The USDS stablecoin will be backed by short-duration treasury bills, overnight repos, and cash.
Crypto custody firm BitGo has revealed plans to launch a unique kind of dollar-backed stablecoin next year. It shared the update during the Token2049 event in Singapore, explaining that the stablecoin will stand out from the rest in the way that it would reward institutions for providing liquidity to the ecosystem.
According to BitGo’s announcement, its stablecoin, dubbed USDS, will be just like most other ones available in the market. That is, in the sense that it will be backed by short-duration treasury bills, overnight repos, and cash. However, the firm claims that the USDS will come with a twist as it will serve as the first open-participation stablecoin.
Elaborating on the point, CEO Mike Belshe acknowledges that there are a good number of stablecoins on the market, which already serve a good function. Despite that, however, there aren’t many of them that operate an open and fair system that promotes innovation and rewards those responsible for building the network. This is where USDS comes in, Belshe added. His part statement reads:
“A stablecoin’s true value comes from the people using it, the liquidity they provide, and the access points for interchange.”
For clarity, a stablecoin is a type of cryptocurrency whose value is tied to another asset class. Usually, they are pegged to fiat currency or gold so as to ensure the stability of their price. This unique nature of theirs is what has made them quite popular among crypto traders as they currently contribute most of the liquidity in decentralized finance (DeFi).
Notably, though, the biggest stablecoins in the market are also pegged to the US dollar, just like BitGo’s USDS. Tether’s USDT USDT $1.00 24h volatility: 0.1% Market cap: $144.18 B Vol. 24h: $85.21 B dominates the market and is followed by Circle’s USDC, which is about a third of the size of the former.
BitGo USDS Stablecoin: How It Compares to Rivals
There appears to be only one unique selling point in BitGo’s offering that separates it from its direct rivals. That is, its rewards-based approach. This model ensures that institutions that are providing liquidity to the USDS network earn rewards through the process of distributing a portion of the returns generated from its reserves.
Belshe emphasized that while this sounds so much like a typical dividend, it is not. That is because the proceeds do not go to the end user but the institution providing the liquidity. Belshe said:
“At the end of each month, we generate some return from the cash being held in the underlying fund, and we will pass it back to the participants on a pro-rata basis, based on their custody of the asset.”
BitGo has huge plans for the USDS stablecoin. The firm says it is working on listing it on all major exchanges and should have $10 billion in assets held within the stablecoin in the next one year.
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