Gemini, the bitcoin exchange founded by the Winklevoss twins, is throwing a hot corner of the cryptocurrency market with a new stable currency, the company announced on Monday.
The so-called Gemini dollar would be pegged to the US dollar, with each token supported by a US dollar in a reserve of cash held by State Street, the Wall Street custodian bank. The company hopes that the new currency, which is based on the Ethereum network, will serve as a new type of digital money that can be used in stores by customers.
The project, which has lasted for over a year, deals with "a common trust problem" among other stable currencies, according to his white paper.
Gemini says that the supervision of financial regulators, particularly the New York Department of Financial Services, will give the crypt more credibility than its competitors. The crypt is also subject to New York bank law, according to the exchange rate operator.
Yeah, it was evaluated by the computer security company Trail of Bits over the course of eight weeks. According to the documents examined by Business Insider, the twins have solved all the problems detected by the audit.
The Gemini dollar will go head to head with Tether, the reluctant feat behind their stable USDT currency that has dominated the currency market stable. The skeptics have wondered if Tether actually has the dollars he says to support his cryptography.
And some market participants have linked encryption to market manipulation. For example, academics from the University of Texas published a paper stating that Tether was used last year to manipulate the price of bitcoin, bringing its run to $ 20,000 in December.
However, since the start of 2018, transactions between USDT and bitcoins have become more common, Morgan Stanley noted. The bank, which has collected data from over 350 exchanges, estimates that 14.2% of bitcoin transactions are combined with the USD, up from less than 1% in October.
In all cryptographic space, projects are attempting to intervene on the ground of Tether, including TrueUSD and MakerDAO.
The Gemini dollar will be launched next week and will eventually exchange many exchanges, according to a spokesperson.
Business Insider spoke with the co-founder Gemini and President Tyler Winklevoss about the project and related topics in the cryptocurrency space.
Business Insider: Goes through the evolution of this project. What is the idea behind it and how did it come to fruition?
Tyler Winklevoss: We have been thinking about the idea of a stable currency for over a year. The thing that attracts the concept is that it does something different from any other digital asset. When we think of the first ever digital asset, bitcoin, which is a virtual commodity, took years for the market to solve the broad understanding of what bitcoin is. The legal precedent and the use case are definitely going down as a virtual merchandise. And the ether is the same. These are very interesting use cases. Ether as digital oil. And bitcoin like digital gold. The idea of a digital product is there and well understood.
And then we had the intro of the titles on the blockchain, normally referred to as ICO, which represent a stake in a company or a project. Being in this space over the years it was really interesting to see the development of both virtual and virtual goods.
But when something is a store of value, you generally do not want to spend it. We use the word digital currency as a generic term in this space, and at the beginning this term has been used, but not many of these digital resources behave like currencies. And it makes sense. Do not buy things with your gold or your Apple shares. In the same way it makes no sense to do it with an ICO or bitcoin. A stable currency is different and necessary for the ecosystem as a medium of exchange.
BI: What problems does the Gemini dollar face?
Winklevoss: We have seen two problems we wanted to solve when we thought about how to build a valid stable currency. The first was the technical implementation. A computer problem. Make sure you have smart contracts, choosing the right network. Ether was a good network of course because of the human capital that surrounds it, the level of adoption, its experience. And build the engineering of a valid stable currency. This is where Gemini's strong team comes into play.
So there is trust. If we print too much or too much, we need to make sure it matches the fiat dollars of a bank account. As a trust company, we are regulated by the state of New York, but the problem of trust does not start or stop there. It is about building a network of trust among all the participants in the ecosystem. Multiple eyes are watching us over.
Getting an auditor is not a trivial task. They must feel comfortable with you as a company. This was another interesting but good challenge. And getting ready for approval takes a long time.
[Editor’s note: Gemini’s US dollar balance held at State Street will be audited by an independent accounting firm on a monthly basis, according to a news release.]
BI: Stable coins like Tether have been a treasure trove that can use them to quickly transfer their coins out of the volatile bitcoin and other encrypted markets without having to engage with slow take-off ramps. Have you talked to those participants in the Gemini dollar market and what is their impression?
Winklevoss: Of course we talk to all our customers, retail stores, props stores, market companies, commercial companies, sometimes a company can do all these things and more. There is a lot of demand there. We thought that a stable currency was important for the ecosystem. But we have also seen a lot of demand from those customers. And so basically bringing USD on the blockchain is the key here. Connect the traditional financial network with the world of cryptography in the way that includes all the good benefits of money, giving them all the positive things of the crypt. The obvious case of use for a trader is arbitrage or the ability to move capital into an efficient subject.
It is not just the demand from traders. I think the dollars on the blockchain are a really important and crucial component. We think that a good stable currency is a very important catalyst for adoption. Because there is a reason why the fiat lives side by side with stocks, bonds and precious metals. They do not cannibalize each other because they satisfy different cases of use.
There is a use case in order to accept dollars for decentralized applications. They can accept bitcoin and ether. But if you're creating a decentralized Uber, people will not want to pay with a resource that many of us believe will go up 10 or 20 times in the future.
BI: Throughout the market, I have noticed bitcoin exchanges that go into trading outside of trading, including custody or adventitio and now in your case, the stable coin business. Do you think that the role of crypto trade is not just facilitating trade in order to help bring the market to the next level?
Winklevoss: I think a lot of us, and especially good actors, are definitely doing things that we do not have to do proactively. Or they are not required to do. But it is a long-term approach. This is something we must do to advance the ecosystem. And we want to see the market continue to mature. Wall Street is aware of digital resources that is not really in cryptocurrency today as it could be in the future.
If we want the banks' compliance departments to feel comfortable, we need to speak their language. Whether this means the right internal controls or a SOC2 designation, then that's what it means.
The main point is market surveillance. The Virtual Commodity Association, which will obviously become a member, pushes forward. All these things will help to mature the market. And it is also just time. You can not build markets and trust the night. He is so young and so early. But also a lot has changed in a short time. A couple of years ago the conversations were so different. And even a year ago, there were huge changes.
BI: In order for the Gemini dollars to become digital money, it would be thought that the big traders would get on board. Is Gemini talking to merchants like Starbucks to accept stable money in their stores?
Winklevoss: This is a big point. There was a time in this world where people did not know if bitcoins would kill the fiat or the financial system or both. And some people have tried to live out Bitcoin for a month. Apparently, people generally do not believe that the bitcoin will be used to buy Starbucks or a Happy Meal. Is the question actually interrupting the gold or are precious metals side by side in a wallet? The beauty of a stable currency is that you do not have to worry about spending it. And the groups do not need our permission to use it. Starbucks could accept it if they wanted to. And we will be open to those conversations.