Edelcoin (EDLC) is the first stablecoin backed exclusively by base metals
Often, the reserves are made up of several heterogeneous assets. Still, some stablecoins are backed solely by a single asset class — this is where the Edelcoin token comes in.
What is Edelcoin?
Edelcoin (EDLC) is a new stablecoin issued as an ERC-20 token on the Ethereum blockchain and pegged to the U.S. dollar exchange rate. The Edelcoin stablecoin was listed on exchanges in late October 2024.
Edelcoin stands out because it is fully backed solely by base metals. As of November 2024, Edelcoin's stablecoin reserves consist of copper, cesium and nickel reserves. The value of the reserves is 125% of the value of all tokens issued. In other words, Edelcoin is a super-secured stablecoin.
All the metals that make up the Edelcoin stablecoin reserves are safely kept in Swiss bank vaults. The Edelcoin issuer ensures the transparency of the reserves, which undergo regular independent verification, and provides reports on it on its official website, which is standard practice for stablecoins.
The issuer of the EDLC stablecoin is Edelcoin AG, a member of the VQF self-regulatory organization recognized by the Swiss Financial Market Supervisory Authority (FINMA). This means that Edelcoin is fully regulated and complies with all the requirements of Swiss law.
Advantages and disadvantages of Edelcoin
According to the developers of Edelcoin, base metals are a better alternative for securing stablecoins compared to fiat currencies like Tether (USDT) and USD Coin (USDC) for at least three reasons:
- Unlike fiat currencies, which tend to lose their purchasing power over time, metals are less susceptible to inflation. In addition, governments can issue unlimited amounts of currency, which makes it even more vulnerable to inflation, while metal reserves are limited. Metals are also in high demand worldwide because they are used in many industries.
- Less regulatory risk. Metals are generally not tied to a particular country's economy and can become more expensive when certain countries' currencies become cheaper, including periods of economic crisis.
- Currencies are also used for money laundering, which creates additional risks for stablecoin issuers. The movement of metals, especially non-ferrous metals, is much easier to track, so they are less likely to be used in criminal activity, unlike currencies, which are easy to move covertly.
However, Edelcoin, like USDT and USDC, is a centralized stablecoin whose issuance and circulation are entirely under the issuer's control. This creates certain risks for users needing to convert their EDLC tokens into metals taken from Edelcoin reserves. For example, this will become a problem if the price of the EDLC token loses its peg or, in other words, parity to the U.S. dollar.
Edelcoin's current situation with the Edelcoin stablecoin and its prospects
The market capitalization of the Edelcoin stablecoin as of the end of November 2024 is $1.45 billion. According to the CoinMarketCap service, 5.52 billion EDLCs have been issued, of which only 2.02 billion are traded on the market.
As of November 2024, Edelcoin stablecoin has significantly lost its peg to the U.S. dollar. Moreover, the price of the EDLC token first rose to $1.12 at the end of October and then collapsed sharply to $0.69. As of the end of November 2024, the value of the Edelcoin token is at $0.71, which is 29% lower than the price of the U.S. dollar.
Since the EDLC token has only recently appeared when writing this article, it is too early to talk about its prospects, as this stablecoin has not yet passed the test of time, and the issuer has yet to prove its reliability. It should be noted that many stablecoins, including USDT and USDC, showed intense volatility in the first months after their appearance on the market.
In addition, Edelcoin still has low liquidity, because of which even small volumes of purchases and sales can lead to the loss of the EDLC stablecoin's peg to the U.S. dollar exchange rate. As liquidity and capitalization grow, the volatility of the Edelcoin token should decrease, allowing its exchange rate to not deviate too much from the USD exchange rate.
The Edelcoin stablecoin exists only on the Ethereum blockchain, but the team plans to add support for other EVM networks.