Truly Crypto 101
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Truly Crypto 101

Truly Crypto 101 Lesson 21: Why Should You Convert Part of Your Stablecoins Into TUSD?

Over the past few days, FTX, one of the world’s top three crypto exchanges, went into bankruptcy. This news sent a shocking wave across the crypto community, and some compared this to the “Lehman Brothers” moment in crypto. While the panic began to spread, the investors’ trust in the whole market fell to a record low, and the tokens of many projects suffered significant losses.

The tanked crypto prices may be the most visible ramifications of this crisis. More importantly, the lessons for all crypto investors include carefully vetting the exchanges/wallets to store assets and making sound investment strategies. Diversifying your investment portfolios remain a wise option, even when every operating entity claims absolute security for their custody of assets. And part of that strategy is to diversify your stablecoin holdings. Here are three reasons why TUSD should be your go-to choice of stablecoin.

One major cause of FTX’s bankruptcy is its misuse of users’ assets. It is only after the news that everyone realizes the importance of proof of reserves for exchanges; exchanges including Binance and Huobi are scrambling to release their proof of reserves.

Transparent proof of reserve system is critical not only to exchanges but also to the crypto industry. It is particularly true for U.S. dollar-backed stablecoins, as users’ trust in these stablecoins is hinged on the 100% reserves the issuers hold to the stablecoins they issue. TUSD adopts the PoR system and boasts greater transparency than other stablecoins of the same nature, which is conducive to building trust between platforms and users.

TUSD is also a paragon of transparent audits in the stablecoin sector. Armanino, one of the largest accounting firms in the US, provides 24/7 real-time audit reports for TUSD, with details including the balances held in various bank accounts and tokens issued on different chains. At the same time, the TUSD team has no access to the funds in custody, nor will it be involved in the allocation of the funds. These independently audited reports are updated in real-time and are available on TUSD’s official website, tusd.io.

Click the top right corner of TUSD’s official website to download Armanino’s real-time audit report.

In addition, TUSD works with Chainlink, a leading provider of secure and reliable open-source oracle solutions, to record the audited data on the chain. Once the PoR contract warns that the USD in reserve is lower than TUSD’s supply, a meltdown mechanism will be triggered to stop minting. Also, any platform can access the data of TUSD’s reserve through its API interface. These measures safeguard the users’ assets and make TUSD the first USD-backed stablecoin that provides real-time audit on-chain.

It is worth noting that TUSD also carefully vets the banks it works with, which is essential for TrueUSD to build trust with users. Among TUSD’s partners, Signature is a listed commercial bank headquartered in New York and a Federal Insurance Company (FDIC) member. Another partner called Prime Trust is a regulated financial institution overseen by the banking commissioner’s office at the Nevada Financial Institutions Division.

Statistics show that TUSD is more robust and outperforms other cryptos amid market volatility, which is another solid reason to choose TUSD. CryptoQuant, a data analysis firm for cryptocurrencies, published a research report on stablecoin efficacy in July. According to the article, “robustness” indicates the ability of a project to stabilize its value against risks, and TUSD’s robustness ranks top among the major stablecoins.

(Different stablecoins’ robustness scores. Source: CryptoQuant)

Next, let’s analyze the price movement of TUSD and USDT from the beginning of this year. As shown in the graph below, TUSD has maintained a stable price and could quickly recover from temporary price drops. TUSD’s price climbed up amid UST’s collapse in May, reflecting its holders’ confidence in the stablecoin. In comparison, the price of USDT de-pegs from the U.S. dollar whenever a major crypto incident occurs, and it takes longer for its price to rally back to $1.

(TUSD’s price movements from the beginning of 2022. Source: coinmarketcap.com)
(USDT’s price movements from the beginning of 2022. Source: coinmarketcap.com)

Comparing TUSD’s robustness with that of non-dollar-backed stablecoins or Ethereum shows a starker contrast. Following the collapse of FTX, the price of Ethereum plunged to $1,070 — its lowest point in the past four months, causing panic among DAI holders. MIM, another stablecoin, also saw greater price swings after the FTX incident. Moreover, MakerDAO scrambled to modify its parameters shortly after the incident to prevent severely devalued crypto assets from being used as collateral. By contrast, it is easier for TUSD holders to remain calm amid market volatility. Read more at https://cointelegraph.com/news/traders-take-a-neutral-position-after-ethereum-futures-contracts-see-massive-liquidations.

(Total MIM borrowed. Source: Abracadabra)

Love me, love my dog. If a company has a popular signature product, people are willing to follow other products launched by the company. This rule also applies to the crypto industry and goes even further. However, FTX’s collapse reveals the other side of the story. If a company is mired in a crisis caused by a flaw in a product, other relevant products of the firm are also likely to be affected. Over a short period of time, TUSD has been listed on over 70 exchanges and integrated with multiple public chains. TUSD can also be found in most DeFi protocols. People say that DeFi has three growth drivers: decentralized exchange (DEX), lending platforms, and stablecoins.To illustrate this with liquidity, DEX provides a venue for liquidity exchange; lending platforms mark the price for liquidity; stablecoins pegs the liquidity. TUSD is intensely focused on its partnership with DEXs and lending platforms.

Curve is a DeFi automated market maker (AMM) that offers stablecoins exchange services, and its total value locked (TVL) ranks top among all DEXs. The TVL of its TUSD pool has exceeded $30 million. Curve has also launched the TUSDFRAXBP pool with an APY of up to 7.15%.

AAVE is a popular decentralized lending platform and a flagship project in the Ethereum ecosystem. It tops the list among all DeFi projects in terms of TVL, the number of users, and the value of tokens. There is a total supply of over $13 million TUSD on AAVE (Ethereum). TUSD is also one of the collateral assets accepted on AAVE. This means TUSD users can earn interest from their TUSD deposits on AAVE and use TUSD as collateral to borrow other assets.

In a nutshell, the negative impact on crypto exchanges’ credibility and image from the FTX incident will linger on for years to come. Before more information about the FTX crisis is disclosed, people have a good reason to think that other institutions may have similar issues and that they need to take greater caution before making any investments.

That’s all for today’s Truly Crypto 101 Lesson! Please comment if you’d like to know more. Truly values every comment.

Disclaimer: The aforementioned views do not constitute recommendations for any investment product or trade.

References:

https://cointelegraph.com/news/traders-take-a-neutral-position-after-ethereum-futures-contracts-see-massive-liquidations

https://docsend.com/view/cpt8kn599e9ty5n2

https://www.theblock.co/post/184109/mim-stablecoin-slightly-loses-dollar-parity-amid-fears-of-partial-ftt-backing

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TUSD is the world’s most trusted stablecoin, fully backed by USD and independently attested live and on-chain, now moving billions of dollars around the world.