Can you imagine a future in which all tradeable assets are tokenized? If you’re in crypto, which I’m guessing you are, then you probably can. After all, there are already thousands of cryptocurrencies out there, many of which essentially represent shares in a crypto company/network. They are utilized in their corresponding blockchain networks and ecosystems but are also traded in the global cryptocurrency market. They enable borderless and efficient fundraising for companies, as well as the seamless transfer of value without relying on trusted third parties (middlemen).
What blockchain technology and cryptocurrency enable is truly revolutionary and it won’t stop there. Just like with cryptocurrency, the tokenization of any type of asset, be it real estate, art, licensing, virtual game items, oil, gold, and much more can be done. Tokenizing/digitalizing the world’s assets will usher in a new age of shared economy where everyone with an internet connection can participate in a borderless market of all types of assets.
It will enable fractionalized ownership of a piece of fine art or a multi-million dollar condo building or hotel. The tokenization of assets enables anyone in the world to attain real capital assets without being apart of the wealthy class, and the crypto industry is making this a reality.
The Evolution of Crypto Leading to an Era of Tokenization
In order to understand this new era of tokenization and how it will be facilitated, it helps to first look back at the evolution of crypto.
It all started in 2009 with the launch of Bitcoin, a peer-to-peer electronic cash system created by the pseudonymous Satoshi Nakamoto. Next came the Bitcoin forks, where Bitcoin’s core code was copied and tweaked to create new cryptocurrencies such as Litecoin and others.
Then other blockchains and cryptocurrencies began to emerge such as Ethereum in 2015. Ethereum was launched along with the ERC-20 token standard which became the technical standard used for all smart contracts on the Ethereum blockchain for token implementation. This token standard led to an explosion of new cryptocurrencies and initial coin offerings (ICOs), which is why we have thousands of cryptocurrencies today.
The next wave of tokens were stablecoins, which are cryptocurrencies designed to minimize price volatility and maintain a stable price relative to some "stable" asset or basket of assets. In most cases, they are pegged to the US dollar on a 1:1 basis. Stablecoins/stable assets are important to the crypto economy because the unstable and volatile nature of crypto assets prevents businesses from participating. Merchants will not accept crypto for fear of it losing value and consumers won’t spend it for fear of missing out. Therefore, stablecoins are necessary for making payments and securing a stable value.
We already have a range of different kinds of stablecoins including fiat-backed stablecoins like Tether (USDT), TrueUSD (TUSD), Gemini Dollar (GUSD), and more. The problem with these stablecoins is that they require a level of trust that a central party has the collateral (USD) to backup the stablecoin. In the case of Tether, many crypto enthusiasts believe they do not have the collateral to back up USDT.
Another type of stablecoin is crypto-backed such as DAI from Maker (MKR). DAI is a decentralized stable cryptocurrency backed by crypto (ETH) as collateral. The problem with this kind of stablecoin is that you can lose your collateral if the price of ETH drops too much and you must trust that the network will work appropriately and hold up DAI.
These current stablecoin solutions have flaws and are far from perfect. However, there is a new stablecoin solution that is unique in itself and could usher in the era of tokenized assets. This new solution I speak of is PegNet – a Stablecoin Network for Decentralized Finance.
What is PegNet?
PegNet is a decentralized, non-custodial network of tokens pegged (stabilized) to different currencies and assets that allows for trading and conversion of value without the need for counterparties. It is a fully auditable, open-source stable coin network using the competition of PoW and external oracles to converge on the prices of currencies and assets.
Unlike existing stablecoin solutions, PegNet shifts the type of risk exposure from that of most stablecoins by issuing assets with no counterparty, collateral, or smart contracts. Instead, assets on PegNet (pegged asset tokens) have their value determined from an Oracle Price Record (OPR). This OPR gets its price data from miners on the PegNet network. Anyone that wants to mine prices for the PegNet can use their computers to mine price data which is collected into an Oracle Price Record – I’ll explain this in greater depth later.
