{"id":21493,"date":"2018-09-04T22:08:52","date_gmt":"2018-09-04T22:08:52","guid":{"rendered":"http:\/\/ci027cfe63401b26c3"},"modified":"2018-09-04T22:08:52","modified_gmt":"2018-09-04T22:08:52","slug":"newly-launched-stablecoin-youve-never-heard-coming-ledger","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/newly-launched-stablecoin-youve-never-heard-coming-ledger","title":{"rendered":"A Newly Launched Stablecoin You\u2019ve Never Heard of Is Coming to Ledger"},"content":{"rendered":"
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\u201cWe suck at marketing,\u201d Eiland Glover, CEO and founder of Kowala<\/a>, admitted in good humor. \u201cOur PR probably doesn\u2019t want to hear me say that, but it\u2019s true.\u201d<\/p>\n

Glover\u2019s brutally honest statement is by no means a reflection on the company\u2019s work ethic or even its progress \u2014 quite the opposite. The milestones the project has surpassed this summer have been an unintentionally well-kept secret, which makes its most recent announcement pretty surprising: Kowala, an under-the-radar stablecoin based in Nashville, Tennessee, is being integrated into Ledger\u2019s hardware wallets.<\/p>\n

An integration by the world\u2019s largest hardware wallet manufacturer is a significant stamp of approval, especially considering it\u2019s the first stablecoin to merit the company\u2019s attention. <\/p>\n

\u201cI think it\u2019s indicative of what we\u2019re all about,\u201d said Glover, who also pointed out it was the Ledger team that originally approached Kowala about integration. \u201cWe\u2019re not the best social media mavens; we\u2019re not the best hypesters. The Ledger deal is indicative of when very serious companies [and] organizations take a deep dive into our code and look at what we\u2019re doing (the structure, the monetary policy, the algorithmic stability mechanisms) [and] say, \u2018This is the real deal.\u2019\u201d<\/p>\n

The integration announcement also came shortly before another milestone moment for Kowala: the launch of its mainnet alpha version, Andromeda.<\/p>\n

Rethinking Decentralized Stability<\/h3>\n

Tether<\/a> likely comes to mind for most people when thinking of stablecoins. The multibillion-dollar market cap coin has become synonymous with its asset class, although TrueUSD<\/a>, a rising competitor, has recently inserted itself into the conversation.<\/p>\n

Both Tether and TrueUSD retain their stability with underlying collateral in fiat. For both currencies, each coin is reportedly backed 1:1 by a corresponding dollar, though questions continue to surround Tether\u2019s coin issuance<\/a> as it has never received an official audit.<\/p>\n

Outside of the fiat-collateralized model, MakerDAO\u2019s stablecoin, Dai<\/a>, pegs its value to the USD with collateral in cryptocurrency. Through what the project calls Collateralized Debt Positions, anyone can issue Dai with an Ethereum-powered smart contract \u2014 so long as they have an excess of cryptocurrency, usually bitcoin or ether, to back the issuance and hedge against volatility. <\/p>\n

Self-advertised as a \u201cnon-asset-backed stablecoin,\u201d Kowala breaks the collateralized mold that shapes the market\u2019s most prominent fiat-pegged coins. In fact, the only thing backing Kowala is its mining protocol, smart contracts and some serious mathematical gymnastics. <\/p>\n

The coin\u2019s economic model is a play on the seigniorage shares<\/a> stability mechanism proposed by economist Robert Sams in 2014. Taking its cue from the economic principle of the same name, the seigniorage shares model leverages smart contracts to keep a coin\u2019s value stable without needing to tie it to an underlying currency. Overseeing mintage, the smart contract would issue and buy back coins in response to price movements; if price goes above $1, for instance, the smart contract would mint more coins to compensate; if it goes below this threshold, then it would buy back coins until the price stabilizes. <\/p>\n

As a non-asset-backed stablecoin, Kowala achieves the same end but through different means. Instead of smart contracts, the network\u2019s miners are in part held responsible for the coin\u2019s stability and distribution. When prices exceed $1, miners net larger mining rewards until the coin\u2019s price reaches an equilibrium. If the price dips too low, then all transaction fees are sent to a dead-end address and burned, taking coins out of circulation permanently until the price stabilizes.<\/p>\n

