OpenLedger adds Tether dollars and euros

Monday 25 July 2016

There are various ways of transferring value over the blockchain without volatility issues – and OpenLedger now includes almost all of them.

Bitcoin is a remarkable technology. Until 2009, it was simply impossible to transfer value over the internet without a trusted intermediary to keep accounts. Sending money online necessarily meant using a centralised authority like a bank or credit card company.

Bitcoin changed all that, but its position outside the established financial system has a number of implications. Without a government to back the currency and a central bank to manage it, its value is subject to the whims of the market. Bitcoin – and every other cryptocurrency – is extremely volatile, experiencing sometimes violent price swings. While bitcoin is ideally suited to transferring value on the blockchain, it is categorically not suited to storing it. OpenLedger has worked hard to address this issue. OpenLedger is the lynch pin of the world’s first decentralised conglomerate, built on top of the BitShares 2.0 fintech platform. Recognising that there are various approaches to the problem, it has now added another string to its bow with Tether dollars and euros – with benefits for the whole ecosystem of services that comprise the Decentralised Conglomerate.

Pounds

Tether frees money from its shackles to move freely around the blockchain

Walking the line

So how exactly do you maintain the value of a decentralised, blockchain-based currency? In practice, there are several approaches, and each of them walks a line between the constraints imposed by the different systems in play.

Many traders simply choose to keep money on an exchange. This is the most risky option, as those who had funds in MtGox discovered. Exchanges are highly centralised, and the lack of regulation means they also lack the confidence and protections of government legislation. This is the worst of both worlds!

BitShares has taken another approach with its SmartCoins – assets like BitUSD, BitEUR and BitCNY. These use a decentralised pegging system to hold their value, guaranteed by collateral provided by participants. Whilst this is fully decentralised, these ‘synthetic’ currencies don’t yet have the adoption them need to make them truly liquid and usable. There is a chicken and egg problem here, since liquidity comes from adoption.

Tether has taken a different approach again. The company uses a kind of ‘currency board’ system, similar to nations that peg their currencies to the dollar. They hold funds in a fully audited, insured bank account, and issue the equivalent number of crypto coins, each representing one dollar (USDT). Thus Tether holds funds centrally, but trades backed tokens on the blockchain in a completely decentralised way. It’s a kind of halfway house, but it means that USDT has all the liquidity of the US dollar – because it is 100% fiat backed with $3 million of reserves – whilst leveraging the efficiency of the blockchain for fast, low-cost transfers. OpenLedger itself uses a similar approach with OPEN.USD, OPEN.EUR and other coins, which are backed by funds held in the gateway company, CCEDK.

OpenTether

OpenLedger is now complementing BitShares’ SmartCoins and its own OPEN.USD coins with Tether’s approach. The platform is adding OPEN.USDT and OPEN.EURT, to provide another option for US dollars and euros on the blockchain.

As OpenLedger’s de facto fiat gateway, Danish exchange CCEDK will provide facilities for users to deposit and convert their funds into OPEN.USDT and OPEN.EURT. These are redeemable for dollars and euros respectively at 1:1 on CCEDK, minus of course a small trading commission. After trading, users can withdraw these as fiat money again.

This move gives traders additional choices and confidence in the options for storing their funds on the OpenLedger blockchain, and has further implications for the wide range of services provided by the Decentralised Conglomerate. This includes a series of companies and services in a mutually-beneficial ecosystem: as members of the Decentralised Conglomerate, OBITS, BitTeaser and ICOO all stand to gain from the addition of USDT.

 

This article was sponsored by Ronny Boesing and CCEDK.


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