The network extends beyond stablecoins pegged to assets such as the US dollar, as the network enables the issuance of pegged asset tokens for any type of asset. Therefore, PegNet’s ability to issue pegged assets in a secure and decentralized network can usher in the era of tokenized assets.
Convert between any listed asset for just $.001
With PegNet, any asset with reliable price feeds can be tokenized. Currently, the PegNet supports pegged tokens that represent cryptocurrencies, currencies, and metals. Many more assets and even baskets of assets will be supported in the future, but for now, PegNet supports the following pegged assets in which people can store value in:
All of the pegged assets listed above can easily be converted between each other for 1/10th of a cent ($0.001) on the PegNet. These ultra-cheap transactions enable participants in the network to seamlessly trade with one another globally, without borders. It doesn’t matter whether you send five cents or five million dollars, all payments and transactions cost 1/10th of a cent. Additionally, PegNet will be interoperable with Ethereum and other popular blockchain platforms to enable frictionless asset exchange across all networks.
Therefore, the nature of PegNet’s inexpensive transaction costs combined with its lack of counterparty, collateral, or smart contracts, opens up new implementations for the cryptocurrency industry such as simplified smart contract settlement and novel DEX liquidity mechanisms. Essentially, PegNet enables a frictionless trading platform between tokenized pegged assets and this is something necessary for the tokenized era we’re entering. And PegNet is already paving its way.
For instance, just recently, the first transactions of pGold (Gold pegged asset) have been made on the network where 40 participants on the PegNet received .001 pGold, or .001 Troy ounces of Gold (about $1.50 in value). These 40 people are part of history as they were paid gold for the cost of less than ½ a penny in the first multi-output transaction on PegNet. You can verify the transaction ID (txid) for yourself here.
If you want to make history and be part of some of the first transacted PegNet Assets, PegNet invites you to join their Discord where you can learn about PegNet, converse with the team, discuss its development, and make history.
PegNet Use Cases
PegNet is much more than just a stablecoin network for decentralized finance. It’s also a frictionless trading platform, a place to store value, a payment network, a transaction scaling solution, and an oracle system.
The many uses cases for PegNet include:
PegNet supports pegged tokens that represent currencies, metals, and other cryptocurrencies. These pegged assets enable frictionless payments between customers and merchants because the assets are seamlessly interchangeable.
A customer can pay in pEUR, pGLD, or pBTC, and the merchant can convert the payment to pUSD without a currency exchanger or any other 3rd party. Also, all transactions, no matter what asset or amount being sent is transacted for just 1/10th of a cent making payments with PayNet frictionless and affordable.
Many cryptocurrencies fail to scale because they are simply too slow or too expensive to transact. Take Bitcoin for example, microtransactions are not really feasible because transaction fees are too high.
With PegNet, customers and merchants can still transact Bitcoin by using pegged Bitcoin (pBTC). Then the merchant can simply convert pBTC into any other pegged asset by burning the pBTC and issue new pegged asset tokens equating the same value. Or the merchant could sell the pBTC for real BTC or USD on an exchange. Therefore, any blockchain can scale by utilizing PegNet for its blockchain’s payment transactions.
Since PegNet is interoperable with Ethereum and other popular blockchains, PegNet assets can be used for the simplified settlement of smart contracts with any listed asset from USD to Gold. Since pegged asset tokens are all based on Factoid addresses, the same Factoid address holds the ability to sign pBTC, pFCT, pGold, and many more asset transactions. Therefore, smart contracts can seamlessly be settled in any asset.
PegNet utilizes an innovative Oracle Price Record (OPR) system that’s backed by Proof-of-Work mining. Therefore, projects can leverage PegNet’s network of Proof of Work-based price oracles in creative ways.
Store of Value
PegNet enables people to store value in any listed fiat currency, cryptocurrency, or precious metal with many more assets and even baskets planned. Crypto holders can store value in pegged asset tokens and easily convert between pegged assets for 1/10 of a penny.
