BitMEX co-founder and crypto veteran Arthur Hayes is proposing an thought for a brand new Bitcoin (BTC)-backed stablecoin.
In a brand new weblog put up, Hayes tells his 67,000 followers that the collapse of crypto-friendly financial institution Silvergate means that there’s a necessity for a token that’s value $1 however doesn’t depend on the standard banking system.
“The objective is to not create a decentralized fiat forex. MakerDAO is nice, assuming it truly is decentralized, however for 1 USD of worth it requires locking up >1 USD value of crypto. It removes extra liquidity than it provides, which is a internet destructive for the system. What we’d like is a mechanism that permits you to lock up 1 USD value of crypto to acquire 1 USD value of a stablecoin.”
Hayes proposes the “Satoshi Nakamoto Greenback, NakaDollar, NUSD,” and lays out the way it might work.
“1 NUSD = $1 of Bitcoin + Quick 1 Bitcoin / USD Inverse Perpetual Swap.
A Bitcoin inverse perpetual swap (e.g., Ticker: XBTUSD on BitMEX) which is value $1 of Bitcoin paid out in Bitcoin has the next payoff operate:
$1 [divided by] Bitcoin Worth in USD
If Bitcoin is value $1, then the Bitcoin worth of the perpetual swap is 1 BTC, $1 / $1.
If Bitcoin is value $0.5, then the Bitcoin worth of the perpetual swap is 2 BTC, $1 / $0.5.
If Bitcoin is value $2, then the Bitcoin worth of the perpetual swap is 0.5 BTC, $1 / $2.”
Briefly, Hayes proposes an thought the place a stablecoin is pegged to each the worth of Bitcoin and the worth of brief Bitcoin within the perpetual markets. In principle, the 2 values ought to cancel one another out throughout value swings to keep up the $1 peg.
To additional elaborate on his thought, Hayes exhibits an instance of how the stablecoin will keep on with its peg in a situation the place BTC’s worth fell from $1 to $0.1. In line with the crypto capitalist, the income made by the stablecoin from shorting BTC within the perpetual markets will negate the losses that include the decline in BTC’s worth.
In the meantime, an increase in BTC’s worth may also invalidate the stablecoin’s losses from its brief place, successfully retaining its peg.
BTC is buying and selling for $24,258 at time of writing, up 8% on the day.
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