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Gemini's cryptocurrency exchange, founded by the Winklevoss twins, announced on Monday that the company has launched a stablecoin built on the ERC-20 standard.
Called "Gemini Dollar" (GUSD) the value of the currency will be "tightly anchored 1: 1 to the US dollar", according to the white paper. Of course there are many stablecoins that are anchored to the USD, such as Tether (USDT) and Dai (DAI), although some pegs are reserve-based and others are algorithmic.
The technical specifications for the Gemini coin are an important factor for improving confidence, and below we will dive into the token whitepaper.
GUSD Issue and Redeem
Gemini tokens and the quantity in circulation can be viewed by the public on the Ethereum blockchain. An independent audit firm will be in charge of carrying out regular checks of the Gemini Trust Company to ensure that the tokens have the dollars necessary to support them.
The blockchain will verify the overall supply of coins, while a third-party auditing firm will verify the sums in dollars in accordance with the revision laws.
Gemini dollars are created on the blockchain whenever customers withdraw dollars tokenized from the Gemini stock exchange. They are destroyed or "redeemed" every time users deposit them in their Gemini accounts.
Withdrawals can be sent and stored on any Ethereum address as part of the ERC-20 protocol. The Gemini token retains all the functionality of the ERC-20 protocol, ie smart contracts.
Smart contracts like governance, logic and register
As the white paper states, Gemini wants to maintain strict control over the token so that they can perform any updates. Gemini wants:
- Resolve vulnerabilities;
- Extend the system with new features;
- Improve the system and optimize its operational efficiency; and
- Transfer of tokens, blocks or token reversals in response to a security incident (eg catastrophic event) or legally obligated or required to do so by a court or another government agency.
They have it set up smart contracts that perform different functions. The "Proxy" level controls the rights to create and transfer coins. As a prerequisite, this proxy level allows a simpler mechanism to stop trading and issuing coins in the event of a security incident. The proxy acts as a level of governance for who and what can happen on the blockchain and execute the logic of the intelligent contract contained in the level of Impl.
The intermediate level, called "Impl" (most likely an "abbreviation" for "implementation"), contains data and logic for smart contracts, whether they are creating new tokens or transferring them to certain conditions. The Impl level has intelligent contract features similar to most ERC-20 tokens. However, the idea is that the intelligent contract works only assuming that the Proxy has granted the right to execute them.
The final level of the intelligent contract is the current ledger, called "Store". This level maps the token owners to their balances and acts as "the external and eternal register of the Gemini Dollar". This is where the public can view the ledger for Gemini coin transactions.
As a developer, the way I imagine the levels of the smart contract is very similar to a web stack. The proxy is the local server that allows files to be executed. If the webmaster no longer wants a file to run, he will remove it from the server. The files, or the "Impl" layer, must store the data in a database so that it can be retrieved at any time at any time. The database is the "Store" of the essential information generated by the logic of the file.
Although this is a very simplified example, the three-tier approach highlights the separate functions of each level of smart contract. They are built to allow simple centralized control, but also to allow the flexibility needed by intelligent contract developers with ERC-20 tokens.
Custody: linear keys as final approval
[19659003] Gemini will require developers of smart contracts to get approval from a custodian or ke yset. For the developer, these can be online or offline. However, the custodian will look for another custodian and so on, creating a chain until an offline keyset is reached. At this point, the whitepaper states: "If the custody of a smart contract ends on an offline keyset, an offline approval mechanism has been created for its actions."
The idea is that the chain of custodians should end on a centralized offline keyset to approve the developer's intelligent contract.
If Gemini never needs to update the IMPL level of the smart contract, there is a system in place to pause the network and exchange the old IMPL level with the new one, bringing at the same time old smart contracts the new level of Impl .
Both the Proxy and Store levels will treat the new level of the Impl smart contract as authoritative and ignore the previous one. In addition, the currently active tokens will be transferred to the new Impl
Strict limit on how many GUSD coins can be printed
The printing of new tokens is a persistent topic in the history of the stablecoins because each new token must have exactly one dollar to support it in reserve. The Gemini currency will use an online and offline hybrid deposit mechanism to ensure that the amount of tokens never exceeds the underlying USD balance.
A method built into the Imply layer, called "PrintLimiter", deals with this for GUSD. PrintLimit, as the name suggests, sets a hard limit on the number of tokens that the Impl layer can create. The limit has a check-and-balance procedure in place each time the token offer has to change. An increase in the limit must first get approval from an offline keyset (ie custodian). A decrease requires the approval of an online custody key.
Coins can not be printed on a whim. A limit will always be in place, and any changes to it must be approved by the chain of custodians, both online and offline.
Summary
It seems clear that the Gemini exchange has reflected on the implementation of their stablecoin. The separation between custody, issuance and development logic is a unique take for a semi-centralized token.
Images from Shutterstock
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