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**Author: Hamster | Source: ChainFeeds**
Tether, the world’s largest stablecoin issuer, has recently launched a new stablecoin, aUSD₮, aimed at meeting the growing market demand and injecting fresh vitality into the DeFi ecosystem. aUSD₮ is a unique digital asset collateralized by Tether Gold (XAU₮), meaning it is backed by physical gold stored in Switzerland.
**What are Alloy by Tether, Tethered Assets, and aUSD₮?**
Recently, Tether announced the launch of the new platform Alloy by Tether, introducing a new type of digital asset called Tethered Assets. These assets aim to track the prices of reference assets through stabilization strategies, such as over-collateralization with liquid assets and secondary market liquidity pools. Tethered Assets can accept single or multiple types of collateral and track the prices of various well-known assets, including fiat currencies, commodities, and similar products.
Alloy by Tether serves as an open platform allowing for the creation of different Tethered Assets with broader support mechanisms, potentially including yield products. This technology also offers institutional investors a modern asset management approach, providing secure, gold-backed digital assets integrable into portfolios. Moon Gold NA, S.A. de C.V., and Moon Gold El Salvador, S.A. de C.V. have been authorized by the Salvadoran CNAD to oversee the issuance and management of Alloy by Tether, catering to diverse customer groups and regulatory requirements.
Alloy by Tether tokens use Tether Gold (XAU₮) as collateral, representing a Tethered Asset. aUSD₮ is the first Alloy by Tether token designed to track the value of 1 US dollar. Tether Gold tokens represent physical gold stored in Switzerland, with each XAU₮ token pegged to an ounce of physical gold and meeting the London Bullion Market Association’s (LBMA) good delivery standards. This combination aims to provide the stability and reliability of gold while offering the functionality and convenience of the US dollar for transactions. aUSD₮ is created on the Ethereum network, managed through Ethereum-compatible smart contracts, ensuring transparency and security. This approach not only bridges physical gold with digital trading but also enhances stability by using price oracles to monitor real-time relationships between the token and its underlying value.
As of June 30th, aUSD₮ has minted over 19.04 million tokens, with over 417.23 kilograms of gold collateralized.
**aUSD₮ Minting Mechanism: Over-Collateralization and Vaults Smart Contracts**
The aUSD₮ minting mechanism includes several aspects:
**Over-Collateralization:** Over-collateralization is central to aUSD₮. Each aUSD₮ token is backed by Tether Gold (XAU₮) valued higher than its face value. Excess XAU₮ serves as a buffer, safeguarding aUSD₮ from fluctuations in gold prices. When minting aUSD₮, users must deposit more gold than the value they wish to mint, ensuring the token’s stability and security.
**Minting Process:** Users mint a corresponding amount of aUSD₮ by locking a specified quantity of Tether Gold into smart contracts. The maximum amount of aUSD₮ that can be minted is determined by the Minting Value Ratio (MVR), with a maximum MVR of 75%. The entire minting and management process is conducted through Ethereum-compatible smart contracts (Vaults), ensuring transparency and security. Minting is accessible as long as users pass KYC and their CMP’s MVR does not exceed the liquidation point.
**Vaults Mechanism:** Vaults are smart contract systems used to store user collateral and unissued aUSD₮ independently and permissionlessly, verifying XAU₮ collateral supporting each issued aUSD₮. Vaults also store user CMP information and address indices, such as minted aUSD₮, provided XAU₮, and MTV positions. Only addresses that have completed KYC verification can interact with Vaults to mint aUSD₮. Vaults utilize price oracles to continuously fetch price data, monitoring and calculating the current MTV of each user collateral position.
**Oracle Mechanism:** The oracle mechanism ensures that the value of aUSD₮ remains pegged to the US dollar at a 1:1 ratio. Oracles fetch real-time price data for XAU₮ and USD from multiple trusted sources to calculate the current MTV of each user collateral position, ensuring system stability and transparency. This mechanism not only maintains the value of aUSD₮ but also utilizes the intrinsic value of gold to provide additional stability and security.
