A rundown on Stablecoins and PAX
In case you don’t know, a stablecoin is a digital currency, the value of which is backed by another reserve asset. Just like the name implies, stablecoins are designed to overcome volatility that is very common in cryptocurrencies. There are quite a few varieties of stablecoins, collateralized by fiat currencies, other cryptocurrencies or other kinds of collateral like precious metals or commodities.
Paxos Standard is a stablecoin pegged against USD on the 1:1 ratio (1 PAX = $1). It was designed to combine dollar payments with blockchain technology, to make payments fast and available anytime. In essence, it is an ERC-20 token. Unlike some digital assets that choose to build on their own blockchain, Paxos chose Ethereum consciously for the simplicity and minimalism of the smart contract. Besides, due to its nature, PAX can be accessed from any wallet that supports Ethereum blockchain.
Origin of And Design behind PAX
Paxos Standard might be the most radical answer to the Tether controversy in 2018 when the company provided dubious proof of backing of the currency. A few market giants saw their opportunity in the light of demand for a regulated alternative to USDT. GUSD, TUSD and USDC all emerged around the same time. However, PAX is different in the regard that it is not backed just by any dollar reserve, but by the dollars in reserve of its issuer, Paxos Trust. Why does that matter?
Well, for one, Paxos’ design was to create a digital currency that can be trusted. For that purpose, they aim for maximum transparency and security of the reserves. Paxos owns a legal charter from the New York State Department of Financial Services — an authority said to provide the most rigorous overview of the financial sector. As for transparency, Paxos regularly has Nomic Labs audit the PAX smart contract and Withum — its account reserves.
The People Behind PAX
Paxos is a long-established player on the market, founded in 2012. They have operated…