GUSD cryptocurrency exchange, founded by the Winklevoss brothers, announced on Monday that it has launched a stable currency based on the ERC-20 standard.
According to the white paper, the value of the “Gemini Dollar” (GUSD) stable currency will be “linked to the US dollar in strict accordance with the ratio of 1:1”.
Of course, there are many stable currencies linked to the US dollar, such as Tether (USDT) and Dai (DAI), some based on reserves, and others are algorithmic.
The technical specifications of GUSD are an important factor in improving trust. Below we will delve into the white paper on this stable currency.
Issue and redeem GUSD
People can view the GUSD and its liquidity in the Ethereum blockchain. Moreover, an independent accounting firm will conduct a regular full audit of the Gemini Trust to ensure that the tokens have dollar support.
The Ethereum blockchain will verify the total supply of tokens, while third-party audit firms will verify the number of tokens based on the audit method.
Whenever a customer withdraws a certified dollar from the Gemini exchange, a GUSD is created on the blockchain. When a user deposits a currency into the Gemini exchange, the GUSD is destroyed or “exchanged”.
The removed GUSD can be sent to any Ethereum address and stored there as part of the ERC-20 protocol. Gemini tokens retain all the features in the ERC-20 protocol (smart contract).
Smart contracts as governance, logic, and ledger
As stated in the white paper, Gemini wants to maintain strict control over tokens so they can perform any upgrades. Gemini hopes 1. Resolve vulnerabilities; 2. Extend the system with new features; 3. Improve the system and optimize operational efficiency; 4. In response to security incidents (ie catastrophic events), or if the court or other government agency requires it to comply with the law To suspend, prevent or reverse the transfer of tokens when performing an obligation or completing a liability.
They do this by setting up smart contracts that perform different functions. The Proxy layer controls the permissions to create and transfer tokens. As a hypothesis, if there is a security incident, this proxy layer supports a simpler mechanism to stop token transactions and issues. The agent acts as a management layer for managing people and things on the blockchain and executing the smart contract logic contained in the lmpl layer.
The middle layer, called “Impl” (probably an abbreviation for “implementation”), contains the data and logic of a smart contract, whether it’s creating new tokens or transferring them under certain conditions. The Impl layer has smart contract functionality similar to most ERC-20 tokens. However, the idea here is that the function of a smart contract can only work if the agent grants execute permission.
The final smart contract layer is the actual ledger, called “Store.” This layer assigns the token owner to their balance as an “external eternal Gemini dollar ledger.” This is where the public can view the GUSD transaction ledger.
As a developer, the smart contract layer is like a network stack. A proxy is a local server that allows file execution. If the webmaster does not want to execute a file, they will remove it from the server. These files or the “Impl” layer need to store the data in a database for later retrieval. The database is the “storage” of the basic information generated by the file logic.
While this is a simplified example, the three-tier approach highlights the individual features of each smart contract layer. They are built in a way that is easy to centrally control, while also supporting the flexibility that smart contract developers need to use ERC-20 tokens.
Hosting: Offline key set as final approval
Gemini will require smart contract developers to obtain approval from the custodian or key set. For developers, these can be online or offline. However, the custodian will look for another custodian and create a chain until the offline key set is reached. Here, the white paper states, “If the hosting of a smart contract ends in an offline key set, an offline approval mechanism for its operations is created.
“The idea here is that the custodian chain must terminate in a centralized offline key set to approve the developer’s smart contract.
If Gemini needs to upgrade the smart contract Impl layer, the system will pause the network and replace the old Impl layer with the new Impl layer, while bringing the old smart contract to the new Impl layer. Both the proxy and the storage layer treat the new Impl smart contract layer as an authoritative layer and ignore the old layer. In addition, the currently active token will be transferred to the new Impl layer.
Strictly restrict the creation of GUSD tokens
Creating new tokens is a tricky issue in the history of stable coins because each new token should have a precise dollar to support it.
GUSD will use a mix of online and offline hosting mechanisms to ensure that the token amount never exceeds the base dollar balance.
The method built into the Imply layer is called “PrintLimiter”. As the name suggests, PrintLimit sets a hard limit on the number of tokens that the Impl layer can create. Whenever the token supply needs to be changed, the limit will have a check and balance procedure. The increase in restrictions must first be approved by the offline key set (ie, the custodian), reducing the need for online hosted key approval. Tokens cannot be created at will. Restrictions will always exist and any changes to them must be approved by the online and offline chain of custody.
to sum up
It is clear that the Gemini exchange has added a lot of ideas to the implementation of its stable currency. The separation of hosting, distribution, and developer logic is a semi-centralized token.
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