It happened just as they predicted it would. USDC had never went below $1 in its entire history as a stablecoin. But 2 months ago a whitepaper predicted that collateralized stable coins would fail. Here's a direct quote from the whitepaper. "Luna was well meaning in what they were trying to do. It's just...over collateralized stablecoins don't work. Others will try, and they will fail. Using over collateralized assets to back another asset is like taking a picture of a beautiful woman...at one moment in time...and expecting her to maintain her beauty...forever. Eventually, over a long enough time, her looks will fade."
DXO is an entirely new type of cryptocurrency. DXO requires you to burn Bitcoin to create it, labeling itself as "The Bitcoin Standard". As you may know the dollar was once backed by gold but...ironically...could not keep enough gold collateral to support the expansive needs of the dollar. Other stablecoins like DAI use ETH as collateral to back it. But as DAI has had numerous issues, including this weekend where it fell to below 90 cents, it has proven that it doesn't work either. In fact on the DXO homepage it boldly predicts that "all collateralized stable coins will eventually die". Strong words but, given what has happened - are these anonymous devs right?
It's important to note that while USDC and other "stable coins" were dropping, DXO was actually increasing in value. According to this chart DXO jumped from 1.01 to 1.25 during the weekend. It is currently 1.18 at the time of this article. So how is it that DXO can maintain its price while other stablecoins fall? It's because every DXO is created by burning Bitcoin or other deflationary coins. When you burn...the value of Bitcoin at that time is burned into DXO. Burn $100 in BTC receive 100 DXO. Once DXO is created it is completely independent of price movements of the coin you burned to create it. In fact DXO makes the crypto it uses to create it more scarce. BNB which is deflationary has also been used to create DXO and to date hundreds of BNB has been burned.
Even before this weekend, dozens of other collateralized stablecoin projects already failed. This is because many of them minted coins when Ethereum was $4000. Even in a conservative example of only minting 50% of it's collateral, every single project built like that would either A. Have to raise millions to pay back the stablecoins it minted as the price of the collateral fell or B. Would cease to exist.
They thought that by adding other stablecoins as collateral would work, but this weekend proved otherwise. Since all stablecoins are dependant upon the US dollar, and the US dollar is dependent upon banks...essentially stablecoins are as robust as banks. Food for thought...over 500 banks have defaulted since the invention of Bitcoin. And since these banks have no proof that reserves are there, stablecoins issuing audits that they have reserves "in the bank" is now meaningless.
DXO does not require banks. It only requires Bitcoin. Bitcoin has not stopped operating since it was created. Even when major mining operators had to go offline, BTC kept going. Bitcoin is also much more transactable than gold. You can forge DXO 24/7 because Bitcoin never sleeps. All DXO created is instantly verifiable as you can see here.
At the moment DXO is tiny. Less than 150,000 DXO are in existence. One other advantage that DXO has over everything else is that it rewards holders. Holding DXO in your wallet is owning a piece of the network. Every time someone transacts with DXO HOLDERS receive a piece of every transaction. According to a twitter bot account that keeps track, DXO holders have made 5.3% just holding DXO in the last 26 days. So now crypto investors can actually own a part of the growth of a stablecoin. If DXO grows to billions in circulated supply, who knows what kind of yield that would provide. And now Bitcoin holders have an option for turning their Bitcoin into a yield generating asset.
Tether was seen as a hero this past weekend as it maintained its dollar peg. Users rushed into Tether from USDC, driving up the price as high as $1.01. But if anymore DXO whitepaper predictions come true, you shouldn't hold your breath for Tether either. The whitepaper also suggests that it's only a matter of time before Tether collapses in that there is no way that they are 1 to 1 backed with dollar reserves. Tether in their most recent audit (which was 2 years ago), admitted to this. They said they were holding other assets to strengthen their reserves. But the public doesn't know what those reserves are, what country those reserves are in, the value of them, or the ratio of these reserves versus dollar reserves, such as treasury bonds.
It has always been rumored that Tether was tied to Chinese property investments and as mortgage lenders in China failed, that this would somehow expose Tether. But these rumors so far have been unsubstantiated. It's obvious these anonymous DXO developers understand the market in a way that most people don't. Since they predicted the LUNA crash and now the collateralized stablecoin crash, it's past time to pay attention to whatever else they may have to say. You can find out more about DXO by visiting their website and follow developments via their community led twitter page.
