Why We Don’t Need Failed Fiat Stablecoins Like USDT?May 17, 2019
Developers from Platinum Q DAO shares a secret of creating definitely reliable stablecoins like USDQ, KRWQ, CNYQ and JPYQ.
Haleel Risthisen is an active member of crypto community who has contributed extensively to emerging blockchain-based solutions. She currently works as a Blockchain Engineer at Platinum Q DAO Engineering, leveraging her skills in cryptography and DLT to help develop USDQ, a fully decentralized stablecoin for easy Bitcoin collateralization.
Accustomed to agile and SCRUM environments, she combines a platform-level architecture mind and ability to discern lower-level challenges and bottlenecks, always ready to consult customers on the journey ahead and choices available. Dedicated to delivering superb UI/UX, Haleel works closely with front end development sub-team, smoothing out kinks in implementations, shipping pixel-perfect and usability-first deployments.
- 1 USDQ = $1
- Q DAO helps maintain USDQ at $1 by means of a collateral guarantee and pricing system. This collateral guarantee is itself managed by holders of Q DAO. Moreover, KRWQ – a stablecoin pegged to Korean Won will be attached to Q DAO family. This will not only make a huge impact on the local Korean market but also to the whole Asian region.
- Q DAO holders will always have the chance to buy any debt or collateral guarantees.
- The system is protected by Global Resolution.
- Decentralized stablecoins are needed for the prosper of the crypto market.
Sure, we understand that when you think about some of the information about how USDQ works it may seem a bit too complicated and complex. This is even more evident if you don’t have any technical background. Throughout this text, we will be explaining USDQ and the Q DAO ecosystem as if we are talking to a newbie in the scene of crypto.
What’s exactly the product of Platinum Q DAO Engineering?
Instead of focusing on who Platinum Q DAO Engineering is we should first start to outline what kind of product the company has created. The product in question is called USDQ.
USDQ is, indeed, a stablecoin. Today, the concept and uses of a stablecoin are well understood. In simple words, it’s a blockchain cryptocurrency (like BTC or ETH) but that has a pegged value in relation to the U.S. Dollar. In short, one USDQ is the same as one dollar.
But there seems to be lots and lots of stablecoins recently. What’s so different about this one? If you are thinking about stable assets like Tether (USDT) you are most familiarized with coins that maintain their peg to USD by keeping fiat money in their actual bank accounts. These types of companies issue their own cryptocurrency tokens backed by these real-life dollars. We can refer to this kind of stable coin as a legally-backed cryptocurrency because, if you think about it, those bank accounts could be frozen at any point and if that happens the stablecoin becomes a note of debt on whatever is remaining if and when the bank accounts are unfrozen again. Nevertheless failed Tether example showed that the scammy nature of creators of USDT can spoil the whole idea. Frankly, You are basically depending on an intermediary that will arbitrate on what you should receive in these fatal scenarios.
There has to be a better way. There is, with USDQ.
USDQ is a stable asset cryptocurrency whose USD-pegged stability that does not rely on any specific blurry legal system or intermediary counterparties.
Why do you need stable asset cryptocurrencies?
A non-volatile stablecoin is a key step towards realizing the potential of blockchain technology to transfer value online. This means that cryptocurrencies can be used more effectively for traditional financial products such as loans. If you were to take out a loan denominated in BTC or ETH and the value fluctuates between 10% to 20% in 24 hours the sense of choosing it over a fiat-based option does not make much sense. How about if want to send a specific amount for remittance. In only the time it takes for a bitcoin transaction to confirm your crypto could lose value and you may end up paying more as opposed to just paying the fees of remittance services using fiat money. Ever placed a bet on something? You shouldn’t denominate that bet in ether. How about if you are betting on the results of a month-long sports competition? A month from now ether’s price could be quite different from where it’s at now. Lastly, think about using decentralized exchanges, the original dream for cryptocurrency adopters, complete P2P transfers without unnecessary intermediaries valued with the help of non-volatile stable assets and would always allow users to maintain full custody of their own funds being transacted. No hacking situations, no single-point-of-failure scenarios for exchanges losing customers’ funds.
Explanation of the Q DAO System
This will be the most important part of this text. To be able to understand how the Q DAO creates stability for USDQ we will also make definitions for some terminology related to blockchain throughout the sections of this text.
USDQ, the stable asset coin is upheld by collateral guarantees. These collaterals are in the form of crypto (bitcoin to be precise). Let’s imagine you want to use your BTC to generate some USDQ. The first step requires you to send it to a Collateralized Debt Contract (CDC) which basically means that it becomes a value that remains locked by a smart contract as a form of guarantee for the USDQ you receive for it. It is a computer program on the ethereum blockchain whose main function is to make each transaction compliant with the terms of USDQ and the collateral guarantees each user is placing.
