Understanding Tether’s Gold-Backed Stablecoin: Introducing ‘Alloy’ (aUSD₮)
Tethered assets, also known as stablecoins, are digital tokens designed to mirror the value of various underlying assets, such as the U.S. dollar. These assets can be backed by a single type of collateral, such as gold or a specific fiat currency, or a diversified portfolio of multiple assets. This flexibility allows tethered assets to track a wide range of assets, including major fiat currencies, commodities like gold, oil, and wheat, or financial instruments such as stocks and bonds.
The stability of tethered assets is maintained through mechanisms like overcollateralization and robust liquidity pools. This ensures that the value of the tethered asset closely follows its reference asset, enhancing stability and trust among users.
A prominent example of a tethered asset is Tether (USDT), which aims to maintain a 1:1 peg with the U.S. dollar. Despite its popularity, Tether has faced regulatory scrutiny and challenges related to its pegging reliability.
To address these concerns, Tether undergoes regular independent audits to verify its reserves and publishes quarterly reports on its asset composition. Recently, Tether completed a System and Organization Controls 2 (SOC 2) audit, highlighting its commitment to transparency and compliance.
Alloy (aUSD₮) by Tether is a noteworthy addition, leveraging Tether Gold (XAU₮) as collateral. XAU₮ represents physical gold on the Ethereum blockchain, with each token equivalent to one troy ounce (31.1 grams) of gold stored in a Swiss vault. This integration provides a stable foundation for aUSD₮, combining the stability of the U.S. dollar with the scarcity and value preservation attributes of gold.
Licensed by the National Commission of Digital Assets (CNAD) in El Salvador, Alloy by Tether operates under Moon Gold NA, S.A. de C.V., and Moon Gold El Salvador, S.A. de C.V., which manage the issuance and administration of aUSD₮.
Interacting with Alloy by Tether involves using its user-friendly web interface to mint and redeem aUSD₮ tokens using XAU₮. For advanced users, direct interaction with the underlying smart contracts is possible, though access is restricted to verified addresses that have completed Know Your Customer (KYC) checks.
Key features of aUSD₮ include overcollateralization, managed through Vaults that store XAU₮ and facilitate minting and liquidation processes. Vaults ensure transparency and system integrity by automating operations and monitoring collateral value against minted tokens.
Users can acquire aUSD₮ by depositing XAU₮ into the smart contract or trading on exchanges like Bitfinex, with fees applied for minting, redemption, and liquidation processes. These fees ensure system stability and cover operational costs associated with managing the collateral.
In summary, Alloy (aUSD₮) offers stability, transparency, and integration with the Ethereum ecosystem, making it a versatile option for investors seeking a reliable store of value and potential yield generation in decentralized finance (DeFi) platforms.
