Stablecoins are one of the more attractive cryptocurrency assets in the world, as their value is directly pegged to another asset, like the dollar, the euro, or even gold. However, in an effort to provide customers with greater security, Equilibrium has just created a massive insurance policy for their stablecoin, which is entirely self-funded.
- The insurance payout is programmed into a smart contract, requiring certain activities to take place to trigger it.
- CEO Alex Melikhov hopes that the insurance becomes a benefit that is standard for cryptocurrency platforms.
The cryptocurrency market is known for being extremely volatile, but stablecoins have helped to erase some of these concerns from investors. Equilibrium, a stablecoin issuers, decided to create more security for their EOSDT stablecoin, according to CEO Alex Melikhov. The CEO explained that the company has self-funded a new insurance policy, worth $17.5 million.
Presently, the stablecoin is pegged to the dollar, but the insurance policy also backs it with smart contracts, programmed to instantly pay out to customers if it ever crashes. The smart contracts help to create certainty and stability for consumers, much like the way that the FDIC insures traditional banks accounts for customers. The “doomsday reserve,” as described by CoinDesk, contains 6.5 million EOS, which is being called the Stability Fund. This reserve is divided into three smart contracts within Equilibrium.
“If the system is triggered, a mechanism will calculate how much additional capital is required to collateralize the system up to 100%. This makes sure that every user who has generated EOSDT stablecoin on our framework will get back their funds even if the collateralization of the system will drop below 100%.”
Equilibrium has already gone through multiple efforts to ensure that the insurance policy for customers is locked up tight. Contracting a DeFi consultancy firm named EOS42, the company has arranged for a security audit of the smart contracts that the policy is tied to, notifying auditors that there are set conditions already programmed that will release the funds.
Outside of this reimbursement system, fund movement is rather restricted, requiring a 30-day public notice for any funds that move outside of it. This limit is already “coded into the contracts,” says Melikhov. Still, with this groundbreaking move, the CEO is hoping that other platforms will follow their lead, as the insurance policy becomes “some sort of standard for the industry,” especially for projects involving DeFi.
Overall, with this additional transparency in the stablecoin, Equilibrium expects that the EOS token pool will continue to grow, even though it is one of the largest single pool for EOS right now. In fact, EOSDT is presently at the forefront of decentralized apps that use EOS with 4.5 million collateralized tokens.