How does the Q DAO Ecosystem work?
The ecosystem is built on the notion of smart contracts. Such is the case of the CDC. The Collateralized Debt Contract referenced in the paragraph above. Remember, a blockchain gives you a chance to get things done without anyone else involved – no usual intermediaries are needed here. Very identical to how websites allow you to share data without going back and forth with other unnecessary parties. So we can say that blockchains let you share an incentive without a mediator. As you may have heard numerous times this was the original idea for the first decentralized peer-to-peer digital currency known as Bitcoin. Bitcoin allows anyone the ability to send from Point A to Point B without confiding in anybody except yourself. Actually, the trust is not eliminated completely but it is placed on the way the blockchain works. You are putting your confidence in the mechanism used by blockchain to confirm and accept only the valid transactions and operations. Ethereum came along and added more functionalities to this idea of transferring value. It actually allowed users to now be able to send instructions and specific guidelines along with their transfers. And this is exactly how Smart Contracts were born as a concept. We can summarize it like this “Send my ether from Point A to Point B on this date, right now, and with these unique guidelines.”
Smart Contracts in the USDQ Ecosystem
The most important thing at the center of it all is the CDC. Just think of the times when someone goes to a bank and asks for home mortgage. This is essentially a loan given to you based on the value of your home. What is the collateral here? If you guessed your home then you are correct! If the value of your home reduces over time then you will be asked to pay the money back. If you can’t pay it back completely they will take your home, because it was your loan collateral. Now just take this idea back to USDQ and the Q DAO ecosystem. Just change the home for bitcoin, the bank for a smart contract and the actual loan for USDQ stable coins. How simple is that? You can give your cryptocurrency bitcoin or other top 10 cryptocurrencies in the future) to the Q DAO smart contract and it will allow you to apply for a line of credit denominated in USDQ in relation to the collateral you used. If the value of the bitcoin used to back the USDQ generated goes down below a specific edge then it will sell part of your bitcoins automatically, because it is a smart contract programmed to do this, via means of a debt auction.
Very briefly, CDCs and the smart contract is where the insurance that covers and protects the system stems from.
You may ask what the incentive to lock your crypto as CDC is. The answer to this is simple. You can generate additional USDQs for having crypto used as CDCs. The amount you can earn is in relation to the amount you have staked this is also known as collateralization proportion.
Let’s assume bitcoin is worth $1,000 right now. And the collateralization proportion is 166%. When any user sends 1 BTC ($1,000) into the CDC smart contract, let’s say the user can generate 602 USDQ from this. This implies, at the present estimation of bitcoin, that for every 1,000 USDQ that there is it’s upheld by at least 1.66 bitcoin collateral. In the Q DAO framework, you don’t lose your bitcoin, yet you likewise never again control it. The bitcoin that you sent to the CDC is locked until you repay the collateral loan amount. Basically the 602 USDQ which, in turn, destroys the USDQ and limits its circulation.
How is USDQ secure?
Let’s first ask what happens when the price of bitcoin goes down. In the event that the price of bitcoin held as collateral in CDCs goes down from the limit of USDQ it should be worth then it would make USDQ lose its fix value of one dollar. This could potentially compromise the whole system. Platinum Q DAO engineering has enforced a mechanism to prevent this by buying back the CDCs and in effect the USDQ is burnt. This means that the price is always one United States dollar.
As mentioned before, if the value of bitcoin goes down beneath a specific limit of USDQ then at this point CDC is swapped and the bitcoin inside the CDCs is unloaded for USDQ stable coins until there is sufficient USDQ to pay back what was removed from the CDC.
The Q DAO framework basically sells the CDCs in an auction. It sells the bitcoin inside each contract before the value of bitcoin is less than the amount of USDQ it is supposed to be backing. This fact alone, guarantees that USDQ is a fully collateralized stable asset unlike other kinds of stable coins.
Introducing: The Q DAO token.
