June 19th What is USDT? First look
aUSDT is a new “tethered” digital asset that combines the stability of gold and the functionality of Web3-based digital assets. This introduces the concept of a “Tethered Asset” based on Tether Gold (XAUt), which represents ownership of physical gold stored in Switzerland. The aUSDT token is designed to track the value of the U.S. dollar through overcollateralization and secondary market liquidity pools that provide stability and mitigate market volatility. Users can mint USDT by depositing XAUt into an Ethereum-compatible smart contract. These smart contracts automate and secure the collateral management process, providing a trusted and stable digital currency option.
A new kind of tethered digital asset
aUSDT is an innovative new foray into the digital asset space, combining the stability of gold with the capabilities of decentralized digital assets. aUSDT introduces a new class of “tethered assets” designed to maintain stable value by tracking a specific reference asset, such as the U.S. dollar, through mechanisms such as overcollateralization and secondary market liquidity pools. Overcollateralization aims to provide a safety net against market fluctuations and improve the stability of assets by holding more value as collateral than the value of the issued assets.
The first asset in the Alloy by Tether ecosystem is USDT, a digital asset issued using Tether Gold (XAUt) as collateral. Tether Gold represents ownership of physical gold safely stored in Switzerland, providing confidence in the preservation of the gold’s historical value. Users can mint USDT by depositing XAUt into a smart contract, which then holds collateral and allows USDT issuance. This process, combined with the activity of clearers and secondary markets, will help aUSDT become closely tied to the value of the U.S. dollar, providing users with a stable digital currency that combines the benefits of gold’s scarcity and low volatility.
One of the important features of USDT is that it uses smart contracts designed to be compatible with the Ethereum Virtual Machine (EVM). These contracts are written in Solidity, a powerful and secure programming language for developing Ethereum smart contracts. Smart contracts enable automated, transparent, and immutable transaction execution, ensuring that all interactions with USDT assets are secure and verifiable. This technology forms the backbone of the system, allowing users to seamlessly create, manage, and return tethered assets.
aUSDT’s smart contract stores user collateral and unissued aUSDT. We also track and manage information related to a user’s specific Collateral Mining Positions (CMPs), called “Vaults.” The smart contract uses price information from the price oracle to recalculate and adjust each user’s CMP based on the collateral value reported by the price oracle. When the collateral value falls below a certain threshold, the system initiates a liquidation process managed by professional actors known as liquidators. This mechanism helps maintain the stability and reliability of issued USDT by maintaining the collateral ratio. Through this sophisticated system, aUSDT aims to provide a stable and secure digital asset that bridges the traditional value of gold with the capabilities of modern digital currencies.
How does USDT work internally?
Published by MoonGold El Salvador, SA de CV and MoonGold NA, SA de CV (“publisher”), aUSDT operates through a sophisticated system designed to combine the stability of gold with the technical advantages of digital assets. Users start by depositing Tether Gold (XAUt) tokens into a smart contract, which represent ownership of physical gold stored in a Swiss vault. This forms the basis for creating a Tether asset called USDT. The system requires you to deposit more XAUt value than the amount of USDT issued. The system does not allow users to mint USDT exceeding 75% of the deposited XAUt value. If the value of issued (and not returned) aUSDT exceeds 75% of the XAUt collateral value, the liquidation process described above will occur. This excess collateral helps ensure the stability of the aUSDT token by acting as a buffer against market volatility.
aUSDT’s Ethereum-compatible contract, written in Solidity, manages the entire process from collateral deposit to issuance, USDT return, and clearing support from the clearer. We ensure automated, transparent and secure transaction execution. This is a specialized smart contract that stores user collateral, tracks issued and returned USDT, and manages each user’s Collateralized Position (CMP). Each Vault can only interact with one verified address, which must be whitelisted to interact with a smart contract, helping issuers comply with Know Your Customer (KYC) obligations.
Once collateral is deposited, users can mint USDT pegged to the US dollar. The amount of USDT issued depends on the user’s preferences (the maximum collateral ratio set by the system is up to 75%). Users can monitor CMP through a user-friendly front-end interface and check indicators such as collateral amount, minted USDT, clearing points, and status bar. This helps users effectively manage their positions and prevent liquidation.
