So far, the collateralized stablecoin has been an innovative and practical upgrade that allows for a price stable alternative to the volatile and other free-floating . Collateralized stablecoins are useful in many ways. First, anyone who holds a stablecoin can engage with a merchant who accepts as a form of payment to conduct an exchange, all without the headache of constant price changes. When it comes to sending as money across borders and oceans, stablecoins again demonstrate their utility as a form of digital money. Moving beyond the world of money transfers, stablecoins prove useful to traders who need to hedge their portfolio in times of market volatility. By switching over to stablecoins, they can maintain a certain fiat value for their portfolio to prevent further losses arising from price drops. Moreover, stablecoins that are denominated in a national currency make for easier calculations when , as opposed to observing trades in satoshis.
While collateralized stablecoins bring much to the table, they do display imperfections, as do all other . One flaw is that these stability-guaranteeing are capital inefficient. Because of the reserve requirement for some of these stablecoins, massive amounts of capital are locked up to keep up with the number of minted or coins. As more stablecoins are created, an equal number of dollars or euros or yuan must be deposited into an account. was invented by Satoshi to be a substitute for state-backed currencies, but at their current state, stablecoins need government money for them to live another day. As more fiat-collateralized stablecoins emerge and as existing ones become more widely adopted, there may be questions as to the feasibility of putting money into reserves.
Therefore, although stablecoins have come afar in the journey for mass , collateralization remains a hurdle. Thus, there must be a stablecoin that does not require collateral for functionality, does not require the constant adjustment of money supply, and does not have a complex architecture of multiple .
One such project that satisfies the three aforementioned requirements is . To start with the conclusion, Xank does not require any collateral, nor does it adjust money supply. Conveniently, it adopts a single-coin architecture to relieve us of the complexities of two or three-coined systems. So how does Xank fulfill stablecoin functionality?
Xank is a free-floating with optional stable transactions. Its price fluctuates in accordance with the forces of market demand and supply — like . However, Xank allows for stable transactions with the help of a certain mechanism. Within the Xank network is something called the Xank Reserve, which plays a vital role in Xank’s stablecoin functionality. The Xank Reserve receives 15% of all coin emissions, so it is self-funding. At the same time, because the Xank Reserve is funded through block creation in a decentralized network, it is completely autonomous, requiring no additional injection from any third party. The free-floating Xank fluctuates in price, but a feature called Stable Pay permits a user to fix a transaction at a certain fiat value with the click of a button, whether it is to send money to another person, to pay for a carton of milk, or to hold as a stable asset in a .
Here’s what happens.
Let’s say I want to send you $100 in Xank coins, and the current price of Xank is $10. I click Stable Pay and send you 10 Xank coins, which equals $100. But a week from now, the price of Xank jumps to $20. Now, you have 10 Xank, but because Xank is $20, you have $200, right?
Not really.
Because Stable Pay was activated, the fiat value is fixed at $100, and this is made possible because of the Xank Reserve. As the Xank price goes up from $10 to $20, the autonomous Xank Reserve pulls 5 Xank coins from the transaction, leaving you with 5 Xank coins amounting to $100 — the original intended value. The 5 coins are added to the Xank Reserve pool, which uses its supply of Xank coins to calibrate other transactions in the same fashion. On the flip side, if the price of Xank drops from $10 to $5, then the Xank Reserve deposits 10 Xank coins to the transaction, leaving you with 20 Xank coins amounting to $100. Here, the Xank Reserve loses 10 coins from its pool.
Regardless of price movement, the Xank Reserve calibrates transactions by depositing and pulling coins to and from transactions. All of this without any collateral, adjustment of total money supply, or a complicated structure.
Xank’s vision is to improve upon currently existing stablecoins by functioning as a free-floating with stable transactions. Due to its design, Xank does not have to be backed by any amount of fiat money. It is completely collateral free, thus solving the problem of capital inefficiency so often observed in today’s stablecoins. Xank is showing promise as a new breed of algorithmic, non-collateralized stablecoin, and it is worth keeping an eye on how Xank develops.
Published at Sun, 26 May 2019 20:02:55 +0000
