Gemini Dollar (GUSD) is a widely-used stablecoin by investors to leverage their trades. Unlike other cryptocurrencies, GUSD is designed to resist market volatility that leads to a negative impact on a crypto token’s valuation.
Why Was Gemini Dollar (GUSD) created?
To solve the problem of volatility in the crypto market, Gemini USD was created. Its value is tied to the stable currency of the US dollar, which means it maintains a value of $1 regardless of market conditions, unlike cryptocurrencies like Bitcoin and Ethereum which are known for being highly volatile and, therefore, unreliable for payments and storage of value.
What is the Gemini Dollar?
Gemini Dollar (GUSD) is a stablecoin collateralized by cash or cash equivalents held across bank accounts, money market funds, and US treasury bills. A stablecoin is a type of cryptocurrency designed to maintain a stable price over time. It is pegged to the value of fiat currencies like dollars or pounds.
Stablecoins like GUSD are backed by the specific assets that they are pegged to. An organisation that issues out stablecoins usually sets up a reserve at a financial institution that holds the underlying asset, or fiat currency, that it is pegged to. For example, a stablecoin could issue 100 million coins with a fixed value of $1 and, therefore, have a reserve of $100 million.
Use cases of Gemini Dollar (GUSD)
Similarly to other stablecoins such as USDT or USDC, the GUSD stablecoin is used in trading to minimize price volatility on crypto exchanges. It allows traders and crypto investors to hold their money on an exchange without its value fluctuating.
Exchanges: GUSD is used to move money between cryptocurrency exchanges to assist with arbitrage.
Payroll: The use of GUSD stablecoin for payrolls could be extremely effective in times when remote work beyond borders is increasing. It will cost less time and money to process payrolls for businesses and employees won’t have to worry about experiencing problems with their banks.
Safe Haven Asset: Other cryptocurrencies, such as Bitcoin, are not stable stores of value as their prices are highly volatile. This can be highly unsettling for people who need to access their crypto assets regularly. As a safe haven asset, users don’t have to worry about their money fluctuating.
Lending: Due to its high yield, GUSD is a great way for debt investors to collateralize their investments. This makes investing much more appealing.
Escrow: The process of escrow can be entirely automated using a stablecoin such as GUSD. Without the intermediation of institutions, USDD can automatically handle the process using smart contract technology.
Payment: GUSD can be used to complete everyday transactions. We can expect to see the use of stablecoins implemented in stores where payments are used by scanning a QR code. Businesses can benefit from this as they can avoid the high processing fees of traditional institutions.
Alternative to banking: Not everyone around the world has access to a bank account. With cryptocurrency, all users need is access to the internet to create their account which they can then store GUSD in. This will help unbanked people participate in the economy.
History of GUSD
GUSD was founded by Gemini Trust Company, LLC (Gemini) in 2018. Gemini is the company of twins Cameron and Tyler Winklevoss. In September 2018, Gemini received approval from the New York Department of Financial Services (NYDFS) to launch the stablecoin. Gemini describes GUSD as the ‘world’s first regulated stablecoin’. Unlike Tether, Gemini Dollar is highly transparent. It is regularly audited to make sure that it maintains its value of 1:1 with the US dollar. This makes GUSD stand out from the crowd and helps it to build trust.
Pros and Cons of Gemini Dollar (GUSD)
Pros
Faster transaction speed: Transacting funds through banks can be tedious due to the lengthy processing times. This is especially true when transacting across borders. GUSD cuts down majorly on these times, with transactions processing in as little as 5 minutes.
High-interest rate: GUSD’s high-interest rate is the biggest pro of the stablecoin, however, it is also a con.
Borderless: The ability to be an anonymous and borderless store of value makes an algorithmic stablecoin a necessity for the real world in places experiencing extreme inflation with their fiat currency or sanctions such as Venezuela as they cannot use their own currency to emigrate or transact across borders.
Stable value: People from countries whose currency is prone to extreme fluctuations benefit by holding their funds in a store of stable value.
Transparent: Transparency means that anyone on the internet can view transactions. This is useful as it dispels any confusion as to where funds are going.
Lower fees: The price to transfer funds across borders tends to be highly expensive. Because GUSD mitigates middlemen, it can offer low-fee transactions.
Cons
Security: Trading platforms and crypto wallets are highly exposed to hacker threats. Although there are safety measures that can be taken to convolute the threats, the risk is still big because, unlike traditional banking, crypto transactions cannot be reversed.
Counterparty risk: As a result of being “decentralized”, multiple parties are involved in the management of a stablecoin. For the coin to maintain its value, all the parties involved need to be properly performing their tasks (security, reserving properly, etc).
Reserve risk: Without reserves being secure, the coin issuer cannot guarantee the value of a stablecoin with full confidence. Reserves are vital as they are the final backer of a stablecoin’s value.
Lack of confidence: The price of a stablecoin can fall if traders lose confidence in its ability to maintain the peg. This usually happens when a stablecoin is not sufficiently backed by hard assets or cash, as it could suffer a run and lose its peg against its target currency.
List of Popular Stablecoins
USD-pegged
Tether (USDT)
USD Coin (USDC)
True USD (TUSD)
Binance USD (BUSD)
DAI
Paxos Standard (PAX)
sUSD
Reserve (RSV)
Origin Dollar (OUSD)
GBP-pegged
Binance GBP Stable Coin (BGBP)
EUR-pegged
Stasis Euro (EURS)
Turkish Lira (TRY)-pegged
BiLira (TRYB)
Korean Won (KRW)-pegged
Binance KRW (BKRW)
Gold-backed
Tether Gold (XAUt)
Paxos Gold (PAXG)
CACHE Gold (CACHE)
Other
Petro (PTR) (oil-backed)
Where To Buy Gemini Dollar (GUSD)
You can trade Gemini Dollar on major crypto exchange platforms. You can buy, sell or use the GUSD stablecoin for trading on both centralized and decentralized exchanges.
Centralized exchanges:
1. Binance
2. Coinbase
3. Huobi Global
Decentralized exchanges:
1. Uniswap
2. Crypto.com
3. Pancakeswap
Before buying cryptocurrency, users need to know the risks involved. Because centralized exchanges hold your private keys, you are at risk of losing access to your assets if there is a hack. Holding your cryptocurrency in your own hardware crypto wallet is recommended, but you put yourself at risk of losing your assets forever if you lose your private key or are targeted by hackers unknowingly. In any case, it’s important to do your research before investing in any crypto project; this article is for guidance only and should not be seen as investment advice.
