Tether's New Stablecoin Experiment aUSDT: A Gold-Backed Digital Asset
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Tether's New Stablecoin Experiment aUSDT: A Gold-Backed Digital Asset
Tether's new stablecoin aUSD₮ offers users an innovative digital asset management tool by combining the stability of Tether Gold with the transparency of blockchain technology.
Navigating Web3 tides with focused insightsBy HAMSTER
Tether, the world's largest stablecoin issuer, has recently launched a new stablecoin called aUSD₮ to meet growing market demand and inject fresh momentum into the DeFi ecosystem. aUSD₮ is a unique digital asset overcollateralized by Tether Gold (XAUT), meaning it is backed by physical gold stored in Switzerland.
What Is Alloy by Tether, Tethered Assets, and aUSD₮?
Recently, Tether announced the launch of a new platform, Alloy by Tether, introducing a novel category of digital assets known as Tethered Assets. These assets are designed to track the price of reference assets through stable strategies such as overcollateralization via liquid assets and secondary market liquidity pools. Tethered Assets can accept single or multiple types of collateral and are capable of tracking the prices of most well-known assets, including fiat currencies, commodities, and similar products.
Alloy by Tether is an open platform that enables the creation of various Tethered Assets with broader support mechanisms, potentially including yield-bearing products. This technology also offers institutions a modern approach to asset management by providing a secure, gold-backed digital asset that can be integrated into investment portfolios. Moon Gold NA, S.A. de C.V. and Moon Gold El Salvador, S.A. de C.V., both authorized by El Salvador’s CNAD, will oversee the issuance and management of Alloy by Tether to meet diverse client needs and regulatory requirements.
Alloy by Tether tokens use Tether Gold (XAU₮) as collateral and represent a type of Tethered Asset. aUSD₮ is the first token issued under Alloy by Tether, designed to maintain a 1:1 value peg to the U.S. dollar. Tether Gold represents physical gold stored in Switzerland, with each XAU₮ token linked to one troy ounce of physical gold meeting London Bullion Market Association (LBMA) good delivery standards. This combination aims to deliver the stability and reliability of gold alongside the transactional functionality and convenience of the U.S. dollar. aUSD₮ is built on the Ethereum network, with the entire process managed by Ethereum-compatible smart contracts to ensure transparency and security. This approach not only bridges physical gold with digital transactions but also employs price oracles to monitor in real time the relationship between the token and its underlying value, further enhancing stability.
As of June 30, more than 19.04 million aUSD₮ tokens have been minted, backed by over 417.23 kilograms of gold.
aUSD₮ Minting Mechanism: Overcollateralization and Vaults Smart Contracts
The aUSD₮ minting mechanism includes the following components:
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Overcollateralization: This is a core feature of aUSD₮. Each aUSD₮ token is supported by Tether Gold (XAU₮) valued higher than its face value. The excess XAU₮ serves as a buffer to protect aUSD₮ from fluctuations in gold prices. When minting aUSD₮, users must deposit more gold than the value of aUSD₮ they wish to create, ensuring the token's stability and security.
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Minting Process: Users mint aUSD₮ by locking a specified amount of Tether Gold into a smart contract. The maximum quantity of aUSD₮ that can be minted is determined by the Minting Value Ratio (MVR), with a maximum MVR of 75%. The entire minting and management process is handled through Ethereum-compatible smart contracts (Vaults), ensuring transparency and security. As long as users pass KYC verification and their CMP’s MVR remains below the liquidation threshold, they can proceed with minting.
MVR Calculation Formula:
MVR = (Value of Minted aUSD₮ / Value of Collateralized XAU₮) × 100
For example, if a user deposits $10,000 worth of Tether Gold and mints $7,500 worth of aUSD₮, the MVR is 75%. If this ratio exceeds 75%, the position becomes subject to liquidation.
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Vaults Mechanism: Vaults are a system of smart contracts used to store users’ collateral and unminted aUSD₮, enabling independent and permissionless verification of the XAU₮ backing each issued aUSD₮. Vaults also store users’ CMP information and address metrics such as the amount of aUSD₮ minted, XAU₮ provided, and the position’s MVR. Only addresses that have completed KYC verification can interact with Vaults to mint aUSD₮. Vaults use oracles to obtain real-time price data, monitoring and calculating the MVR for each user’s collateral position.
