The Winklevoss Twins, founders of the Gemini exchange, have received approval to launch their own cryptocurrency. Launching on the Ethereum blockchain, the “Gemini Dollar” is available right now, reports Forbes.
The Next Big Stablecoin
Described as a stablecoin, the Gemini Trust Company’s request was validated by the New York Department of Financial Services (NYDFS.) Tokens will be backed by the U.S. dollar to provide stability while maintaining the unique aspects of a decentralized digital asset.
However, unlike other tokens like Bitcoin and Ethereum, the Gemini Dollar exists as a form of exchange rather than a store of value, similar to Ripple’s XRP. Ideally, each Gemini Dollar will be around the same value as a single U.S. dollar.
Stablecoins are used to combat the volatility of traditional cryptocurrencies. Whereas regular tokens are mined through verification or pre-mined during development, this other form of token represents the value of fiat currency deposited into an account. Transactions, of course, are made via smart contracts.
That said, the Gemini Dollar differs from traditional stablecoins. Here, token-backing dollars are held in an FDIC-insured account via the State Street investment firm, while monthly, third-party audits by BMP Audit will occur to account for all the money. Tyler Winklevoss calls this collaboration of companies a “network” of trust:
“It’s not just Gemini Trust, but you have to build a network of important players that are also trusted to solve for the trust problem of a stablecoin.”
The Gemini team of 150 employees has been working closely with State Street to secure the deposit account. “There’s a lot of enhanced due diligence and on-boarding and kicking the tires that goes into that,” states Winklevoss.
The NYDFS superintendent, Maria T. Vullo, backs the idea of multiple managers, stating that the additional regulation prevents market manipulation or money laundering:
“These approvals demonstrate that companies can create change and strong standards of compliance within a strong state regulatory framework.”
Suggested Reading : Learn how Gemini compares to another popular exchange—Coinbase
To ensure price stability, Gemini Dollars are created or destroyed at the time of deposit, while also adhering to ERC-20 standards, according to the Gemini white paper Forbes saw. This technology enables the Gemini Dollar to be compatible with other tokens on the Ethereum network. The current overall Ethereum network is worth around $11 billion.
While they sound like the next significant innovation in cryptocurrencies, stablecoins are really quite similar to traditional coins, only less volatile.
However, these types of coin are still superior to fiat currencies in a variety of ways, as they link “the 24-7/365 nature of cryptocurrency and blockchain with the fiat world,” says Tyler Winklevoss. “If there’s a price dislocation in a certain market and it’s a Friday night, traders can’t move fiat currency until Monday,” he continues in defense of the Gemini Dollar.
Aiming for a stable launch, Gemini worked with audit firm Trail of Bits to check for network issues. The full report isn’t available yet, but Trail of Bits CEO and Co-founder Dan Guido reported finding four low-security issues, two medium-security issues, and two high-security issues to Forbes. Yet, all of the bugs were resolved immediately by the Gemini team.
“At the end of the engagement, every issue we had identified was sufficiently resolved,” said Guido.
Gemini is currently the 54th largest exchange, trading around $12 million in volume every day. Yet, another exchange, itBit, also recently received approval for a similar ERC-20 stablecoin. To invigorate interest, Tyler Winklevoss validates Gemini Dollars even more:
“You don’t generally spend gold to buy something. You don’t generally spend a share of Apple to buy something. You convert them into a fiat currency. So we want to bring a fiat currency onto the blockchain that can be used as an effective medium of exchange for payments.”
Hopefully, the launch of the Gemini Dollar will help push cryptocurrencies into the mainstream market. While companies like Microsoft have accepted Bitcoin for a while now, digital assets still struggle to replace fiat for daily purchases, mostly due to volatility and scalability issues.
There is still hope, however, as we’re seeing more big tech names getting involved in cryptocurrency.
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