Lastly, there is one blind spot that could threaten the proper functioning of the framework we have explained so far. The situation is the following: Imagine the cost of bitcoin, the principal crypto backing USDQ, tumbles down well beneath the coordinated collateralization proportion and the set specific edge in the very short time period so short that the framework doesn’t even have time to initiate its countermeasures of selling as covered above. For this, the Q DAO token was created. This one is basically an ERC20 token on the ethereum blockchain. The special thing about this one is that has admin rights. It can make smart contracts perform specific actions and override their normal limitations. As an example only Q DAO token holders can vote on how much in percentage should the specific edge for collateralization proportion is set. As a byproduct of directing the framework, Q DAO holders are remunerated with expenses. Q DAO token holders also have the important role of becoming purchasers after all other sell options have run out. If the security measures in the USDQ and Q DAO framework are not sufficient to cover the measure of USDQ in presence, Q DAO tokens are made and sold onto the open market so as to raise the extra insurance coverage amounts. This gives a solid motivation to Q DAO token holders to very mindfully manage the parameters at which CDCs can create USDQ and manage conservative limits because, in essence, it is their cash on hold should the framework come up short.
Global Resolution: The end of security measures.
The Global Resolution is the final “nuclear option” if you will. Global Resolution is the very final option to keep the system within normal boundaries. This function makes the whole framework stop and all holders of USDQ and CDCs are restored their respective collaterals.
It still keeps the decentralization intact because all it does is give you back your guarantee.
Can USDQ also provide leverage?
Because volatility is transferred to the holders of the CDCs then a user can use their bitcoin to withdraw USDQ. As long as the value of bitcoin is above the liquidation limit then the same user could exchange the USDQ for more bitcoin effectively using 2x or 3x their total capital to bet on the price of bitcoin. This means that exchanges that use USDQ allow the use of leverage.
The USDQ stablecoin a particular stable coin built on collateralized value. This means that it will be set apart from other stablecoins and could even help improve the chances of general mass adoption.
Maybe you heard about the project MAKER DAO and their DAI?
I want to praise these guys – they are first to create a decentralized stable coin.
We occupy an honorable second place at this race, and basically, we were inspired by the technologies of MAKER`s DAI.
Some Q DAO functionality is similar to MAKER DAO, so we decided to use Maker`s terminology because we do believe – their technologies should be a reference for creating any decentralized stable coins.
Why we are using BTC as collateral? 1) Bitcoin is a most liquid digital asset 2) we have many friends who are big Bitcoin holders (BTC whales) or Bitcoin OTC traders.
We hope even so big guys like Brothers Winklevoss (Cameron Winklevoss and Tyler Winklevoss) will start to use Q DAO. They have a lot of Bitcoins, but they don’t want to sell it. So if they need money – they can pawn their bitcoins to Q DAO and immediately get USDQ.
Why we built Q DAO based on Ether smart contracts, but not Tron (by Justin Sun) and not EOS ( by Daniel Larimer)?
Our genius engineers are love ETHEREUM because of mass adoption of this blockchain, also we respect the approach of Vitalik Buterin (we met him a few times). Maybe in the future, we will consider using TRON or EOS, in case their foundations can provide enough funds to proceed with development.
USDQ is decentralized stablecoin, which uses smart algorithms to offer higher stability and reliability. Fully on-chain and monitored by high-speed AI robots, ecosystem offers reliable defences against malicious acts and attacks. First run in line of fiat-pegs, USDQ is brought by Platinum Q DAO Engineering team, looking to edge together innovative solutions in collateralization, using stabilizing mechanisms and neural networks for high-endurance stablecoins. Soon there will be even more fully backed stable coins: JPYQ, KRWQ, SGDQ, HKDQ, CNYQ, RUBQ under USDQ brand. Fully anonymous, USDQ breaks limits out of this legacy world.
BTCNEXT Exchange – next generation spot and margin trading platform by the PLATINUM Q DAO ENGINEERING team. It is the first Strategic business partner of USDQ stablecoin that is based on a DAO technology. All pairs will be listed with USDQ. BTCNEXT customer service will be happy to answer all of your questions.
Haleel thanks readers’ for their attention and invites to connect in her personal Telegram. She’s convinced that Q DAO and USDQ will open up new highways to adoption across corporate and individual audiences, alluring with minimal fees, fast processing and border-blind approach. She’s fascinated with Q DAO ecosystem’s plans to launch stablecoins pegged to other major fiat currencies, such as JPYQ, KRWQ, SGDQ, HKDQ, CNYQ, RUBQ, seeing them as drivers to capture lucrative global market shares in hedging and margin trading. Reach out to the PLATINUM ENGINEERING in Telegram or Facebook and find out ways to collaborate on fundraising, marketing and IR for budding blockchain-driven startups.
This overview may not be fully exhaustive and does not assess the viability of any project, nor its team legitimacy. Readers should conduct their own due diligence before using or investing in any of the listed Stablecoins. This article represents the author’s opinions only and should not be considered investment advice. All described functionality in the article is still under development, it can be changed/processed. Please follow the updates
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