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Oracle Mechanism: The oracle mechanism ensures aUSD₮ maintains a consistent 1:1 peg to the U.S. dollar. Oracles collect real-time price data for XAU₮ and USD from multiple trusted sources to calculate the current MVR of each user’s collateral position, ensuring system stability and transparency. This mechanism not only preserves the value of aUSD₮ but also leverages the intrinsic value of gold to provide additional stability and security.
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Liquidation Mechanism: Liquidation occurs when the collateral value drops below a predetermined threshold (typically set at 75% of the collateral value). If a user’s collateral position approaches the liquidation point, authorized liquidators can intervene, reclaiming the user’s XAU₮ and redeeming the corresponding amount of aUSD₮. This mechanism ensures system integrity and prevents under-collateralization.
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Fee Structure: Minting, redemption, and liquidation of aUSD₮ incur certain fees. Currently, both minting and redemption fees are set at 25 basis points (bps), while liquidation fees are 75 bps. These fees help cover operational costs and maintain system stability.
Through this mechanism, aUSD₮ provides a digital asset combining the stability of the U.S. dollar with the value of gold, suitable for various transaction and investment needs.
Detailed Minting Process:
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Deposit Collateral: Users begin by accessing the Alloy by Tether website and selecting the minting option. On the left side of the screen, users specify the amount of Tether Gold (XAU₮) they wish to provide and determine how many aUSD₮ to mint. (XAU₮ can be purchased via the Tether Gold platform or secondary markets.)
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Set Parameters: The system displays key information such as collateral amount, number of aUSD₮ to mint, minting fee, liquidation threshold, MVR, health bar, XAU₮ price, and liquidation price.
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Transaction Overview: A detailed summary of the transaction is shown, including changes in wallet balance, CMP impact, and associated fees.
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Confirm Minting: Users click the "Add Collateral and Mint aUSD₮" button to confirm the transaction, transferring XAU₮ from their wallet to the Vault as collateral. The minted aUSD₮ then appears in their wallet.
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Monitor CMP: Users can monitor their CMP and current status on the right-hand side of the screen.
Core Advantages of aUSD₮: Stability of Gold and Full On-Chain Transparency
The core advantages of aUSD₮ include the following:
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Stability Backed by Gold and Direct Exposure to Gold Value: aUSD₮ is collateralized by Tether Gold (XAU₮), with physical gold stored in Switzerland, ensuring value stability. Through overcollateralization, each aUSD₮ token is backed by a higher-value XAU₮, creating a buffer that protects aUSD₮ from gold price volatility. Additionally, aUSD₮ offers the everyday usability of fiat currency while giving users direct exposure to the value of physical gold. Users benefit from gold’s safety while leveraging aUSD₮ for efficient transactions and value storage.
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Transparency and Security: The minting and management of aUSD₮ are conducted through Ethereum-compatible core smart contracts, which allow independent and permissionless verification of XAU₮ collateral, ensuring system transparency. All interactions require KYC verification, guaranteeing that only authenticated addresses can engage with the smart contracts. Price oracles continuously monitor the relationship between the token and its underlying value, further strengthening system stability.
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Liquidity and Efficiency: aUSD₮ offers a streamlined way to trade gold, serving both daily transactions and as a stable asset management tool for investors. Integrated within the Ethereum-compatible ecosystem, aUSD₮ can seamlessly connect with various DeFi platforms, enabling yield generation and portfolio diversification.
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Versatility and Broad Applications: Beyond stability and transparency, aUSD₮ introduces a new model for asset management applicable to financial institutions and individual investors alike. Its design supports traditional financial transactions and enables automated minting, redemption, and liquidation via smart contracts, offering a modern solution for asset management.
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Continuous Transparency and Auditability: aUSD₮ operates independently of the banking system as a robust, fully on-chain solution, delivering high levels of transparency and security.
These advantages make aUSD₮ a stable and efficient digital asset management tool, combining the safety of gold with the transparency and efficiency of blockchain technology, offering investors a reliable store of value and transaction medium.
Conclusion
Tether’s new stablecoin aUSD₮ combines the stability of Tether Gold with the transparency of blockchain technology, offering users an innovative digital asset management tool. Utilizing overcollateralization and smart contracts, aUSD₮ ensures value stability and system transparency. It not only leverages the intrinsic value of gold for added stability but also enables automated management via Ethereum-compatible smart contracts, making it suitable for diverse transaction and investment needs. With its transparent operations and strong security, aUSD₮ provides investors with a reliable store of value and transaction instrument, while expanding options and possibilities within the DeFi ecosystem.
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