The system uses a price oracle to determine the value of XAUt. The price oracle values each USDT as 1 USD. This oracle provides real-time price data that smart contracts use to adjust collateral value and CMP. This design allows for arbitrage. If aUSDT is trading below or above 1 USD on the market, the user creates or returns aUSDT to a smart contract that values aUSDT at 1 USD and then makes these transactions by buying or selling aUSDT on the market where the value of aUSDT is 1 USD. You can take advantage of inconsistencies. Less than or more than 1 USD. This mechanism helps keep prices stable.
If the collateral value falls and the CMP exceeds the set liquidation point (75% Mint-to-Value), the position will be subject to liquidation. Professional actors, called liquidators, can use USDT to purchase collateral at a discount, restoring collateral ratios and maintaining system stability. The clearer returns USDT to the cleared user’s Vault to claim the XAUt collateral at a discount to the XAUt price reported by the price oracle. This incentivizes clearers to act and ensures that USDT is backed by excess collateral of XAUt.
Ethereum’s powerful blockchain technology ensures that all transactions are secure, transparent, and immutable. Because everything is on-chain, every transaction and collateral value can be independently verified, promoting a high level of transparency and trust in the system. aUSDT aims to provide a stable and trustworthy digital asset that mitigates risks associated with market volatility and provides users with a reliable store of value.
The need for new safe assets
aUSDT provides a stable and trustworthy digital asset solution by utilizing Tether Gold (XAUt) to issue USDT. The system is designed to maintain price stability and provide a reliable store of value, which is especially useful for users looking for a stable digital currency for a variety of financial activities. aUSDT combines the enduring value of gold with modern digital asset technology to provide price stability through the powerful collateral and smart contract mechanisms described above, while also providing a stable and diverse digital asset that can be used for a variety of financial activities.
Users can utilize USDT for everyday payments and transactions. Support from Tether Gold (XAUt) helps keep the value of USDT stable, mitigating the volatility associated with other cryptocurrencies. This stability allows users to expect that the value of their holdings will not fluctuate significantly between the time of acquisition and the time of transaction, making aUSDT a useful digital currency for purchasing goods and services. Additionally, the peg to the US dollar facilitates simple pricing and conversion, making it easier for merchants and consumers to adopt and leverage USDT in their everyday financial activities.
In times of economic uncertainty and market volatility, aUSDT aims to serve as a trusted store of value by combining the stability of gold with the operational advantages of digital currencies. Users looking to protect their assets from market downturns can choose USDT, which can preserve its value thanks to its gold backing.
Arbitrageurs can take advantage of USDT’s price discrepancies and contribute to USDT’s price stability. If the market price of aUSDT falls below 1 USD, traders can benefit from the price difference by purchasing the asset at a lower price and using it to secure collateral in the Vault. Conversely, if aUSDT is trading above 1 USD, traders can mint new aUSDT and sell it at a higher market price to increase supply and drive the price back down to the peg level. These arbitrage activities not only provide opportunities for traders, but also help maintain USDT’s price stability, ensuring it remains a trustworthy and stable asset.
For users holding XAUt as collateral, aUSDT provides efficient collateral management and liquidity options. By depositing XAUt into the system, users can mint USDT, which can be used for a variety of financial purposes without the need to sell XAUt and can be returned to a smart contract at any time. This flexibility allows users to effectively manage CMP and adjust collateral and issued assets as market conditions change. Additionally, the ability to return aUSDT to reclaim collateral allows users to quickly react to asset value fluctuations, maintain personal collateral ratios, and manage liquidation risk. The seamless integration of gold-backed stability and digital currency features makes USDT a powerful tool for users.
Important note:
This post is not an offer or solicitation to buy Alloy by Tether (aUSDT) tokens or any other cryptocurrency. Buying or selling cryptocurrency on Bitfinex is done only in accordance with the Bitfinex Terms of Use, available at https://www.bitfinex.com/legal/exchange/terms.