Tether has introduced a new gold-backed stablecoin, named Alloy (aUSDT), which is tethered to the U.S. dollar. This marks the first asset of its kind from the issuer, and it is accessible through the newly launched Alloy by Tether platform.
Alloy, distinctively overcollateralized by Tether Gold (XAUt), which itself grants ownership of physical gold, is strategically pegged to the U.S. dollar. However, unlike traditional assets, it is not directly backed by the dollar but rather aims to replicate its value and utility through a synthetic approach.
Alloy by Tether elaborated on their X platform that tethered assets are digital assets designed to mirror the price of another asset using various stabilization mechanisms. This synthetic dollar facilitates transactions that reflect the U.S. dollar’s functionality, enhancing practical economic engagement for users.
Benefits of Using Alloy
- Economic Stability and Flexibility: Users can experience the stability of gold while engaging in everyday transactions pegged to the dollar, effectively balancing long-term investment with daily financial needs.
- Innovative Asset Creation: The platform also supports the creation of other tethered assets, including those offering yields, thus broadening the scope of digital financial instruments available.
The synthetic dollar, aUSDT, can be minted by depositing XUSDT into a smart contract, which utilizes price oracles to manage transactions. This process allows users to maintain their investment in the gold-backed Tether asset while utilizing aUSDT for regular transactions.
Development and Partnerships
Developed by Tether subsidiaries, Moon Gold and Moon Gold El Salvador, Alloy by Tether is set to integrate into a broader real-world asset tokenization platform anticipated to launch later this year, as stated by Tether CEO Paolo Ardoino.
Comparing Alloy with Other Synthetic Dollars
- Earlier Synthetic Dollars: Although not the first synthetic dollar—preceded by Galoy’s Bitcoin-based Stablesats and Ethena Labs’ Ether-backed USDe—Alloy stands out due to Tether’s robust liquidity and centralized control mechanisms.
- Market Reception: Despite some initial skepticism similar to that faced by earlier synthetic dollars, aUSDT has been favored by analysts for its smarter decision-making and reduced principal-agent risk.
In an appealing move, Tether has offered a bonus at a 2:1 ratio to USDT holders, with 10 million aUSDT allocated for this incentive, aiming to boost adoption and liquidity of the new stablecoin.
| Feature | Alloy (aUSDT) | Stablesats | USDe |
|---|---|---|---|
| Backing Asset | Gold (XAUt) | Bitcoin | Ether |
| Pegged To | U.S. Dollar | U.S. Dollar | U.S. Dollar |
| Launch Year | 2023 | 2022 | 2023 |
| Unique Offerings | Overcollateralization with physical gold | Utilizes Lightning Network | Ether-backed stability |
Tether’s launch of Alloy represents a significant advancement in the landscape of digital finance, blending traditional asset security with modern financial technology. This innovative approach provides users with a stable medium for transactions and investments, reinforced by the intrinsic value of gold and the stability of the U.S. dollar.
Featured image credit: DALL-E by ChatGPT