price of Bitcoin goes up, BitPro goes up a little more and also receives a fee”, explains Max.
The leverage makes allow to obtain profits derived from the increase of the price of crypto assets, but it does not exempt from the risk of losses, given the volatility of cryptocurrencies.
The BitPro token has a target leverage of 10% above of Bitcoin and additionally it pays an interest, which will be determined by the market. This interest depends on the leveraged bitcoin-derived product, initially a BTC2X, which will be as a kind of Bitcoin future, with a duration of 90 days.
“BPro was thought for Bitcoin holders: instead of holding their Bitcoin in cold storage, they could put some of their holdings to work to obtain low-risk leverage and earn a passive income in exchange for lending their money to the decentralized exchange,’’ says Max Carjuzaa, from Money on Chain.
Confidence in the wisdom of crowds
A third product created by the project is aimed at users who seek to maximize profits with leverage, which they can make through Bitcoin leveraged operations in a decentralized exchange.
The Money On Chain (MoC Token) is a fourth product. It is designed to govern the decentralized autonomous organization (DAO), and can also be used to pay fees for the use of the platform at a lower rate than those to be paid with BTC. MoC holders will also be able to run an oracle that will feed BTC prices and other market data into the platform and, in return, they will get a reward.
Any MoC token owner can vote on contract modifications directly on the new features. This means, deciding whether or not to do an update to the code of the smart contract, or another decision taken by the DAO.
The project was developed for the RSK blockchain, which the company understands is the only blockchain that allows executing smart contracts using Bitcoin in the background, that is, the only one that allowed them to use Bitcoin as collateral. In fact, RSK Smart Contract Network is the first open-source smart contract platform secured by the Bitcoin miners.
“RSK is the only blockchain that meets our needs. In addition, the solutions that RSK is implementing seem incredible to us. They are building a lot of solutions which other blockchains that have many more years, are not delivering yet. Lumino, which is like Lightning Network over RSK, is something that will be very useful with stablecoins”, expressed Max.
The platform will also offer a fifth service, that will allow to exchange any token in the RSK blockchain.
In a second phase, the project plans to implement the stablecoin collateralized by Bitcoin in products on the retail market and launch the Peso on Chain, which will be linked to the Argentine peso with collateral in Bitcoin.
It all started with a dream
“It all started with a dream” explains Max Carjuzaa when asked how did the idea come about. The dream was to find a decentralized solution for the volatility of the price of Bitcoin. An idea that was spinning in his head.
“That dream was there revolving within our heads for about a year, until the first mathematical model that could solve the problem emerged. Four people worked to improve and evolve the model for another year. And once we had the mathematical model, we did the review with financial consultants, we wrote a paper and we made a formal verification of the mathematics behind it. Then we made a prototype, we built a simulator, we made a formal code verification and then we decided to implement it in the blockchain. The truth is that there was a lot of theoretical work on this project, until it became a reality”, tells Max.
The team working on the project is made up of six people, in addition to an expanded team of about ten people who have a part-time participation and another twelve people involved through two software factories.
The project is running privately in the RSK test network since January and will soon be on that same network with an open access version where everyone can see and try the products. It will be released on the main network during the fourth quarter of the year.