**Liquidation Mechanism:** Liquidation occurs when the value of collateral falls below a predetermined threshold (usually set at 75% of the collateral’s value). Authorized liquidators can intervene when a user’s collateral position approaches the liquidation point, reclaiming the user’s XAU₮ and returning an equivalent amount of aUSD₮. This mechanism ensures system integrity and prevents under-collateralization.
**Fee Structure:** Minting, redemption, and liquidation of aUSD₮ incur certain fees. Currently, minting and redemption fees are both 25 basis points (bps), while the liquidation fee is 75 bps. These fees help cover operational costs and maintain stability within the system.
Through this mechanism, aUSD₮ offers a digital asset combining the stability of the US dollar with the value of gold, suitable for various trading and investment needs.
**Detailed Minting Process:**
1. **Collateral Deposit:** Users first visit the Alloy by Tether website and select to start minting. On the left side of the screen, users choose the amount of Tether Gold (XAU₮) they wish to provide and decide how much aUSD₮ to mint. (XAU₮ can be purchased through the Tether Gold platform or secondary markets.)
2. **Setting Parameters:** The system displays information such as collateral, the amount of aUSD₮ to be minted, minting fees, liquidation points, MTV, health bar, XAU₮ prices, and liquidation prices.
3. **Transaction Overview:** Detailed transaction summaries show wallet balance changes, CMP impacts, and related fees.
4. **Confirm Minting:** Users click the “Add Collateral and Mint aUSD₮” button to confirm the transaction, transferring XAU₮ from their wallet to the Vault as collateral, with minted aUSD₮ appearing in their wallet.
5. **Monitoring CMP:** Users can monitor CMP and current statuses on the right side of the screen.
**Core Advantages of aUSD₮: Stability of Gold and On-chain Transparency**
The core advantages of aUSD₮ include:
**Stability backed by Gold and direct exposure to Gold’s value:** aUSD₮ is collateralized by Tether Gold (XAU₮), stored in Switzerland, ensuring stability. Through over-collateralization, each aUSD₮ token’s face value is supported by higher-value Tether Gold, providing a buffer against gold price fluctuations. Additionally, aUSD₮ offers the convenience of daily use similar to fiat currencies, while its backing by Tether Gold offers users direct exposure to the value of physical gold. Users can enjoy the security of gold while efficiently transacting and storing value with aUSD₮.
**Transparency and Security:** The minting and management of aUSD₮ are conducted through Ethereum-compatible core smart contracts, independently and permissionlessly verifying XAU₮ collateral. All interactions require KYC verification, ensuring that only verified addresses can interact with smart contracts. Price oracles continuously monitor the relationship between tokens and their underlying value, further enhancing system stability.
**Liquidity and Efficiency:** aUSD₮ provides a simplified pathway for gold transactions, usable for both daily transactions and as a stable asset management tool for investors. Through compatibility with the Ethereum ecosystem, aUSD₮ can seamlessly integrate with various DeFi platforms, facilitating yield generation and asset diversification.
**Versatility and Broad Application:** Apart from stability and transparency, aUSD₮ offers a new asset management approach suitable for various financial institutions and individual investors. Its design not only supports traditional financial transactions but also enables automated minting, redemption, and liquidation through smart contracts, providing a modern asset management solution.
**Continued Transparency and Auditability:** Operating independently of the banking system, aUSD₮ serves as a resilient, fully on-chain solution, offering high levels of transparency and security.
Through these advantages, aUSD₮ provides users with a stable and efficient digital asset management tool, combining the security of gold with the transparency and efficiency of blockchain technology, offering investors a reliable tool for value storage and transactions.
**Conclusion**
Tether’s new stablecoin, aUSD₮, innovatively combines the stability of Tether Gold with the transparency of blockchain technology, offering users a new digital asset management tool. aUSD₮ utilizes over-collateralization mechanisms and smart contracts to ensure its stability and system transparency. It not only leverages the intrinsic value of gold to provide additional stability but also enables automated management through Ethereum-compatible smart contracts, suitable for various trading and investment needs. With its transparent operations and robust security, aUSD₮ offers investors a reliable tool for value storage and transactions, while providing the DeFi ecosystem with more choices and possibilities.
