On December 17th, 2018, Alchemint launched its SDUSD stable coin issuance platform to the NEO MainNet. The team delayed announcing the launch until December 26th so it could first monitor the performance of the smart contract. The stable coin distribution platform aims to mortgage digital assets through smart contracts and manage collateral risk. Eventually, Alchemint aims to anchor a stable coin to any asset including fiat currency, cryptocurrency, and other commodities.
Alchemint seeks to differentiate itself from other stable coin projects in the frequency of its audit reports. Users will be able to audit the stable coins at any time using the blockchain explorer.
Stable coins are designed to maintain a fixed price or value and are backed by various methods of collateral. The three most popular models are fiat-collateral, cryptocurrency-collateral, and non-collateral.
Fiat-collateral has a reserve of an equivalent value of fiat currency, equal to the number of stable coins in circulation. The model can provide sufficient liquidity, but there might be issues with centralization and transparency (i.e. if the issuer refuses to share their reserve account information).
Cryptocurrency-collateral pegs the stable coin to the value of a fiat currency but mortgages digital assets for collateral. As a risk mitigation strategy, issuers will often require the stable coin user to over-collateralize the coin or will use tactics such as compulsory liquidation. As the collateral is locked in a smart contract, there is transparency, which negates the need for a centralized management model.
Lastly, the non-collateral method uses an “algorithmic bank” model, which adjusts the prices of the stable coin by influencing the supply and demand of the market. If the value of the stable coin is lower than $1, an amount of bond tokens will be released, which are later redeemable for the stable coin once it has returned back to its 1:1 peg ratio. With this model, capital needs to flow into the market continuously, or else the stability of the coin will deviate from its $1 peg.
Smart Assets Reserve
The smart contract Alchemint is utilizing for its stable coin offerings is termed the Smart Assets Reserve (SAR). SAR smart contracts will allow Alchemint to offer stable coins by the mortgaging of digital assets on the NEO blockchain through its SAR-C module.
According to the whitepaper, SAR-C is designed for “individual users who issue stable coins by means of over-collateralized digital assets.” In this model, users have the opportunity to open multiple SAR’s. The maximum amount a user can unlock will be tied to the market value of the collateral and associated risk control parameters.
MainNet launch and new functions
SDUSD is the first digital asset to be launched through SAR-C and is pegged to the US dollar. SDUSD was selected as the US dollar is the largest liquid currency, but Alchemint aims to gradually anchor other assets in the SAR-C model. NEO News Today has provided previous coverage on the SDUSD mortgaging method.
In communication with NEO News Today, the Alchemint team has stated there are three new additions to the platform not listed in the whitepaper.
First, a migrate function has been included in case of any significant future updates. Should a function upgrade, bug fix, or other circumstance require a change to the smart contract code, users will be able to migrate their SAR to the new smart contract.
Second, to maintain price stability liquid limitations have been added to the stable coin issuance platform. The purpose of the limitations is to keep SAR’s collateral rate above 150% and discourage users from liquidating all of the SAR debt. When a SAR faces liquidation, users who liquidate their SAR can acquire collateral at a discounted price, and users whose SAR has been liquidated will lose some of their collateral and face a penalty.
Third, Alchemint has established a Stable Foundation which will serve to liquidate any SAR that is below the 100% collateral rate. While liquidating a SAR with a collateral rate below 100% is a profit-loss for Alchemint, it is a necessary function to maintain a high collateral rate for the overall system.
However, the Stable Foundation isn’t the only entity that can liquidate SARs to maintain a high collateral rate. Users can also liquidate SARs that have a collateral rate of 149% or lower. To liquidate, the individual uses SDUSD to purchase the SAR at a 10% discount (compared to market value). This way, users help individual SARs maintain their collateral rate of 150% or more.
The Alchemint platform is currently under the operation of the Alchemint Operation Committee, which is comprised of financial and technical experts. Eventually, control from a centralized group will be disseminated to SDS holders, who may vote on issues surrounding the platform. Such areas of voting will include:
- Adjustment of risk control parameters
- Addition or modification of types of mortgaged assets
- A trustworthy oracle to determine the external market price of digital assets
- Rates Alchemint charges its stable coin users
The Genesis stage of Alchemint’s roadmap will take place between 2018 and 2019. In this timeframe, the primary focus of development will be to build an open-architecture stable coin issuance platform, support other NEP-5 assets as collateral, and complete cross-chain functionality.
Listing on Switcheo
With the announcement of its MainNet launch, Alchemint will also be listing on the Switcheo decentralized exchange.
Deposits will begin at 11:30 am (UTC +8) onThursday, December 27th, and trading will begin at 12:00 pm (UTC +8).
Alchemint’s SDUSD will be paired with NEO. Other token pairings will be made available at a later date.
NEO DevCon Tickets
Alchemint will be offering NEO DevCon tickets through its website, at a price of 120 SDUSD per ticket. An article highlighting the purchasing process will be released by Alchemint in the coming days.