Kowala utilizes a two-tiered token system to structure its stability mechanism. The first of these, kUSD, is the stablecoin itself, serving as the network\u2019s native currency and its mining reward. The second token, mUSD, is a staking token used to gain mining rights on the network. Miners must stake at least 30,000 mUSD in a mining client to earn kUSD.<\/p>\n

This week\u2019s Andromeda release sees the distribution of mUSD to Kowala\u2019s early investors. Fully regulated as a securities sale under the U.S. Securities and Exchange Commission (SEC) guidelines, mUSD was only available for private purchase by accredited investors. In our interview, Glover said that Kowala \u201coriginally intended to hold a public token sale,\u201d but as the regulatory conversation became complicated, the team decided to err on the side of caution.<\/p>\n

\u201cWe decided to play it safe rather than get slapped with a subpoena halfway into our token sale,\u201d John Reitano, Kowala\u2019s CTO, said.<\/p>\n

Once the project gains traction and has sufficiently decentralized, Glover said, there are plans to take its mUSD sales public for unaccredited investors. Until that time, however, the team is looking to free up avenues for additional private investments, and it\u2019s working on a crowdfunding model with an undisclosed partner to this end (Glover indicated that Kowala can not reveal specifics due to securities guidelines).<\/p>\n

After Launch: Expectations<\/h3>\n

With Andromeda underway, Kowala is standing on its own two feet. But by distributing the network\u2019s mining tokens, this alpha version is only just baby steps. It won\u2019t be until these miners begin minting and distributing kUSD \u2014 and these coins start trading on exchanges \u2014 that the project will truly test its balance and see if it has legs.<\/p>\n

Glover indicated in our interview that Kowala is in talks with \u201ca number of top exchanges\u201d as the project enters a phase of seminal growth. These exchanges will provide the live price-watching that the mainnet\u2019s upcoming Bo\u04e7tes release, slated for September of 2018, hopes to introduce, along with a kUSD wallet app.<\/p>\n

As the project grows, the team plans to extend its stablecoin to additional currencies. Kowala\u2019s roadmap has the Chinese yuan and Russian ruble in its sights. Glover teased that the project also hopes to establish a presence in Japan; they are tied up in NDA business talks with a multitude of top corporations.<\/p>\n

Until then, Andromeda marks the introduction of a hitherto unforeseen stablecoin model. Lacking central control and governed by mathematical principles, kUSD adheres to Bitcoin\u2019s decentralized ethos by completely divorcing itself from underlying assets and centralized entities. If its mainnet functions fully operationally, as its testnet did in its controlled, theoretical confines, Kowala could effectively set the standard for what a fully decentralized, autonomously maintained stablecoin looks like.<\/p>\n

\u201cWith the distribution of our mCoins, we come even closer to fulfilling the promise of the original Bitcoin whitepaper and creating the infrastructure that this industry needs to go mainstream. Andromeda brings an unprecedented level of decentralization to the stablecoin class, allowing users of the kUSD to forgo the centralization problems that have plagued the space for years. Such a system will allow node operators around the globe to have ownership of a money supply mechanism that keeps the stablecoin within its target range around one dollar, without that money supply being locked in a vault controlled by a small handful of c-suite executives,\u201d Glover said.<\/p>\n","protected":false},"excerpt":{"rendered":"

Kowala, an under-the-radar stablecoin based in Nashville, Tennessee, is being integrated into Ledger\u2019s hardware wallets.<\/p>\n","protected":false},"author":3468,"featured_media":21494,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[3502,851,97,804],"class_list":{"0":"post-21493","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-kowala","9":"tag-ledger","10":"tag-mining","11":"tag-stablecoins"},"author_data":{"id":3468,"name":"Aaron Van Wirdum And Colin Harper","nicename":"aaron-van-wirdum-and-colin-harper","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/88b6c65a7515990786b1c04473e15469e5b0d0fffef947ed629a60854e1cb426?s=96&d=robohash&r=g"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/a-newly-launched-stablecoin-youve-never-heard-of-is-coming-to-ledger.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21493","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/3468"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=21493"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21493\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/21494"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=21493"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=21493"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=21493"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}