With the DeFi revolution ramping up, the cryptocurrency community has witnessed the rise of stablecoins. Commonly used and discussed stablecoins include USD Coin (USDC), Paxos Standard (PAX), and perhaps the best-known of all, Tether (USDT).
Hypothetically, stablecoins should offer stability and peace of mind since they are pegged to fiat currencies and backed by reserves. With new financial technologies piloting use-cases for the entire cryptocurrency industry, it is apparent that existing stablecoins suffer issues with not only liquidity, fragmentation, and growth, but also with social trust. Tether itself has been investigated and fined by the CFTC and continues to fight for its trustworthiness in all financial markets.
An online organization known as Sperax has taken initiative in building a decentralized, community-owned, stablecoin which debuts as SperaxUSD (USDs). Sperax’s stable currency has the power to resolve these problems, providing a trusted, high-yield alternative to Tether and other “promising stablecoins”.
Crypto Users Are Losing Confidence in Tether
Not familiar with the scandal erupting around Tether? Tether Holdings Limited claimed that its USDT token reserves were held as exclusively US dollars. While having close ties to Bitfinex, the once the most trusted crypto-asset exchange is now on the c-list of celebrity exchanges with a low trust rating in numerous financial markets.
Upon investigations by not only the cryptocurrency communities of Reddit, Twitter, and popular forums, the Federal government or more specifically the CFTC discovered that “Tether relied upon unregulated entities and certain third-parties to hold funds comprising the reserves; commingled reserve funds with Bitfinex’s operational and customer funds; and held reserves in non-fiat financial products.”
As a result, the government is fining Tether and Bitfinex $42.5 million. Now there may be reasonable excuses for why Tether would switch around the wording on asset reserves details within the company-owned sites, they continue to play an important role in providing users with a stable currency pair.
What if you could stop worrying about the market action, buying high and selling low, and stick your money into a stablecoin that continues to earn interest while being risk-free similar to a bank savings account, yet better? Well, I hate to break it to you but you may have missed an earlier statement where I mentioned Sperax.
The cryptocurrency community has called for a trusted organization that provides an easy-to-use interface with automatic interest on stablecoin pairs. SperaxUSD is able to provide users with high-interest returns on holdings similar to staking. Sperax allows for liquidity mining and better yet, their stablecoin isn’t the only thing that is gaining attention. Sperax’s DAO token, $SPA, can be bought, sold, and traded on numerous online exchanges. SPA provides a great governance mechanism with their decentralized autonomous organization (DAO) and is integral to the algorithmic strategy, as users can always mint and burn USDs for $1 of SPA.
How Sperax Solves Tether’s Problems
Tether is a case study of what goes wrong when a cryptocurrency is controlled by a single entity. When that entity is suspected to attack, it can jeopardize the funds of all investors.
USDs is a crypto-collateralized algorithmic stablecoin that takes a different approach. As a true DeFi asset, it is not subject to exploitation by any centralized entity.
In fact, Sperax is working toward fully decentralizing every aspect of its protocol. For example, it is presently keeping community funds in a multi-sig wallet that uses more than one admin key to protect against malicious actors. Other protocols use only a single key. But in the future, there will be no admin keys at all. Instead, the community will have complete control.
Key Benefits of SperaxUSDs
Below, we discuss additional advantages of SperaxUSDs over traditional stablecoins and why you should consider looking into Sperax.
Transparent
Since USDs is overseen by a DAO, all transactions are recorded on the blockchain. That means that any member of the public can view the record. Contrast that with Tether, which not only keeps its records in a black box but has actively interfered with public access.
Cheaper Transfer Fees
While the problems we discussed with Tether involve its centralized nature, DeFi itself faces challenges of its own. One of those is steep costs.
Ethereum transaction fees, known as “Ethereum gas,” have reached record highs this year and last, rising to over $500. To say that the cost of gas has become prohibitive to many users would be an understatement.
This is another area where Sperax is turning to innovative solutions. Thanks to the use of the Arbitrum L2 scaling platform, transferring USDs is much more cost-effective than transferring many other decentralized cryptos.
The reason Arbitrum is so affordable has to do with the efficient way it runs its computations. Other platforms require that all nodes on a public network run full computations; Arbitrum does not. Calculations take place off the chain, but the results are publicly available on the chain. So, it is the best of both worlds. The reduction in fees is dramatic. In fact, there are virtually no costs for gas.
Sperax’s LM Strategy Benefits All
One of the most exciting opportunities that Sperax presents is the chance to earn passive income by participating in Sperax liquidity mining (LM).
Indeed, the Sperax Team posted an update on this strategy at the end of September with the APY schedule. As a liquidity provider, a participant can lock collateral in a liquidity pool. The longer the lockup period, the higher the APY.
This LM strategy helps maintain the liquidity that other novel stablecoins lack. It also minimizes slippage, ensuring that the prices buyers and sellers see are close to those they receive. This can make for more predictable and profitable trading.
In its October update, the Sperax team said, “We will launch Liquidity Mining as soon as we submit $USDs contracts for a final audit. Right now we target a mid-November launch on Arbitrum for our SPA/ ETH pair.”
Tighter Peg Due to Lower Arbitrum Fees
While Arbitrum keeps transfer costs for USDs affordable, cost savings are not the only advantage. These lower fees also allow for a tighter peg for USDs. The more closely and consistently a stablecoin is pegged to its corresponding fiat currency, the more stable and reliable it is.
Earn Continuous Interest Without Needing to Stake
New to staking? When you stake crypto, you lock funds as collateral in a crypto network.
With most cryptos, users need to manually lend their collateral out. This can be a complicated, expensive, and daunting process for novices.
But with Sperax, the protocol takes care of collateral lending automatically. That way, the process is accessible for investors of all skill levels. In fact, all you need to do to earn passive income from USDs is to hold it.
Not only that but yields are paid out whether the market is trending up or down. The reason this is possible is that USDs yields are delivered through a combination of DeFi aggregators and other strategies instead of leverage.
What is Next for Sperax?
This is an exciting time to follow along with Sperax. As discussed before, the team hopes to launch SPA/ETH on Arbitrum in mid-November, and once the final audit takes place on USDs contracts, liquidity mining will begin.
Sperax also offers a mobile app called Sperax Play. On this community hub, you can enjoy the convenience of a DeFi wallet, create hubs for your friends, mine cryptos, and more.
This platform is growing by leaps and bounds, with 26,000 new users joining just in October.
Soon, a Marketplace will be opening on the app that allows you to enter raffles and bid on non-fungible tokens (NFTs). You can do both using XP, which you can earn by inviting users to the platform. Users who want to submit feedback on USDs can do so once it is available on the testnet.
Sperax is Ushering in a More Liquid, Transparent, and Stable Experience
While stablecoins have played a vital role in the crypto economy, there is no denying that existing coins have largely fallen short of their promises. Cryptocurrency is very much in its early stages—and the broader world of decentralized finance is in its infancy. What happened with Tether has shown us that many of the weaknesses we still see in crypto stem in part from centralization itself. Thankfully, new solutions are evolving fast. With its decentralized structure, its efficient consensus protocols, its exciting liquidity mining strategy, and its dedicated community, Sperax is here to show us the shape of things to come.
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Written by Nicholas Resendez can be reached on Instagram @nirholas, on LinkedIn, and Twitter @nickresendez for updates on new articles.