Tether, the company behind the first stablecoin (USDT), has announced the launching of a new gold-backed stablecoin on Ethereum called "Alloy Tether".

As the future of the American dollar is looking ever more bleak, people are starting to look for alternative stores of value, and Tether knows that gold fills that role well for many.

In this post we'll go over how Tether Alloy works, its potential competition, the future of gold's value, and how this announcement fits into the RWA trend.

How Does It Work?

Almost like traveling back in time before 1971 when US dollars were backed by gold, Tether's new dollar stablecoin is over-collateralized by gold-backed tokens.

From Tether's website:

Users mint Alloy by Tether tokens using Tether Gold (XAU₮) as collateral, creating a digital currency connected to golds strength, redefining stability in the digital world.

The Tether Gold tokens that users put up as collateral are backed by physical gold stored somewhere deep within the mountains of Switzerland.

Competition

Tether Alloy is not the first token on Ethereum to be backed by gold. Back in 2016, a project called DigixDAO was also focused on the tokenization of physical gold, although their success has been limited.

We should also consider how Tether's new stablecoin would compete with the likes of the upcoming BRICS currency, which is also projected to be backed by gold. Tether has a major advantage here.

While not entirely censorship-resistant, Tether's tokens are launched on transparent public blockchains like Ethereum and TRON. A BRICS currency would likely be issued on a blockchain under the strict control of the Chinese and Russian governments.

Trust Issues

Even though Tether states that the physical gold backing Alloy is stored in a reputable country like Switzerland, how can we fully trust the custodian to not falsify the quantity stored, or to steal it from their customers in a "shit hits the fan" scenario?

This highlights the beauty of decentralized cryptocurrencies like Bitcoin because they have no "counter-party risk", meaning that even if the world economy were to implode, or another financial crisis were to occur, your Bitcoin is guaranteed to be stored safely on a globally distributed ledger.

Gold's Waning Value

There is no debating that gold has been considered a store of value for thousands of years, and that makes it a viable alternative to the dollar. That said, the horse was also man's primary means of transportation for thousands of years, until the automobile was invented.

We have to consider how different generations value things differently. The older generations generally value gold a lot more than cryptocurrencies. But if we are forward-thinking, we know that our future is in the hands of the crypto-friendly youth of today.

The RWA Trend

In the future, all real world assets (RWA) will likely be registered on decentralized blockchains, not just gold. As such, we can avoid expensive audits, and nothing can go missing by accident.

Real estate, land, cars, gold and other commodities will all transition from untrustworthy databases to censorship-resistant blockchains, and Tether's latest move to launch a gold-backed stablecoin is another step in that direction.

If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the HIVE blockchain. You can also follow me on InLeo for more frequent updates.

Until next time...

Resources

Alloy Tether Logo [1]
BRICS Coin Image [2]
Panning For Gold Image [3]