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The ideal cryptocurrency should maintain a stable value relative to the legal currency or be subject to an insignificant inflation, which will encourage its holders to spend their coins instead of storing them . A practical realization of this ideal today are stablecoins – cryptocurrencies, whose price is linked to the value of a real asset, for example the US dollar.
Stablecoins maintain all the main advantages of digital money, such as cryptographic security, decentralization, transparency, accessibility for natural and legal persons who are entitled to the same conditions, while the main disadvantage is missing: volatility. Therefore, this cryptographic money is an ideal tool, for example, for the interaction of cryptographic exchanges between them, as well as with real exchanges and banks, which still remain suspicious of digital resources. Traders also use stablecoins to record their earnings during periods of high volatility and transfer funds from one trading platform to another.
Suspether Tether
The most common stablecoin today is Tether (USDT), whose price is linked to the US dollar in the 1: 1 ratio – that is, 1 USDT can be traded for 1 US dollar. The rapid growth in the volume of Tether that exceeds 2 billion of these currencies, which are now in circulation, shows how high the demand for digital money is with a stable value.
The Tether system is based on blockchain algorithms and works on the Test principle of reserves. In theory, Tether Limited accounts receive first dollars, so in accordance with the actual amount of money, the USDT token is issued. They are sent via cryptographic exchanges to users who make transactions between them and exchange Tether for other cryptocurrencies. The real dollars at this time are stored on a special account of the company. If the owner of the token decides to cash out, for example, 100 USDT, Tether will send him 100 real dollars and he will burn 100 tokens. The correspondence between the amount of the USDT in the network and the real money in the bank account of Tether Limited is confirmed by a periodic audit.
However, in practice, serious problems arose with this scheme. Since Tether Limited did not bother to conduct regular audits, the cryptocurrency community suspected that the company had insufficient reserves to provide full support for all USDTs currently in circulation.
On 7 November 2017, industry media published documents called Paradise Papers, which show that the Bitfinex exchange, through which the overwhelming majority of all USD issues took place, and Tether Limited are managed from the same people. The CEO of Bitfinex Jan Ludovicus van der Velde presented himself as CEO of Tether and Philip Potter holds the position of chief strategist in both companies.
Analysts have also noted that the process of issuing Tether often coincides with the fall in the price of bitcoins: 48.8% of the periods of growth of bitcoins have occurred on two-hour intervals after the Bitfinex portfolio is been filled with USDT. The conclusion suggested one: the USDT is issued depending on market conditions and not the availability of legal currency in the reserves.
Therefore, when Tether was issued in the month of January 2018 for an amount of $ 850 million, market participants began to request confirmation that the USDT is actually backed by real dollars. Tether, however, has agreed to provide such information to the industry media only on condition that a non-disclosure agreement is signed.
This has further increased the concerns of market participants. The conflict broke out with renewed force a couple of months ago: on June 13 a large article was published in the journal of the University of Texas, the authors argued that the big jump in the price of bitcoin at the end of 2017 was in part due to the manipulation of the Tether on Bitfinex. The results of this research were widely discussed by the major corporate media, which made the "division" of Tether Limited. The company claimed to have previously hired a well-known law firm Sporkin & Sullivan (FSS) to monitor its activities and bank accounts. On June 18, Tether Limited published a confidential FSS report stating that the company's bank accounts had the cash dollars needed to provide all the USDTs available in circulation.
Last week, former FBI FBI director, Louis Free, gave an interview to Yahoo Finance and confirmed that Tether actually held $ 2.545 billion in two banks, which they covered 2.538 billion coins of Tether in circulation at that time, plus a "security cushion" for about 7 million dollars.
Swiss Franc against the dollar
However, many market participants did not believe in FSS assessments, since the law firm simply does not have enough qualified specialists in the field of encrypted finance. Therefore, projects for the development of new digital capital, backed by real assets, have begun to emerge.
In July, IBM announced the creation of a USD dollar token, supported by the US dollar. The project is being implemented in collaboration with Stronghold and the token will be used by Stellar. The cryptocurrency EURO has been issued in Malta, the value of which is linked to the European currency.
The company ROCKZ AG is launching a stablecoin supported by the Swiss franc. At first glance, the idea seems rather controversial because the prevalence of this currency in the world is much lower than the dollar or the euro. But if it's about stability, the Swiss franc simply has no competitors.
The reliability of this currency is mainly due to the special status of Switzerland itself in the world. This Alpine country has for years been a model of neutrality, not taking part in international wars and economic conflicts. A high-tech industry, a deficit-free budget, one of the highest per capita GDP in the world and low inflation ensure the stability of the Swiss economy.
The highest level of banking technology development, including at the central bank level, enables Swiss financiers to respond quickly to the turmoil in the global financial system. A clear example of this was the multilateral crisis of European debt in 2009-2013, when investors, to save their money, were quick to buy the Swiss currency. A huge flow of funds from European countries to Switzerland has led to a strong strengthening of the franc, making Swiss exports less profitable. Therefore, the Swiss National Bank decided to link the franc rate to the euro. But when the European currency began to weaken against the dollar and affect the franc, on 15 January 2015, the Swiss central bank announced the end of the euro peg, which guaranteed the stability of the Swiss currency against the Euro devaluation.