In addition to storing value and converting between pegged assets yourself, users of PegNet can also trade with others on the global cryptocurrency market without borders. All trades/transaction costs for listed assets are just $0.001 whether you send five cents or five million dollars.
Additionally, the nature of PegNet and its lack of counterparty opens up new implementations for the cryptocurrency industry such as novel DEX liquidity mechanisms for decentralized trading.
PegNet Implementation and Mining PEG
Now that we know what PegNet is and understand its use cases, it’s important to understand how PegNet is implemented and the role of the network’s underlying PEG token.
Apart from the network of pegged tokenized assets, PegNet is an open, distributed, autonomous protocol running on top of the Factom (FCT) protocol. The implementation of PegNet and its assets is simple, but the game theory is complex.
PegNet uses a unique Proof-of-Work (PoW) algorithm called LXRHash which enables anyone to mine using CPUs. Miners are rewarded in PEG, the network token and mining hardware is commonly accessible and uses 90% less energy than Bitcoin.
The LXR Hash mining algorithm is the first RAM hash for proof-of-work which enables mining on a Single Board Computer (SBC). This enables low cost, a low barrier to entry, and low power requirements meaning it runs cool.
PegNet requires proof-of-work mining for the retrieval of price data. The mined price data is collected into an Oracle Price Record (OPR) which holds prices of PegNet assets. Miners “mine” the OPRs, adding their Proof of Work (PoW) and the highest 50 are then evaluated for agreement.
The record that most agrees with the rest of the 50 records provides the prices for the current block. The 10 OPRs that agree the most are the winners and the top 10 miners share a 5000 PEG reward with the best miner receiving 800, second receiving 600, and the other eight receiving 450. Block times are 10 minutes (the block time of the Factom Protocol which PegNet is built on top of), and the reward per block is not reduced over time.
In summary, miners in the PegNet network act as oracles for the pricing data of PegNet assets. These miners are responsible for fetching the latest pricing data and reporting the prices to the Factom Blockchain. Therefore, prices are reported by the PegNet mining community and, with their help, users are able to buy and sell pegged assets peer-to-peer.
If you want to participate in the PegNet network as a miner fetching price data and earning PEG tokens as a reward, you can take action by visiting PegNet’s GitHub mining page where you’ll learn of the requirements and how to get started.
Additionally, you can join the PegNet Discord where you’ll find loads of helpful information and friendly community members to help you get started and start earning PEG tokens.
The PEG Token
The PegNet token (PEG) is the token miners earn for providing price oracle data. Currently, the value of PEG is the summary of all pegged tokens in the market, in which the market value of all the pegged assets, divided by the number of existing PEG is the value of PEG. However, once the PEG token gets listed on exchanges, the market will establish its price.
PEG can be converted into any pegged asset and any pegged asset can be converted into PEG. The conversion between assets involves the burning of the asset you’re contributing and issuing the asset that you want.
For example, if the value of one PEG is $2.00 you could convert it into two pUSD by burning one PEG and issuing two pUSD. The burning of PEG to convert it into pegged assets would reduce PEG’s supply and increase the value of pegged assets, thus increasing the value of PEG.
Moreover, according to the SEC guidelines on securities, PegNet's PEG tokens are not considered securities because 1) there was no ICO or any other form of tokens being sold to the initial investors, and 2) PegNet raised no money. It's just an open-source project made by Factom devs.
PegNet’s new and innovative stablecoin network for decentralized finance has the potential to usher in a new era of tokenized assets. The network’s design is truly unique as pegged assets are issued without any counterparty, collateral, or smart contracts. This opens up new implementations for the cryptocurrency industry and has the potential to become a new standard for trading and exchanging digital assets.
What do you think about PegNet? Does it have the potential to revolutionize the way we exchange digital assets and cryptocurrencies? Let us know what you think in the comment section below.