Break away from the banking system. This is the ambition of Arthur Hayes, the former CEO of BitMEX, which offers a stablecoin based solely on Bitcoin (BTC). The sign of changing times for the ecosystem?
Ex-BitMEX CEO talks about a new kind of Bitcoin-based stablecoin
In a post on the BitMEX blog, Arthur Hayes details what he sees as the current limitations of dollar stablecoins, and how he thinks to remedy any issues that may emerge. A stablecoin based exclusively on Bitcoin would thus make it possible to have no link with the banking system. According to Hayes, this would be more in line with Satoshi Nakamoto’s initial vision – and it would respond to increased scrutiny from regulators in recent months.
The stablecoin, called Satoshi Nakamoto Dollar, NakaDollar, or even NUSD, would be worth exactly one dollar, but in BTC. This means that it would not be based on reserves of dollars or other assets linked to the banking system, like the USDT of Tether for example.
? Read to learn more – Stablecoin, all about this type of cryptocurrency
A dollar stablecoin based on BTC
To maintain its parity with the dollar, the NUSD would be based on reverse perpetual swaps. They are similar to futures contracts, and their value is tied to an underlying asset. That is, funding rate mechanisms are put in place to balance supply and demand. In this example, a BTC/USD perpetual swap means the buyer wants to get 1 dollar worth of BTC.
The “Nakadollar” would therefore be based on these mechanisms in order to maintain parity with the dollar. Calculations and adjustments would be done via a DAO, called NakaDAO by Arthur Hayes. In this way, the NUSD is not based on “real” dollars, but on the equivalent value in BTC. It is not, however, a fully decentralized solution, as the ex-CEO of BitMEX points out:
“The possible point of failure of the NakaDollar solution would be the crypto derivatives exchange platforms [à l’instar de BitMEX NDLR]. I excluded decentralized platforms from the project, as they are not at all as liquid as their centralized counterparts.»
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Best or worst of both worlds?
The solution therefore proposes to combine the perceived solidity and the liquidity of a large exchange platform, while getting rid of the banking system. For Arthur Hayes, it is the best of both worlds, but it should nevertheless be emphasized that the use of a centralized exchange platform makes it a hybrid model, which in itself could create difficulties.
Still, the idea is innovative, and it comes just when we learn that the crypto-friendly bank Silvergate intends to declare bankruptcy. The Arthur Hayes project of course brings back the specter of the USTthe algorithmic stablecoin of the Terra project, whose fall has led to a cascade of consequences up to the present day.
This is often the dilemma of crypto projects. They must choose between, on the one hand, the reliability of solutions related to banks, which are therefore centralized, or innovation linked to new algorithms, which, as we have seen, can fail catastrophically. There is no doubt that the NakaDollar project will therefore generate comments.
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Source: BitMEX Blog – Image: Arthur Hayes via LinkedIn
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