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Rating the reliability of stablecoins
Bluechip, a non-profit organization that evaluates the safety of stablecoins, has launched a service that provides unbiased ratings of major stablecoins on the 13th.
Garrett Jones, chief economist at Bluechip, explains the significance of the service as follows:
The collapse of the old Terra/Luna ecosystem last year showed that many people who used stablecoins were unaware of the risks that were apparent to many experts.
People who want safe, legal and easy payment methods but are not experts in the field need simple tools and a clear rating system to help them decide which stablecoin to use.
It is in the form of developing a rating service that allows anyone who is not a stablecoin or financial expert to easily check the safety of a certain stablecoin.
What is a stablecoin
A cryptocurrency whose price is always stable. Stablecoins are a type of cryptocurrency, and unlike BTC, ETH, and XRP, which have volatility, their purpose is to maintain their value ($1) backed by the US dollar. In addition to US dollar-backed stablecoins (USDT/USDC), there are also stablecoins that use algorithms.
Cryptocurrency Glossary
Rating the reliability of stablecoins
Mr. Jones, the founder of Bluechip, has six indicators (SMIDGE): Stability, Management, Implementation, Decentralization, Governance, and Externals. ) to construct the rating framework.
Jones is also an associate professor of economics at George Mason University, studying macroeconomics and monetary policy.
“Stability” looks at whether the stablecoin maintains the peg and whether it has an appropriate mechanism to maintain the peg. We also check the reliability of the market, including the quality and management of the underlying assets, price and transaction data, and the price stability mechanism.
“Administration” is related to the ability of the management team and the presence or absence of scandals. “Implementation” looks at the risks that arise from smart contracts and oracles. Although “implementation” is not currently evaluated, it is said that evaluation will be added in the future.
Regarding “decentralized”, we look at whether control is concentrated in the hands of a few parties. “Governance” assesses whether appropriate systems and measures are in place to protect stablecoin holders from insider fraud and misappropriation of reserves.
Also, “external indicators” have not yet been introduced. In the future, when information on the risk of stablecoins, sentiment indicators, crowdsourcing, etc. develops in addition to Bluechip indicators, we plan to incorporate them into the evaluation.
Bluechip’s launch was donated by Rune Christensen, co-founder of Maker, which provides the DAI stablecoin, and Nevin Freeman, co-founder of Reserve’s, a platform for creating asset-backed currencies.
It is also advised by Tyler Cohen, Robin Hanson and other economists.
Ratings such as BUSD and USDT
Currently, Bluechip’s platform gives BUSD, LUSD, PAXG, GUSD, etc. an “A” rating. USDC and DAI were “B+” and USDT was “D”.
Bluechip will “disclose the names of partner banks and custodians”, “reduce the minimum redemption amount to approximately 690,000 yen ($5,000)”, and “conduct a full financial audit by an independent auditor” for USDT. It states that the evaluation can be raised to “C” if certain conditions are met.
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English (US) ·