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Crypto Billionaire Arthur Hayes Proposes Bitcoin-Based USD Stablecoin – How Would It Work?


Crypto Billionaire Arthur Hayes Proposes Bitcoin-Based USD Stablecoin – How Would It Work?

Source: Adobe / MaxFrost

Crypto billionaire Arthur Hayes has proposed a Bitcoin-backed stablecoin. The value of the stablecoin would need help from exchanges to maintain its peg at $1.

In a recent blog post, the former CEO of BitMex proposed the dollar Satoshi Nakamoto, NakaDollar ($NUSD), which would rely on derivatives exchanges listing liquid inverse perpetual swaps. This will allow the creation of a synthetic USD equivalent without using USD held in the fiat banking system.

The proposed stablecoin will be based on a set of short BTC positions and inverse USD perpetual swaps, maintaining its 1:1 peg to USD via mathematical transactions between the new Decentralized Autonomous Organization (DAO), NakaDAO, authorized participants ( AP) and derivatives of exchanges.

“1 NUSD = $1 Bitcoin + Short 1 Bitcoin/USD Inverse Perpetual Swap,” Hayes wrote, noting that this is how the proposed stablecoin will be designed. He said this relationship creates a USD equivalent without encumbering more crypto collateral than it creates in fiat value, unlike MakerDAO.

Notably, the NakaDollar would not be decentralized. The stablecoin is supposed to rely on centralized crypto derivatives exchanges, which are highly liquid, rather than banks to hold USD for tokenization.

“Points of failure for the NakaDollar solution would be centralized crypto derivatives exchanges. I have excluded decentralized derivatives exchanges as they are nowhere near as liquid as their centralized counterparts, and their pricing oracles rely on flows of centralized spot exchanges.”

The NakaUSD DAO will have a legacy legal existence as it will need an account on all member exchanges, Hayes said. The DAO will also come with its own governance token, NAKA, which can be used to fundraise and finance developments. Both NUSD and NAKA are said to be ERC-20 tokens that live on the Ethereum blockchain.

The crypto billionaire said the industry currently has the tools and organizations to support $1 trillion or more of NakaUSD stablecoin. “If this solution were adopted by traders and exchanges, it would lead to strong growth in the open interest of Bitcoin derivatives, which, in turn, would create significant liquidity.”

Non-USD Stablecoin Search Gains Momentum

Hayes’ proposal comes amid a renewed call for stablecoins that aren’t pegged to traditional currencies like the US dollar or euro.

Binance, for its part, revealed it was looking beyond dollar-based stablecoins after the New York Department of Financial Services (DFS) ordered Paxos, a crypto company that issues the Binance USD stablecoin ( BUSD), to stop minting BUSD tokens.

Binance chief strategy officer Patrick Hillmann said in late February that several private and public entities had expressed interest in working with the exchange to launch another stablecoin, which may not be dollar-based.

Stablecoins are an essential part of the crypto ecosystem as they facilitate billions of dollars in trades and loans and provide an alternative to the high volatility of popular cryptocurrencies.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.