Stability is not pegged – it goes much wider and further
Stability is a subjective topic. When chatting with an eminent Professor of Finance or Economics, explaining what you mean by stable is no easy task – this is precisely what the CEO of XOV had to do at the London School of Economics in 2018, when the project first engaged with economists.
Understanding the possibilities and limitations of what makes any currency stable takes time. As the stable currency markets started to evolve in late 2018, the project sat back and watched. Numerous mistakes were made.
There were stable coins underpinned by Ethereum (which in itself is volatile), stable coins that could never substantiate the value of its underlying reserves and the list goes on. Many projects appeared that pegged themselves to gold, oil, the US Dollar, apples and oranges, and just about anything else they could attach themselves to that justified their definition of ‘stable’. Luckily, XOV is mature enough to understand that pegging is not stable – it is just one ingredient of stability.
XOV thanks these projects for providing a learning opportunity.
Perhaps one of the easiest ways to answer the stability question is based on what the individuals and holders of the stable currency expect – to give them the confidence to demand and use it.
We have been working on this challenge for some time and our definition of stable, we now call the measure of True Stability.
A stable coin needs to be price stable. The XOV stable coin will not be available on any trading exchanges as this is a contributor to volatility. The stable coin will only be available to purchase from XOV directly at a fixed price of 1 US Dollar.
XOV will appoint an independent board of economists and financial experts underpinned by an experienced team of traders to control a range of underlying reserves/assets to ensure that the value of the XOV stable coin is constant within +/- 5% within a risk framework.
XOV will be developing their own private, proprietary blockchain. This removes the risk of the XOV stable coin being reliant on any third party services that could potentially introduce network errors, network performance issues, and developers that are not security cleared. It also reduces the potential for security vulnerabilities that can arise from open source code.
To give confidence to holders of the XOV stable coin that the underlying reserves/assets can be substantiated, XOV will tokenise these assets which will be available for real-time auditing on the blockchain.
When making payments, especially large payments, it is critical that the sender has the confidence that the recipient will receive it, and to safeguard against accidental or malicious payments.
A major consideration for any Government, bank, corporation or HNW individual in trusting that a stable coin has underlying value, is the security of the underlying asset. The underlying assets will be located in a number of global locations to mitigate any economic or political risks. The underlying assets will be physical and tangible and not virtual, with regular reviewing of contracts.
Accountability in the financial world is essential. When dealing with people’s money, either directly or indirectly, it is not good enough to blame a faceless decentralised network for the malicious or accidental loss of funds. No responsible Government, Central Bank , or corporation is going to take these risks. Security cannot be guaranteed in a decentralised network with unknown actors and developers – the risk of a security breach is higher. XOV Core harnesses the power of decentralisation for wallet storage and transaction validation whilst retaining a perimeter fence of centralised controls. This hybrid network model offers the best of both worlds, balancing security and accountability with the freedom and independence of blockchain technology and decentralised wallet security.