The positive long-term balance of Swiss foreign trade makes a vast indebtedness of money in the international financial market superfluous. The State Ministry of Finance issues government bonds only to maintain recognition in the global loan market. At the same time, the size of external public debt is purely symbolic, so the mood of international investors practically does not affect either the economy or the currency of Switzerland. Unsurprisingly, analysts at JPMorgan's bank company placed the Swiss franc in the currency list in July, which, together with the Singapore dollar and the Japanese yen, should be bought in the event of a global recession and economic crisis.
According to economists, in the last fifty years, the US dollar has lost 78% of its value in the Swiss franc. Apparently, in the next few years, this figure will increase significantly. Now, inflation in the United States is accelerating oil prices and the trade war, which has led to higher prices for steel and aluminum in the United States.
At the same time, the demand for the dollar in the world is falling. On the one hand, more and more countries, led by China and Russia, declare the need to abandon the US currency in international settlements. On the other hand, global demand for US government bonds is declining. Investors, frightened by the dizzying growth of national debt and the US budget deficit, refuse to invest in the Treasury. Thus, at the auction of the US Finance Ministry, held in early August on the sale of three-year government bonds, demand was the lowest in the last ten years: non-residents bought a little more 40% of the titles. [19659003] All this creates preconditions for at least a global weakening of the dollar, as the maximum for a new global financial crisis, which economists are increasingly saying is approaching. In both scenarios, the demand for defensive assets, such as the Swiss franc or the cryptocurrencies related to it, is growing significantly.
ROCKZ Vs. USDT
The economic benefits of the Swiss franc and ROCKZ [19659017] against the US dollar and USDT are complemented by an entire list of other advantages. The first is legal security. Cryptocurrencies that are closely linked to the US dollar can be recognized as derivatives and, consequently, fall within the US Securities Commission regulation. Since no one thought of it when launching the USDT, Tether owners may have problems with American regulators at any time.
The Swiss government, by contrast, has undertaken a course to provide maximum support to companies associated with crypto and block -up to become a world leader in this field. The Minister of Economy Johann Schneider-Amman has recently declared that Switzerland wants to become a "national crypt nation". Last year, the Alpine authorities ranked second after the United States raised funds through ICO. There are now around 200 companies in Switzerland involved in the development of blockchain projects.
Until recently, the growth of this sector was hampered by problems with the access of cryptocurrency companies to banking services due to the rules to combat money laundering. However, Heinz Tannler, financial director of the canton of Zug, recently promised that Swiss politicians and regulators will remove the obstacles in the coming months, allowing the encrypted companies to operate with banks in the same way as other companies.
Secondly, ROCKZ itself has several advantages over the USD. In particular, Tether Limited does not exchange USDT for dollars, but only dollars for USDT. The exchange of Tether for the dollar can be made only through the exchange of cryptocurrency. If you need to withdraw funds from the exchange when you do not have open positions for trading, you will probably be given USDT. In this case, the user will have to pay serious commissions if he wants to withdraw his money in dollars.
ROCKZ, on the other hand, does not impose restrictions on the exchange of its cryptocurrency for legal tender. The owners of this currency can transfer the equivalent amount in Swiss francs to their bank account, credit card or directly to a Swiss bank. Swiss franc reserves backed by ROCKZ coins are deposited in Swiss deposits and banks. Their availability and volume are regularly confirmed by an authoritative reviewer without further requirements from the cryptocurrency owners. All market participants have full and unimpeded access to auditor ratings.
Thus, ROCKZ allows all participants in the cryptocurrency market to securely fix positions and be able to quickly enter the cache, be certain of the issuer's reliability and the security of cryptocurrency in Fiat.
Recently, ROCKZ unexpectedly found another advantage over Tether. SlowMist's Chinese cybersecurity experts studied the code of Tether's cryptocurrency project and discovered something new. This stablecoin has a code vulnerability that allows you to verify a double cost error. It turned out that while the crypto-instruments are processing the receipt of the user's money in USDT, they may erroneously confirm the transfer of money. This operation can be recognized as successful, although in reality digital money has not yet been withdrawn from the user's account. In other words, if you try, in the case of Tether, you can get USDT in your trading account, while you actually save coins.
The total daily average volume of trade in stablecoin in the last four months was almost $ 3 billion, with Tether accounting for more than 99% of this amount. This suggests that over 99% of market participants' market transactions were accompanied by a significant risk. The very concept of ROCKZ excludes this risk and offers investors the opportunity to obtain a more reliable protection tool with a more stable underlying asset.
Disclaimer: This article should not be taken as and is not intended to provide investment advice. Global Coin Report and / or its affiliates, employees, writers and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct a thorough research before investing in any cryptocurrency and read our complete disclaimer.
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