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Tether, the company behind the world’s leading stablecoin, has just introduced a new digital asset called Alloy. This stablecoin, known as aUSDT, combines the value of gold with the flexibility of a digital currency. It is designed to give the stability of the U.S. dollar, but it’s backed by gold, making it a major step in merging traditional finance with digital currency.
Alloy is Tether’s answer to merging gold’s age-old reliability with the speed and utility of digital currencies. Unlike traditional stablecoins, Alloy is a “synthetic dollar.” The coin functions like the U.S. dollar for transactions but is not backed by actual dollars; instead, Tether Gold (XAUt) over-collateralizes it. So, for every aUSDT in circulation, an equivalent amount of gold is stored in a Vault in Switzerland to cover it.
The process to mint aUSDT is straightforward. Users deposit their XAUt, which is Tether’s gold pegged digital token. They do this through Ethereum smart contracts. The contracts track the gold’s value and ensure holding enough gold to cover the created aUSDT. Price oracles, which are tools that check and report prices, keep everything balanced.
Alloy provides the stability of the U.S. dollar while giving users the security of owning gold. This blend makes Alloy a powerful tool for those who want to use digital currency but also want a stable, trusted asset like gold. It allows people to make transactions, save money, and even trade while holding onto the value of gold.
The creation of Alloy follows Tether’s impressive $4.5 billion profit in the first quarter of 2024. This profit was mainly due to Tether’s investments in Bitcoin and gold. Alloy is a natural next step for Tether, combining these successful investments into one innovative product.
This launch underscores the growing trend of blending traditional assets with digital technology. As Tether ventures further into real-world asset tokenization, it highlights the potential for digital currencies to revolutionize financial stability and accessibility. This innovation signals a promising future where blockchain and traditional assets can work together seamlessly.