Bitfinex Introduces aUSDT: A Gold-Backed Digital Asset
Bitfinex has announced the launch of aUSDT, a new “tethered” digital asset that merges the stability of gold with the functionalities of a Web3-based digital asset, according to blog.bitfinex.com. The innovative token is backed by Tether Gold (XAUt), representing ownership of physical gold stored in Switzerland.
A New Kind of Tethered Digital Asset
The aUSDT token is designed to maintain a stable value by tracking the US Dollar through mechanisms such as over-collateralization and secondary market liquidity pools. Users can mint aUSDT by depositing XAUt into Ethereum-compatible smart contracts, which automate and secure the collateral management process.
Over-collateralization ensures that more value is held as collateral than the value of the issued assets, providing a safety net against market fluctuations. This system helps preserve the stability and reliability of the minted aUSDT, combining gold's historical value preservation with modern digital asset technology.
How aUSDT Works
aUSDT operates through a sophisticated system managed by MoonGold El Salvador, S.A. de C.V., and MoonGold NA, S.A. de C.V. Users start by depositing Tether Gold (XAUt) tokens into a smart contract. This forms the basis for creating the Tethered Asset, aUSDT, which is pegged to the US Dollar. The system requires that more value in XAUt be deposited than the amount of aUSDT minted, with a maximum collateralization ratio of 75%.
The smart contracts, written in Solidity, manage the entire process from collateral deposit to minting and returning aUSDT. They ensure automated, transparent, and secure execution of transactions. These contracts store user collateral, track the minted and returned aUSDT, and manage the collateralized minted positions (CMPs) of each user.
The system uses a price oracle to determine the value of XAUt. This oracle provides real-time pricing data, allowing for arbitrage opportunities that help maintain the price stability of aUSDT.
Ensuring Stability
If the value of the collateral drops and the CMP exceeds a set liquidation point (75% Mint-To-Value), the position becomes eligible for liquidation. Specialised actors called liquidators can step in to buy the collateral at a discount, restoring the collateralization ratio and maintaining the system’s stability.
The use of Ethereum’s blockchain technology ensures that all transactions are secure, transparent, and immutable. This high level of transparency and trust in the system makes aUSDT a reliable digital asset that mitigates market volatility risks.
The Need for a New Safe Haven Asset
aUSDT offers a stable and reliable digital asset solution by leveraging Tether Gold (XAUt) to mint aUSDT. This system is designed to maintain price stability and provide a dependable store of value, particularly useful for users seeking a stable digital currency for various financial activities.
By combining the enduring value of gold with modern digital asset technology, aUSDT provides a stable and versatile digital asset. Users can leverage aUSDT for everyday payments and transactions, benefiting from its stability and the ease of pricing and conversion due to its peg to the US Dollar.
In periods of economic uncertainty and market volatility, aUSDT aims to serve as a reliable store of value. Arbitrage traders can take advantage of price discrepancies in aUSDT, contributing to its price stability.
For users holding XAUt as collateral, aUSDT offers efficient collateral management and liquidity options. This seamless integration of gold-backed stability with digital currency functionality makes aUSDT a powerful tool for users.