The cryptocurrency market is fairly volatile. The crypto assets’ prices rapidly react to international economic and political news. This puts the investors’ capital at high stakes and can result in hefty losses. Stablecoins are a solution to hedge the investors’ money against market volatility. Stablecoins are pegged into and backed by other assets; they can be backed by fiat currencies, commodities, cryptocurrencies, and algorithms. The most famous stablecoin is Tether or USDT and is supported by the US dollar. In the remainder of the text, we discuss another stablecoin, Pax Dollar, and how it works.
Paxos is a New York-based trust company with more than 400 million users. The company started as a regulated crypto exchange in 2012, established the financial service trust charter for digital assets in 2015, and issued the world’s first regulated stablecoin in 2018. The company’s primary goal was to bridge the gap between the traditional markets and eCommerce. In other words, Paxos has implemented various markets into a technologically-advanced system to facilitate fund transfers.
Paxos provides several different services. For example, the Crypto Brokerage service allows enterprise users to create digital wallets, transfer funds, lend, and stake assets. Paxos also has a crypto exchange called itBit which is designed for institutional investors; it provides a safe trading platform with oversight from the New York Department of Financial Services (DFS). It is worth mentioning that USPD-paired transactions in itBit have zero fees. Other Paxos services include the Securities and Commodities Settlements that use blockchain technology to maximize efficiency.
Pax Dollar or USDP (previously known as Paxos Standard or PAX) is an ERC20-Standard stablecoin based on the Ethereum blockchain. USDP combines US dollar stability with blockchain so traders can transfer funds with minimized risks. The tokens are collateralized 1:1, meaning that there is a dollar in Paxos’s bank accounts for every token. Paxos is regularly audited, so the USD reserves fully match the USDP tokens. USDP tokens can be transferred to wallet addresses all around the world, and if a user wants to redeem the assets, they can send them to Paxos addresses. Paxos then burns the specified tokens and sends the fiat equivalent to the user’s bank account.
Aside from USDP, which is pegged into the US dollar, Paxos offers another asset backed by physical gold. Pax Gold (PAXG) is ‘backed by one fine troy ounce (t oz) of a 400 oz London Good Delivery gold bar, stored in Brink’s vaults.’ PAXG also uses the ERC-20 standard and is based on the Ethereum blockchain.
Who are the Founders of Paxos?
Charles Cascarilla is the co-founder and CEO of Paxos company with an educational and professional background related to his job. He got his BA in Business Administration from the University of Norte Dome. Career-wise, he was a portfolio manager at Claiborne Capital Management between 2001 and 2003. Charles is also a founding member of the Association of Digital Asset Markets (ADAM) and Cedar Hill Capital Partners. The second co-founder is Rich Teo, who is equally qualified to run a company like Paxos. He graduated from the University of Michigan with a BA degree in Business Administration. Has had previously worked as a financial analyst at Citi and a senior analyst at Cedar Hill Capital Partners. Paxos is transparent about its management team, and some well-known figures in the business world, such as Sheila Bair and Bill Bradly, are on Paxo’s board. You check out the board members here.
What is the Market Status of USDP?
At the time of writing (10/7/2022), USDP is ranked 49 (the fifth among stablecoins) at CoinMarketCap. Each token is steadily worth $1, but considering the all-time chart, it has set a record of $2 as its ATH and $0.87 as ATL. The asset’s market cap is $945,396,898, with a daily trading volume of $81,392,289. Also, since it is a 1:1 collateralized token, the circulating supply equals the total supply, which amounts to $945,642,940.
What are the Advantages of Paxos?
Using blockchain technology, Pax Dollar has accelerated and facilitated fund transfers and reduced transaction costs in a safe environment. Paxos offers verified reserves (audited monthly by Withum) which have gained the trust of traders. Furthermore, Investors’ funds are deposited in bankruptcy-remote accounts, and the corporate funds are separated from them. The investors’ funds are also insured so they can redeem their capital even if the company announces bankruptcy. Moreover, USDP tokens are distributed among several high-volume crypto exchanges such as Binance, Digifinex, Bittrex, Bithumb Global, etc. Therefore, the token has high liquidity. Another good point about USDP is that it can be stored on any wallet that supports Ethereum ERC-20 tokens.
What are the Disadvantages of Paxos?
Paxos is heavily regulated and fully centralized, and the company has full control over the transactions and can decide to stop the asset redemption at will. Therefore, USDP tokens are most useful for fund transfers between two parties who appreciate legitimacy and transparency. However, if the sender and receiver prefer to transfer funds privately, they should use decentralized stablecoins such as DAI. Another downside to USDP is that it is supported by only 20 exchanges, and many crypto exchanges have not listed the token in their trading charts. Furthermore, although USDP is among the top 50 listed tokens at CoinMarketCap, it cannot compete with USDT and USDC in terms of the trading volume. Finally, as an ERC-20 token, the transaction speed is not fast (15 transactions per second), and traders will have to pay an extra gas fee for faster transactions.
Stablecoins offer a viable solution to the volatility of the cryptocurrency market. There are several prominent stablecoins in the market, including USDT and USDC. USDP is also one of the famous stablecoins, but it is entirely centralized and regulated. The asset is most suitable for fund transfers in which transparency plays an important role. Thus, if traders desire to have more anonymity in their transactions, they should use decentralized stablecoins like DAI.
Disclaimer: Please note that the above info is gathered solely for educational purposes and is not financial advice. It’s crucial to consult a market expert before making any investment.
Official Website: www.paxos.com
Source: The Pipsafe Team