Many cryptocurrencies, including Bitcoin, are not living up to their promises of bringing a new world currency. What is happening is that cryptocurrencies are essentially being used as a simple technical channel to make fiat payments, thus losing their decentralized and permission-less benefits. Furthermore, even if you assume that a certain cryptocurrency’s value will continue growing into perpetuity, the inflexible and limited supply will still make it volatile, which encourages speculation and holding instead of using the crypto for payments. Augmint’s solution is the A-EURO, a crypto token that is pegged to the EURO and is instantly transferable across the world.
Introducing Augmint Stable Crypto Tokens
The creation and supply of modern currencies is based on a type of credit situation. The most critical aspect of this credit process is that money is in a constant state of creation and destruction by mutual economic actors within the financial cycle. Augmint is a digital token that is based along the same logic, with each having a specific underlying fiat currency. The supply of Augmint tokens will be automatically adjusted just like other modern fiat currencies.
To promote market stability of the A-EUR tokens, new tokens will only be issued once a new loan with its collateral backing is issued. This means that Augmint tokens will be automatically burnt or destroyed after each loan repayment. However, in the instance where there is a loan default, then the collateral used to back the loan is transferred into Augment’s reserve where smart contracts will manage it. This regulation will occur in an automatic and cryptographically decentralized and secure manner.
Mechanisms To Maintain Stability
There are multiple mechanisms in place designed to guarantee that the Augmint price always remains on par with the Euro. For instance, the system’s loan origination will only be activated where there is a need for money. This will ensure that the extra demands is met at the very site of the new token demand. Furthermore, Augmint will also accept a diverse collateral base to maintain stability and low correlation between types of collateral. Other notable stability mechanisms include allowing users to lock up the tokens for some time to impact the price and also internal market interventions.
Open Governance Model
A key challenge that Augmint faces is to make its system scalable and flexible, while still retaining the decentralized and trustless nature. It is essential to make sure that no one ever hijacks the system through deploying system components without getting consensus. In effect, Augmint plans to use an open governance model where smart contracts are the primary means of decision making. However, where these programmable contracts cannot be used, changes will be performed by a community elected board.
There have been numerous attempts in the crypto industry to come up with a cryptocurrency that is actually stable, with Tether being by far the most effective. Other projects like MakerDAO aim at decentralizing the creation of money. However, Augmint has taken a step further towards achieving reliable stability by basing their tokens completely on the credit money principles. The result is that Augmint tokens will be capable of being usable in the real world just like regular money, either as a store of value, medium of exchange and unit of account.