When trading Bitcoin and Co., many investors rely on Stablecoins, which are supposed to represent the US dollar 1:1, for example. Paxos (PAX) is a popular representative of such Stablecoins and is also considered “the most stable” of its kind.
Fiat currencies such as the euro or US dollar are only of limited use when trading crypto currencies in seconds. This is because the traditional currencies cannot be integrated sufficiently into the interfaces of crypto exchanges, transactions take time and are sometimes associated with high fees. At the latest when used in the DeFi, Smart Contracts or DApps division, Fiat is left out in the cold. For this reason, the crypto industry has developed various Stablecoins in recent years, Tether (USDT) is probably the best known. But with tether, there is justifiable doubt as to whether for every USDT in circulation there is actually one US dollar in accounts for hedging purposes. An alternative to Tether is called Paxos. PAX scores points with transparent accounting by the US company behind it, Paxos Trust Company, which leads to very low exchange rate fluctuations.
Background to Paxos (PAX)
Paxos Trust Company has received crypto trade approval in 2015 from the New York regulatory authorities, which are known to be particularly stringent beyond the US. PAX was then launched in the fall of 2018. The meticulously observed rule applies that new PAX are only generated for deposited US dollars and that PAX are “burned” accordingly for payouts in US dollars. The monthly reports from external auditors can be viewed here.
For Paxos, the US Dollar was chosen as the currency shown because it is still the global reserve currency and thus demonstrates stability. The US Dollar in Stablecoins is besides Bitcoin (BTC) also the dominant base currency for the crypto market, Euro plays only a minor role. PAX is an ERC-20 token, thus at home in the Ethereum (ETH) ecosystem. This guarantees compatibility with DeFi, Smart Contracts and DApps. PAX is supported by most major crypto exchanges and as an ERC-20 token is also suitable for all common software and hardware wallets.
Besides PAX, Paxos Trust Company is now also responsible for the Stablecoin Binance USD (BUSD). With Paxos Gold (PAXG) one also has a token secured by gold in the program. Most recently Paxos Trust Company made headlines through its collaboration with PayPal, where the company organizes the new crypto division of Paypal in the background.
Conclusion: Paxos (PAX) – because it does not always have to be tether
PAX is not yet a real competitor to USDT in terms of market capitalization. But Tether may be even more widespread than Paxos – but trust in USDT has suffered, not least because of the continuing lack of transparent links to the crypto exchange Bitfinex and accusations of price manipulation.
At Paxos, the deposit of USDT for PAX hedging at US banks and the regulation at the New York headquarters bring advantages. For example, Paxos Trust Company can point to the protection of PAX through government deposit insurance, and by its nature is a stablecoin for institutional investors. These are also good arguments for you as a private investor to consider Paxos as a stablecoin for everyday business.
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