Our next Coin of the Week may not take you to the moon on its own, but it might just help you stay there once you arrive. This week we take a look at TrueUSD (TUSD). We’ll cover what purpose this “stablecoin” serves in the world of cryptocurrencies, how it compares to its controversial predecessor, Tether (USDT), and how you can easily add some TUSD to your holdings without using a centralized exchange.

Volatility is the bane of the crypto-trader’s existence, and it remains one of the primary things that hinders broader adoption of cryptocurrencies. Investors in more traditional assets are understandably alarmed when they see the price of Bitcoin and other coins go up or down by hundreds or even thousands of dollars in as little as a few hours.

For many people, the technology and explosive growth are intriguing, but the wild swings in price are just too much to handle. The massive correction of Q1 2018 certainly has not convinced some skeptics that Bitcoin (and cryptocurrencies in general) are a good investment. In such situations, many people want to quickly lock in their gains once they have them, or at least keep some easily-accessible fiat currency on hand to make quick purchases.

Stablecoins offer a solution. Unlike most cryptocurrencies, they (at least in theory) do not experience any changes in price because their value is tied to that of a fiat currency. The most famous of these is Tether, a stablecoin created by Tether Limited that is tied to the US dollar at a 1-to-1 exchange rate. The idea was that the amount of USDT in circulation matched the amount of actual US dollars held Tether Limited’s accounts. Investors could trade their cryptocurrency holdings for USDT, offering a degree of protection against sudden crashes in crypto prices. Sounds great, right?

Not fun.

Unfortunately, the Tether project has become mired in controversy due to unconfirmed allegations that Tether Limited holds far less US dollars than they claim, and are essentially creating USDT out of thin air. This, combined with the fact they have never been successfully audited by a 3rd-party, and the project’s links to the controversial exchange Bitfinex (which was revealed in the Panama Papers leaks) has certainly not helped put doubters’ minds at ease. (The actual timeline of events is too complicated and bizarre to explain in detail here, but this video offers a pretty good summary.)

While USDT remains a popular coin, the amount of scandal surrounding it has understandably freaked a lot of people out. Nevertheless, the demand for stablecoins remains high, opening the door to competitors who could learn from Tether’s mistakes…

Enter TrueUSD

The team at TrustToken has a goal to create a series of asset-backed tokens which can reduce to amount of risk involved with cryptocurrency investing, and help mainstream businesses feel more confident about embracing them. Their first project is TrueUSD, a dollar-backed stablecoin project which aims to avoid the many problems that have plagued its predecessor. Did they succeed? Let’s take a closer look.

TrueUSD is an ERC20 token that hopes to let people and institutions enjoy many of the benefits of using cryptocurrency without the risks. TrueUSD is different from Tether in several important ways:

Each TrueUSD token is backed up 1-to-1 with real US dollars. However, TrustToken does not actually hold any USD reserves themselves. Instead, they have partnered with legally registered banks and fiduciary institutions which hold the dollars in escrow — a time-tested and widely understood legal framework which has been in use for generations.

Any person or organization that can pass a KYC/AML check can open an account with TrustToken and get TrueUSD for the first time by visiting their website. You wire USD to one of TrustToken’s third-party partners, and provide them with your Ethereum wallet address. When this is done, TrustToken initiates a TrueUSD smart contract, in which the equivalent amount of TrueUSD is “minted” and delivered to your wallet. These TrueUSD tokens you now hold are effectively certificates that can be redeemed for fiat USD.

To redeem them, you send TrueUSD tokens back to the TrustToken, which activates a smart contract that will burn the amount of tokens you wish to exchange. TrustToken then notifies the bank holding the corresponding amount of USD in escrow, and they wire the USD directly to your bank account.

In this way, there is always an exact 1-to-1 correlation with the amount of TUSD in circulation and the amount of USD held in escrow.

What if you want to exchange other cryptocurrencies for TUSD, and then redeem them for dollars? That’s easy too — just create an account with TrustToken and follow through the same process described above (you’ll need to pass the KYC/AML checks as well) and you’ll be able to cash out for USD in no time at all.

It sounds great, but how do we know that TrustToken is actually doing any of this? The company has partnered with Cohen & Co, a highly regarded Top-50 auditing firm that publishes bi-monthly attestations to verify that they actually hold the amount of USD in escrow which they claim to. According to the latest attestation, there is a little over $41 million in their funds. (You can check out all the attestation records here.)

So, let’s do a quick recap of the benefits of TrueUSD:

· USD funds are verified in regularly scheduled attestations by a trusted auditing firm.

· USD holdings kept in escrow by trusted third-parties; TrustToken does not have direct access to dollar holdings, and could not abscond with them even if they wanted to.

· Token minting/burning system ensures that every single TrueUSD token is backed up by 1 USD.

· As an ERC20 token, TrueUSD can be stored in an Ethereum wallet (something you can’t do with USDT).

· Mandatory KYC/AML compliance ensures that TrueUSD keeps shady characters from tainting the project.

· The benefits of cryptocurrency (faster transaction speeds and lower fees) without the downsides (extreme volatility).

The Bottom Line

TrueUSD is an incredible tool for any crypto trader, and now that it’s listed on Faast, it’s never been easier to add to your portfolio.

If you have an Ethereum wallet we support, you can instantly gain access to TUSD so you can protect yourself against market swings, and position yourself for success, whether you just want to cash out, or jump back in when prices get lower.

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