[ad_1]
The Stablecoin Basis project, which had raised over $ 133 million in venture capital, should close and return most of the funds to investors. Unlike other projects that shut down due to the bear market, Basis is stalling due to regulatory obstacles while trying to make the Stablecoin project work. Backed by Bain Capital Ventures, GV, Andreessen Horowitz, Lightspeed Ventures, Stanley Druckenmiller, Polychain Capital and others, Basis was aiming to usher in a new era of stablecoin through its unique algorithm. At the time of writing this article, the Basis team made no official announcement.
How the basic algorithm is designed to work
The Basis platform would have been unique in the sense that it had three entities: stable currency, bond tokens and basic units. The basic currency would have been fundamental to the system and anchored to the dollar. Bond tokens would have been sold off the blockchain when they needed to contract the basic supply (inflation). These tokens would not be hooked up to anything. A Bond token would promise the holder exactly a base at some point in the future and would be sold at a discounted price.
The third type of token – basic shares – would be of a fixed supply and not tied to anything. Their value would be based on the dividend model. When the Basis request has risen and new currencies have been created to meet demand (deflation), the basic unit holders will receive these newly created base coins on condition that all outstanding bond tokens have been redeemed.
More information on how the algorithm is designed to work can be found in the project's whitepaper that is available online.
Regulatory obstacles with such a concept
By further studying the algorithm and the whitepaper, we can link the points and conclude that what the Basis project was trying to do is oddly similar to the work of a central bank.
Nevin Freeman, Reserve.org CEO, explained why additional tokens could have caused more regulatory obstacles:
In many cases, these secondary "share" or "bond" tokens are titles. This means that they can only be purchased by investors accredited in the United States and similar restrictions apply elsewhere. They could be traded by retail investors in the future, but this may take a long time for the SEC to approve.
Since there is only a small group of people who can buy these "share" or "bond" security tokens, protocols based on this mechanism could be at risk – if nobody wants to buy these tokens when the stablecoin is trading below the pegged price, the peg will remain broken.
What are your opinions on the Stablecoin Basis project that closes? Let us know in the comments section below.
Disclaimer: This article is not intended to give financial advice. Any other opinion present here is purely that of the author and does not represent the opinion of Ethereum World News or one of its other writers. Perform your research before investing in one of the many cryptocurrencies available. Thank you.
Source link
