DeFi
Tether seeks to compete with DeFi with upcoming synthetic asset platform
Tether has launched a gold-backed USD stablecoin, demonstrating its upcoming “Tethered Asset” platform, Alloy.
Tether, the team behind the largest stablecoin by market capitalization, is launching a new platform offering a centralized alternative to major DeFi money market protocols.
June 17, Tether announcement the launch of aUSDT, a stablecoin pegged to the US dollar and backed by tokenized gold, specifically Tether Gold (XAUt). XAUt is a gold-pegged stablecoin representing ownership of physical gold held in Switzerland.
“[aUSDT] by Tether offers long-term holders the ability to maintain exposure to gold, while at the same time obtaining a dollar-referenced Tethered asset for payments and the everyday economy,” Alloy said in an article on X.
Tether described USDT as its first “tethered asset,” providing the utility of a fiat currency while deriving its value from a different asset.
aUSDT is also the first asset issued through Tether’s upcoming Alloy platform.
Is Tether looking to compete with DeFi?
Tether appears to be positioning its Alloy platform as a CeFi alternative to major money market protocols like Aave and Curve, both of which allow users to create native stablecoins (GHO And crvUSDrespectively) against over-collateralized positions of other crypto assets.
GHO and crvUSD positions are managed by smart contracts, with users able to post permissionless collateral, create stablecoins, and burn their stablecoins to redeem the underlying collateral. Users also risk liquidation if the value of their deposits risks being under-collateralized due to price movements.
Similarly, authorized Alloy users can create USDT by depositing XAUt positions on a smart contract. Users can also manage their positions and redeem USDT against underlying XAUt, and face liquidation if their collateral value falls below a specific overcollateralization ratio.
Open platform
Tether also announced the upcoming deployment of Alloy as an “open platform” allowing users to create over-collateralized Tethered assets backed by a wide range of digital assets, potentially including yield-generating products.
“Alloy by Tether is an open platform that allows [users] to create collateralized synthetic digital assets and will soon be part of the new digital asset tokenization platform, launching later this year, “ saidPaolo ArdoinoCEO of Tether.
However, unlike DeFi protocols, Alloy requires users to undergo know-your-customer (KYC) verification to access the protocol.
Adam Cochran, VP of Operations at SBT Partners, believes Alloy could provide a first point of contact with DeFi for CeFi users.
“My best ‘guess’ about this setup is that they want Alloy to eventually be a consumer-facing DeFi/CeFi application…and then eventually have yield-bearing assets backing Alloy’s assets and makes an integration touchpoint to DeFi,” Cochrane said.
Cochran interrogates the effectiveness of the business model that underpins Alloy, with a focus on the storage costs and lack of returns associated with holding gold for users.
“On USDT, they generate income on the underlying bonds,” he said. “Gold is expensive to store and has no yield, so they don’t really make money by driving its growth.”
Nonetheless, Alloy charges a $150 fee to complete KYC verification. Tether also risks charging liquidation fees in the event users experience margin calls.
Attached USDT is the largest stablecoin with a market capitalization of $112.4 billion after surpassing $100 billion for the first time in March. Tether Gold is the eighth stablecoin with a market capitalization of nearly $571 million, according to CoinGecko.
Alloy is registered as a stablecoin issuer in El Salvador. aUSDT was developed in partnership with Tether subsidiaries Moon Gold and Moon Gold El Salvador.