Stabolut Launches USB, A Fully Decentralized, Dollar-Pegged Stablecoin

Stabolut, a fintech company, has launched USB, a Bitcoin-backed stablecoin aiming to be a fully decentralized and reliable stablecoin pegged to the USD. It uses a unique approach to retain this peg by shorting Bitcoin using derivatives.

Introducing USB: An Alternative Stablecoin

The collapse of UST, which was, before its collapse last year, the largest algorithmic stablecoin, triggered the creation of USB. Stabolut’s Chief Technology Officer (CTO), Julian Beltran, believes there is a clear market demand for a reliable stablecoin. USB aims to operate independently of the traditional banking system to protect itself from regulatory crackdowns.

While stablecoins are critical vehicles, allowing funds to flow from traditional finance to crypto, they are challenges, especially on reputation. Big banks are yet to back mainstream stablecoins and existing issuers like Tether Holdings, behind USDT, are struggling with opaqueness. USB issuers want to change this by leveraging the clarity of Bitcoin and the network’s huge support from some governments, regulated companies, and millions of coin holders.

In an interview, Stabolut co-founder and CTO Julian Beltran explained the idea behind USB and its unique features. The idea originated in 2018 when he traded futures on BitMEX, a derivatives cryptocurrency exchange. He realized that hedging Bitcoin could work as a stablecoin maintained in USD without relying on stored fiat.

USB is intended to be overcollateralized, providing excess funds that can be used in case of problems with any institution. The stablecoin would also use centralized exchanges for custodial storage, which reduces counterparty risk. USB is designed to be a more robust and reliable stablecoin option.

Beltran also explained that there is greater transparency by backing the stablecoin using Bitcoin. In turn, this reduces the risk of sudden de-pegging, supporting Satoshi Nakamoto’s dream of creating a parallel financial system independent of traditional banks.

Current stablecoins offer an alternative to traditional banking. However, issuers heavily rely on banks for fiat custody, that’s, funds behind the peg, making stablecoins vulnerable to various banking issues. The collapse of three major crypto-friendly banks caused significant damage, with the de-pegging of USDC following news that Circle had $3.3 billion stuck in Silicon Valley Bank (SVB), causing panic.

USB aims to restore user confidence and become one of the most widely used stablecoins for powering cross-chain transactions and working with Bitcoin-compatible projects. The development of USB began in October 2022. Then, developers worked hard designing the stablecoin crypto wallet and pegging mechanism. 

Stabolut is backed by the founders of Dextools.io, a platform with over 30 million monthly views on average.  Dextools.io is a platform through which traders can track all details about the decentralized markets. Stabolut has completed the private beta of USB and users can request for access. Meanwhile, the team plans to release the public beta in June 2023.

On USB, Frederic Fernandez, co-founder of Dextools.io, said there was more to be done with the collapse of major CeFi platforms in the last crypto winter.

“Following the collapse of FTX, Silvergate Capital, Silicon Valley Bank, and many other CeFi platforms in 2022, it is evident that DeFi and the entire crypto industry need better ways to safeguard user funds and, most importantly, restore confidence. USB will introduce true decentralization and be backed by Bitcoin in a system where there is no weak point like is in the case with issuers of fiat-backed stablecoins like USDC or USDT.” 

The stability of stablecoins is crucial to the digital asset market’s growth. They offer an alternative to traditional banking, which the industry heavily relies on for customer deposits. BitMEX co-founder Arthur Hayes points out that stablecoins can mitigate counterparty risks, enhance user privacy, and allow the industry to grow beyond the limitations of fiat-backed stablecoins. Moreover, the former BitMEX CEO thinks the recent collapses of the three major crypto-friendly banks have been the most significant financial event since COVID. 

USB, since its inception, is bringing to life the ideas of Hayes when he recently laid out how an ideal stablecoin “NakaDollar” should be backed. It wasn’t actualized but what was hypothesized is now live with USB,  a Bitcoin-backed stablecoin pegged to USD using derivatives. Both are designed to remove dependencies like SVB and Silvergate, so user assets aren’t frozen or blocked.