Understanding Tether’s new platform Alloy: a new synthetic dollar platform powered by XAU₮

Original author: Nancy, PANews

On June 17, Tether, the worlds largest stablecoin issuer, announced the launch of the open platform Alloy by Tether, which allows the creation of different bound assets backed by Tether Gold.

According to the official website, Alloy by Tether aims to combine the stability of the US dollar with the security of gold to provide users with a reliable and versatile digital currency for daily use and asset management. The platform is developed and managed by Moon Gold NA, SA de CV and Moon Gold El Salvador, SA de CV, both of which are members of the Tether Group, authorized by the El Salvador CNAD (National Digital Asset Commission) to meet different customer groups and regulatory requirements.

The platform introduces a new type of digital asset class called Tethered Assets, which can support single or multiple types of collateral and aims to track the price of reference assets through stabilization strategies such as over-collateralization of liquid assets and secondary market liquidity pools. This innovative approach provides consistent value and stability between reference assets and their anchored counterparts.

Vaults are the core of Alloy by Tether and can be used to store user collateral, unissued aUSD₮, and user collateral minting position (CMP) information. Vault sets a specific liquidation threshold based on the liquidation point or maximum MTV, and the liquidation point is 75%. In other words, if the value of aUSD₮ minted in the CMP exceeds 75% of the value of XAU₮ (Tether Gold backed by real physical gold) used as collateral, the CMP is eligible for liquidation. It should be noted that users need to pass KYC verification to interact with Vaults.

In addition, Alloy by Tether is also compatible with Ethereum EVM, including supporting Ethereum mainnet, Polygon, Optimism, Arbitrum, BNB Chain, etc. Alloy by Tether chooses Solidity as the smart contract programming language, which can realize the flexible operation of different blockchains while maintaining extremely high security.

aUSD₮ is the first token in the Alloy by Tether series, designed to track the value of $1, and can provide the functional advantages of using the US dollar, such as its widespread use in payment, trading, settlement and savings, while combining the inherent advantages of gold, such as scarcity, low volatility and preservation of purchasing power. The official website shows that as of June 18, the minting volume of aUSD₮ exceeded 8 million.

The uniqueness of aUSD₮ is that it is over-collateralized by Tether Gold (XAU₮), which is backed by real physical gold stored in Switzerland. That is, users can use XAU₮ as collateral to mint aUSD₮ through Ethereum smart contracts. It is reported that XAU₮ is a gold stablecoin issued by Tether. Each token is one ounce of pure gold on a London good delivery gold bar, with advantages such as no custody fees. Ethereum browser data shows that as of June 18, the circulation of XAU₮ exceeded 246,000, with a market value of approximately US$570 million.

Of course, the aUSD₮ smart contract will also maintain transparency by monitoring collateral and minted tokens, and using price oracles to continuously evaluate the minting value (MTV) ratio. In addition to aUSD₮, Alloy by Tether will also support the creation of Tether assets with different support mechanisms in the future, including products that generate income.