The volatility of cryptocurrencies worldwide in recent years enabled asset-backed coins or stablecoins – blockchain issued tokens backed by an off-chain stable asset, to gain popularity across users and increase competition in financial markets. In 2020 stablecoins have shown systematic growth, as various platforms experienced exponential growth in stablecoin use.
The main reason is obviously safeguarded value propositions stablecoins have offered vs the other crypto coins with no stable price predictions. Namely, stablecoins are collateralizing stores of value that fully back the price of that cryptocurrency. So, the assets are protected by tangible stores of value, and uncertainty, whether a platform will be successful and gain revenue, is in the end removed.
When it comes to the classification of the asset-backed crypto coins we see the ones which are more centralized (fiat equivalent and fiat/asset-backed) and fully decentralized (crypto collateralized and algorithmic) coins. If we explore further what are the major concerns related to more centralized coins, we’ll see the claims by asset-backed tokens and risks whether they are really backed in the way they claim.
Or in other words; How does an issuer prove they really have all the reserves backing the currency?
Of course, there are many other associated risks and challenges, like legal and regulatory challenges or operational resilience and accountability of the issuing organization. So, how this the new trust layer can be set for more centralized coins or collateralized coins?
The generally accepted method is via third-party auditing. An independent inspector will examine the funds to make sure they are in the custody of the issuer. There are some adopted methods that ensure a process is conducted as transparently as possible with evidence written to a public blockchain. The third-party audit ensures that the ICO market is not perceived as an unstable and high-risk investment.
How CUPRUM Coin meets mentioned risk challenges?
We see CUPRUM Coin as the market where underlying asset – ultra-fine and nano Cu Powder, maintains value in the long term. We are aiming to introduce a new layer of fairness and transparency in informing the market about the value of the backed asset. By doing this we hope to earn the confidence from currencies’ buyers in the sense that their investment will be a promising alternative that complements crypto features with the long-term stability of the underlying asset. From a technical viewpoint, our blockchain platform addresses 3 key barriers blockchain is facing to date: smart contract safety, long-term upgradability, and open participation.
By Darko Parun