The world’s largest stablecoin issuer, Tether ($USDT), has unveiled a gold-backed ‘tethered asset’ called $aUSDT for financial stability.
Tethered assets are a new category of digital assets designed by Tether to stabilize prices through strategies like over-collateralization.
While $USDT is pegged to the US dollar (most of the time), $aUSDT is unique in that it is backed by a physical asset – gold stored in Switzerland.
Let’s explore the factors behind $aUSDT contributing to potential trustworthiness and resilience in the DeFi landscape.
$aUSDT’s Gold Integration
Tether tokens are stablecoins on the blockchain pegged directly to real-world currencies at a 1:1 ratio.
Per this press release, $aUSDT is created for users who prefer a more tangible crypto payment solution. However, they must over-collateralize their positions by minting new tokens up to 75% of the collateral amount.
Over-collateralization is a risk control approach that protects collateralized assets from potential losses by being backed by more than their value.
A beneficial aspect of the $aUSDT asset is being over-collateralized on-chain by Tether Gold ($XAUT).
Launched in 2020, with a current market cap of $569M, $XAUT is a stablecoin pegged to the value of one troy ounce (around 31 g) of gold. It offers numerous advantages through blockchain technology:
- Ownership of real-world gold
- Easy transfers compared to physical gold, which is traditionally difficult to move
- Divisible into portions as small as one microgram of gold
- Trading around the clock, unlike tangible gold, which may have limited trading hours
- Redeemable for gold bars, which can be sent to any Switzerland address
- It’s typically cheaper to store gold on-chain than physically
By integrating $XAUT, $aUSDT combines the dollar’s utility with gold’s timeless value.
aUSDT, the first Tethered asset, just launched!
aUSDT is a synthetic dollar over-collateralised by XAUt (Tether Gold).Alloy by Tether is an open platform that allows to create collateralised synthetic digital assets and will soon be part of the new @Tether_to digital assets… https://t.co/J8JyWt9duh
— Paolo Ardoino 🤖🍐 (@paoloardoino) June 17, 2024
Tether’s Novel Digital Asset Platform
$aUSDT is the first edition of tethered assets to join Tether’s newly launched platform, Alloy, held on the Ethereum mainnet.
Alloy is an open platform that enables the creation of tethered assets through robust mechanics. It was created by Moon Gold NA, SA de CV, and Moon Gold El Salvador, S.A. de CV, and authorized by the CNAD in El Salvador.
On the platform, users can deposit more collateral (for example, $XAUT) than the value of the digital currency they want to create. This acts like a safety net, protecting against price fluctuations because liquidators can step in to buy at a lower price through tethered assets.
Additionally, tethered assets will become available on secondary markets for buying and selling.
Potential yield-bearing products broaden Alloy’s appeal by enabling tethered asset holders to generate additional income and returns.
The Potential of Fusing Gold and FIAT
Tether’s $aUSDT introduction could lead to significant advancements in the stablecoin ecosystem and broader financial realm.
Merging fiat’s stability with gold’s intrinsic value introduces a layer of resilience and security against economic volatility.
Minting $aUST on Alloy is now available. With its market cap already hitting over $8M – backed by 140.67 kg of gold – there’s clear interest in tethered assets already.
As always, make sure to DYOR before making crypto investments. Crypto is a volatile industry; success is never guaranteed.
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