Understanding USDT Tethers Synthetic Dollar Backed by Gold Explained
Tether has unveiled a groundbreaking new platform on the Ethereum network called Alloy, which allows users to generate tokens backed by Tether’s tokenized gold (XAUT).
The first token to be introduced on the Alloy platform is aUSDT, a synthetic dollar that is pegged to the value of one U.S. dollar and over-collateralized by XAUT.
Users have the ability to create aUSDT tokens by using XAUT as collateral, with the entire minting process being overseen by smart contracts and price oracles to ensure transparency and stability.
Alloy, created by Tether, is an open platform that may potentially offer yield-bearing products in the future and will be incorporated into Tether’s upcoming digital asset tokenization platform.
The debut of Alloy and aUSDT is a significant step for Tether, as the company looks to expand its offerings beyond the issuance of USDT. Tether has plans to facilitate the tokenization of various assets such as bonds, stocks, and loyalty reward points.
In addition to launching Alloy on the Ethereum network, Tether has also announced the introduction of a new category of digital assets known as “tethered assets,” designed to track the price of reference assets through stabilization strategies such as over-collateralization with liquid assets and secondary market liquidity pools.
The innovative approach of aUSDT, the first token available on the Alloy platform, is backed by Tether’s tokenized gold (XAUT), which is supported by physical gold stored in Switzerland.
This distinct method allows users to engage in digital transactions and payments while retaining exposure to gold, without needing to sell their XAUT holdings.
To mint aUSDT tokens, users can deposit XAUT as collateral through Ethereum-compatible smart contracts. The aUSDT smart contract maintains transparency by monitoring all collateral and minted tokens, while price oracles continuously assess the Mint to Value (MTV) ratio to enhance stability.
The minting process is designed to be overcollateralized, with the maximum amount of new tokens limited to 75% of the collateral value.
Tether’s CEO, Paolo Ardoino, has expressed that the launch of Alloy by Tether introduces a new class of digital assets backed by gold and tethered to a reference fiat currency. He also disclosed that Tether intends to make this technology available in their upcoming digital asset tokenization platform, set to be released later this year.
Alloy, as an open platform, allows for the creation of different tethered assets with broader backing mechanics, potentially including yield-bearing products.
This technology offers a modern approach to asset management for institutions, providing a secure, gold-backed digital asset that can be integrated into portfolios.
Moon Gold NA, S.A. de C.V., and Moon Gold El Salvador, S.A. de C.V., both authorized by the digital asset regulatory body CNAD in El Salvador, will handle the issuance and management of Alloy by Tether, catering to different customer segments and regulatory requirements.
The launch of Alloy and aUSDT is part of Tether’s ongoing efforts to expand its services beyond issuing USDT, including investments in various sectors such as bitcoin mining, payment processing, and artificial intelligence through cloud computing.
Ardoino has also outlined plans to launch a tokenization platform that would facilitate the creation of digital versions of a range of assets, such as bonds, stocks, funds, and loyalty reward points.
