A Bitcoin-blockchain-based Decentral Finance (DEFI) project debuted a stableecoin fully backed by Bitcoin
Tokens as part of its efforts to build a financial system centered on the largest and oldest cryptocurrency.
Elastos, developer of the BEL2 protocol, revealed his Bitcoin dollar (BTCD) on Wednesday.
The project aims to create a digital version of the Bretton Woods system, after the 2nd World War Agreement, which got the US dollar for gold, making Greenback the world’s reserve currency as a means of promoting monetary stability. Elastos said it’s “Reimagining [Bretton Woods] with Bitcoin at the core. “
Stableecoins are symbols associated with the value of a traditional financial asset, such as a Fiat currency, usually the dollar. They are an important cogwheel in the cryptocurrency machine because they accommodate the volatility of cryptocurrencies like Bitcoin, allowing users to keep capital in digital assets without having to enter into wild price herds.
Dollar-Pegged StableCecoins are usually supported by short-term US treasuries that can be easily paid or purchased to meet fluctuating demand.
BTCD is backed by Bitcoin, a modintuitive choice for a token that means having a stable value. Elastos deals with this through over -collateralization of 160% -200% of BTCD’s value in Bitcoin, Ahmed IJ, the leader of Marketing, Coindesk told Telegram.
“Oracles feed the BTC-USD rate every block,” he said. “If the coverage drops to 110%, arbitrage can repay the debt, grab BTC with a small discount and erase the risk.
“When BTCD acts over a dollar, holders burn it to regain BTC, supply falls and the price glasses. If it dips under a dollar, users coin it with fresh BTC and seller, supply rises, price lifter.”
The development of a BTC stacked stableecoin is part of the broader development of the Bitcoin-driven defi, where the security of the Bitcoin network and the huge reserves of BTC are used to secure and finance decentralized activity elsewhere in the blockchain world.
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