Pax Dollar was previously known as Paxos Standard (PAX) and rebranded in August 2021. Issued by Paxos, a company specializing in asset tokenisation for corporate clients. It allows companies to offer their financial products in a crypto environment.
Issuance and collateralisation
USDP is a token backed 1:1 with real dollars and is available for issuance through the Paxos platform. Also, the token can be purchased on third-party digital asset trading platforms (exchanges, exchangers).
The principle of operation is very simple:
- New USDPs are created when a user deposits USD into the protocol.
- USDPs are removed from the offer when the user repurchases his USD.
- All currently existing USDPs are backed by the same amount of USD stored in the company's bank accounts.
The accounts are audited regularly to ensure there is no doubt about the last point. Monthly attestation reports are located here: https://paxos.com/regulation-and-transparency/. The company has initially endeavoured to maximize transparency for both users and regulators.
Paxos is an American trust company operating under the banking laws of the State of New York and regulated by the New York State Department of Financial Services. A trust company differs from a bank in that it acts as a fiduciary, keeping customer deposits isolated and not using them for profit.
All dollar deposits are held in U.S. banks insured by the FDIC (Federal Deposit Insurance Corporation) or are secured by U.S. government treasury bonds.
As of July 2023, there are 828 million USDP tokens in circulation. The asset is in the top 50 regarding market capitalization and is the 7th most popular amongst stablecoins.
USDP tokens are issued and redeemed by Paxos without intermediaries. This ensures short redemption periods and lower fees. However, direct exchange using the official platform is designed more for institutionalized, i.e. legal entities, than for ordinary users due to the presence of minimum amount limits.
Stablecoin is issued on the Ethereum blockchain and complies with the ERC-20 standard. Accordingly, it can be freely transferred from one cryptocurrency wallet to another and used for trading via exchanges and exchanges.
Paxos has its centralized exchange, itBit, which allows direct cash-out of assets or instant redemption of USDP. itBit supports OTC trading, which means it is possible to transact off-exchange.
Other examples of exchanges with USDP support:
- Decentralised exchanges such as Uniswap.
Finally, the token is present in exchanges that can be easily found through our monitoring.
Options for using the token
Like any other stable crypto asset, Pax Dollar can be used as:
- A means to trade against other blockchain assets: cryptocurrencies, tokens, tokenized shares, etc.
- Execution of transactions in decentralized finance protocols on the Ethereum blockchain — trading and credit platforms based on smart contracts.
- Protection against crypto market volatility. Investors can convert their BTC or other coins into stablecoins, preserving capital without losing time and money when converting to fiat (traditional currencies).
In the long run, stablecoins reduce friction between fiat and digital currencies. Banks usually resist converting cryptocurrencies; such transactions involve substantial time and money. Stablecoin, on the other hand, represents the embodiment of the dollar in the digital world, providing instant settlement.
The potential of Pax Dollar has the potential to impact commercial transactions across the globe. This includes creating blockchain-based payment systems and organizing international transactions and money transfers. Another important point is the use of the dollar by people who do not have access to bank accounts. There are many residents of developing countries in Asia, Africa.
Dollar stablecoin unlocks the value of USD for them, allows them to experience all the advantages of digital assets and avoids their main disadvantage — high volatility.