DeFi components on Tezos: USDtz

DeFi components on Tezos: USDtz

By Allen Walters | Publish0x posts | 25 Dec 2020


With the launch of several DeFi components on Tezos in the next few months, I decided to start a series that describes each component. 

USDtz is the first USD-pegged stablecoin on Tezos. It was launched in May this year, and anticipated a future demand. That demand materialized with the launch of DEXter, the first decentralized exchange built on Tezos. More use cases will follow in the form of several announced DeFi applications such as lending-borrowing, a synthetic exchange and a second DEX that goes by the name of Quipuswap.

Why another stablecoin, why another DEX?
To be able to trade value on Tezos-based DeFi applications, tokens need to be exchanged. But if you depend on tokens (for example a stablecoin) that is not built on Tezos, you would need to interact with two different chains. If you would use DAI for example, and make a trade on a Tezos-based DEX, then you would need to interact with the Ethereum blockchain since DAI is built on Ethereum. That would eliminate the whole advantage of trading on a Tezos-based DEX, since the advantage would be the low transaction fees on Tezos. Trading DAI on Ethereum would expose you to the high fees on Ethereum. A stablecoin that lives on Tezos, would only need to interact with Tezos, and thus transaction fees are (on average) 1/3,000th of fees that you pay on Ethereum. Yes, you read that correctly. 1 transaction on Ethereum, costs you the same amount as 3,000 transaction on Tezos. To put that even more clearly in perspective: let's take todays prices. An average transaction on Ethereum will cost you today (December 25, 2020) $3.542. An average standard transaction on Tezos will cost you 0.0004 XTZ x $2.03 = $0,000812

3,000 transactions on Ethereum will cost you 3,000 x $3.542 = $19,626.-
3,000 transactions on Tezos will cost you 3,000 x $0,000932 = $2.44
So today, basic transactions on Ethereum are 4,354 times more expensive than on Tezos. That is why a DEX built on Tezos makes sense. That is why stablecoins, wrapped tokens, Lending-borrowing and DeFi on Tezos in general makes sense.

Add to the above, the fact that Tezos provides formal verification for smartcontracts that are built on Tezos. Formal verification, is a method which is used in mission-critical environments such as aerospace, nuclear, and semiconductor industries. It is used to verify the correctness of smartcontracts. Which simply put means, that a smartcontract will do what it is intended to do. The result is, that applications that are built on Tezos (if formally verified) are a lot less likely to fail. 

3 main ways to obtain USDtz
- Buy on DEXter, the decentralized exchange on Tezos. (Soon followed by the second DEX on Tezos, called Quipuswap.)
- Become a Mintery. This means that you can put up collateral yourself, and create new USDtz tokens yourself as an official USDtz Mintery. TokenSoft facilitates the KYC/registration process for USDtz minter enrollment. This means that all minters are registered and can not be anonymous.
- Buy through a mintery. (No KYC required for buyers, so you can buy anonymously) You pay in USDC, and receive freshly created USDtz from a minter. Current minteries can be found here. 

This month TEZEX is expected to be launched, which is a platform where individuals can mint USDtz. The USDtz on TEZEX is pre-minted through official minteres, this means that the individuals that use TEZEX do not need to be KYC-ed. The advantage is that you can obtain USDtz there pretty much instantly. In time, other tokens will be added to TEZEX.

Wallets
USDtz can be stored on several wallets: 
Trading enabled for DEXTer (and soon Quipuswap):
- Thanos webwallet (Chrome/Brave Browser Extension, Ledger compatible)
- Magma mobile wallet (iOS and Android)
Not compatible with DEXter yet:
- Galleon Desktop for Mac, Windows (Ledger compatible) Galleon has announced they are working on Dexter support though. More info should follow soon.
- AirGap (Mobile and Desktop)

1:1 backed in USD value
USDtz is backed 1:1 by USDC. USDC is a stablecoin which has added protections other stablecoins don't have. It's American and FDIC insured. The USDC that backs USDtz value, is stored in a reserve wallet, which is a public wallet that can be verified and compared with the current circulating supply. On top of that, USDtz is audited by Armanino LLP.

StableTez tokens will be moving towards a multisig controlled reserve system:
"As USDtz and the related family of tokens from StableTez grows and evolves we will be adding multi-sig and other features including migration to the much more feature-rich FA2 token proposal. For the moment we are confident in both the level and the methods of security we have in place to operate with peace of mind on the Tezos chain. Security innovations are of course of central importance to us and for the dApp ecosystem at-large. We're working on deploying various open-source advancements that we and others can implement, including multi-sig administration accounts."

Tezos Stable Technologies, Ltd.
USDtz is one of the products that is launched by, and under the supervision of, StableTech (Tezos Stable Technologies, Ltd.), which is a subsidiary of the Tezos Stablecoin Foundation (Non-profit, non-shareholder foundation.) The TSF has set itself to pursue the following:

1. Building the primordial (Layer 1) technologies that will enable the infrastructural functions and facilities of the Tezos DeFi ecosystem (e.g. Stablecoins, Trading, Lending). This is done through its aforementioned operative arm, StableTech, and is executed by StableTech’s coordinated independent entities.
2. Providing grant opportunities to Tezos developers and entrepreneurs seeking support and resources to innovate the Tezos DeFi ecosystem through independent initiatives.

So anyone planning on building DeFi products on Tezos: consider reaching out.

Fun-fact: Venture Studio & Fund "Draper-Goren-Holm" has invested in Tezos Stable Technologies, Ltd. 

SABZ tokens
All stable coins and wrapped tokens that will be issued by StableTech, will have one umbrella governance token: SABZ. These tokens will be distributed to TRU tokenholders and earned by users. SABZ are governance tokens and will play a role in voting on subjects like distribution and supply caps.
The first batch of SABZ tokens will be issued to TRU tokenholders. This Trustee Network will be launched soon, which is a governance network for all Stable Tech DeFi applications. TRU tokens will be hard-capped and holders of TRU tokens will receive 1:1 SABZ tokens (and all other future tokens that will be issued for any of the "Stable Tech" DeFi applications). TRU tokenholders will be the ones to create stability in the primary phase of token distribution. They are not intended to be the ones to preserve majority in governance. After the initial batch release of SABZ tokens to TRU holders, users will start to earn SABZ tokens too and slowly but surely the TRU holders majority position will be overtaken.

Good news for current users: Kevin Mehrabi informed me that current early adopters will retroactively receive SABZ tokens at a certain point in time.

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New to Tezos? Read this full introduction to Tezos.

Here you can read more about the Status of the Tezos ecosystem. (Latest news, developments and growth of the adoption rate and on-chain statistics)

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Allen Walters
Allen Walters

Fascinated by blockchain and future proofing cryptocurrency. Discover the tech before it gets relevant. Twitter: @IgnoranceIt


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