BitMEX Founder Arthur Hayes Proposes New Bitcoin-Backed Stablecoin – Here’s How It Works

BitMEX Founder Arthur Hayes Proposes New Bitcoin-Backed Stablecoin – Here’s How It Works

BitMEX co-founder and crypto veteran Arthur Hayes proposes an idea for a new Bitcoin (BTC)-backed stablecoin.

In a new blog post, Hayes tells his 67,000 followers that the collapse of crypto-friendly bank Silvergate suggests there is a need for a token that is worth $1 but doesn’t rely on the traditional banking system.

“The goal is not to create a decentralized fiat currency. MakerDAO is great, assuming it’s actually decentralized, but for $1 of value, it requires locking >$1 of crypto value. It removes more liquidity than it adds, which is net negative for the system What we need is a mechanism that allows you to unlock $1 worth of crypto to get $1 worth of a stablecoin.

Hayes suggests “Satoshi Nakamoto Dollar, NakaDollar, NUSD,” and lays out how it might work.

“1 NUSD = $1 Bitcoin + Short 1 Bitcoin / USD Inverse Perpetual Swap.

A Bitcoin inverse perpetual swap (eg Ticker: XBTUSD on BitMEX) that is worth $1 Bitcoin paid out in Bitcoin has the following payout feature:

$1 [divided by] Bitcoin price in USD
If Bitcoin is worth $1, the Bitcoin value of the perpetual exchange is 1 BTC, $1 / $1.
If Bitcoin is worth $0.5, then the Bitcoin value of the eternal exchange is 2 BTC, $1 / $0.5.
If Bitcoin is worth $2, then the Bitcoin value of the perpetual swap is 0.5 BTC, $1 / $2.”

In short, Hayes proposes an idea where a stablecoin is linked to both the value of Bitcoin and the value of short Bitcoin in the perpetual markets. In theory, the two values ​​should cancel each other out during price swings to maintain the $1 stick.

See also  The Pokemon Company May Be Preparing to Make Moves in the Metaverse - Metaverse Bitcoin News

To elaborate on his idea further, Hayes shows an example of how the stablecoin would stick to its peg in a scenario where BTC’s value dropped from $1 to $0.1. According to the crypto capitalist, the profits made by the stablecoin from shorting BTC in the perpetual markets will cancel out the losses that come with the decline in BTC’s value.

Meanwhile, an increase in BTC’s value will also invalidate the stablecoin’s losses from its short position, effectively holding the peg.

BTC is trading at $24,258 at the time of writing, up 8% on the day.

Don’t Miss a Beat – Subscribe to get crypto email alerts delivered straight to your inbox

Check price action

Follow us on TwitterFacebook and Telegram

Surf The Daily Hodl Mix

Check the latest news headlines

&nbsp

Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making high-risk investments in Bitcoin, cryptocurrency or digital assets. Please note that your transfers and trades are at your own risk and any losses you incur are your responsibility. The Daily Hodl does not recommend the purchase or sale of cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Generated Image: Midjourney

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *