In a major development for the cryptocurrency industry, BitGo, a digital asset custodian backed by Goldman Sachs, has officially announced its entry into the stablecoin sector with the introduction of USDS.
This stablecoin, pegged to the US dollar, is set to launch in January 2025 and aims to rival prominent stablecoins such as Tether (USDT) and Circle’s USD Coin (USDC).
BitGo's New USDS Stablecoin: A Game Changer?
The newly launched USDS stablecoin is poised to set itself apart by introducing a novel approach to earnings distribution. Unlike other stablecoins, where issuers retain the majority of interest generated from reserves, BitGo plans to distribute up to 98% of earnings to network participants. This marks a significant shift in how stablecoins traditionally function, emphasizing user participation and engagement within the ecosystem.
According to BitGo, “Traditional stablecoins earn interest on their reserves, and 100% of that interest income is retained by the issuer or funneled to exchanges, leaving you with nothing.
Backed by Short-Term Treasuries and Repos
BitGo’s USDS stablecoin will be backed by a mix of short-duration Treasury bills, overnight repos, and cash. This backing aims to ensure the stability of the USDS token, while also creating a robust foundation to challenge established players in the market. The stablecoin will be issued by BitGo New York Trust Company, a regulated entity formed in 2021 under New York state laws, further adding credibility to the project.
BitGo’s USDS also introduces a new reward system, allowing participants to earn revenue by holding and using USDS within the ecosystem. Eligible institutions, exchanges, and liquidity providers can participate by generating sufficient liquidity and registering with BitGo. Once registered, participants will prove ownership of their USDS holdings, which will be used to calculate their rewards.
Rewards will be paid monthly based on the participant’s share of total USDS holdings. BitGo’s Distribution Revenue Share (DRS) model ensures that participants receive compensation after deducting a monthly administration fee.
Minting USDS: A Flexible Approach
BitGo is making minting and burning USDS more accessible than ever. Approved users will be able to mint USDS using USD, USDT, or USDC. Similarly, they can burn USDS to receive any of these assets. Notably, BitGo will cover any fees associated with the minting and burning process, ensuring a cost-free experience for participants.
This flexibility in minting and burning, along with BitGo’s focus on rewarding liquidity providers, sets USDS apart from competitors like USDT and USDC. BitGo’s ultimate goal is to incentivize growth and adoption, rather than competing directly with other market participants.
The Goldman Sachs Connection
As a company backed by Goldman Sachs, BitGo’s foray into the stablecoin market holds significant weight. Goldman Sachs has shown increasing interest in the cryptocurrency sector in recent years, and its backing of BitGo signals confidence in the future of digital assets and stablecoins. The introduction of USDS may be a critical step in the evolution of how stablecoins are integrated into traditional finance.
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