Galoy, the open-source platform that powers El Salvador’s Bitcoin Beach Wallet, has announced the launch of a new synthetic stablecoin pegged to the dollar.
New stablecoin issued by El Salvador coming soon
Wednesday, Galoythe Salvadoran banking platform that launched the Bitcoin Beach Portfolio in November 2020 in the city of El Zonte in El Salvadorannounced the launch of a new dollar-pegged stablecoin.
The new stablecoin would be a synthetic dollar backed by Bitcoin and pegged to the value of the dollar. These are coins, called Stablesats, that do not require tokens to operate and would be easily spendable. In order to also improve its platform for this new project, the company also announced that it has made a capital increase of 4 million dollars.
Hivemind Ventures led this funding round with participation from Valor Equity Partners, Timechain, El Zonte Capital, Kingsway Capital, Trammel Venture Partners, AlphaPoint and other top Bitcoin investors.
A note from the company reads:
“Today the company announced Stablesats, the latest feature to be added to the platform. An alternative to stablecoins or fiat bank integration, stablecoins use derivative contracts to create a synthetic dollar backed by bitcoin pegged to USD. This allows for dollar-equivalent USD accounts in the Lightning Wallet, solving one of the biggest problems of day-to-day transactions using bitcoin: short-term exchange rate volatility.”
The system uses the Lightning Network in order to work, unlike all other stablecoins on the market.
The note then continues:
“There is no stablecoin or token other than bitcoin underlying Stablesats, which means better interoperability and lower fees for users.”
This means that no third party can control it, which some say is an important tool in the hands of countries with high inflation and high exposure to the US dollar.
What will be the benefits of the new stablecoin for the whole ecosystem
As Nicholas Burtey Well explained to the press, the new synthetic dollar would retain its value beyond the reference exchange rate:
“With Stablesats-enabled Lightning Wallets, users can send, receive, and hold money in a USD account in addition to their default BTC account. As the dollar value of their BTC account fluctuates, $1 on their USD account remains $1 regardless of the bitcoin exchange rate.”
It is essentially a derivative product whose pioneering work must be credited to Bitmex, which first talked about it in 2015 as a solution to the very high volatility of Bitcoin and other digital currencies.
Galoy explains in the note:
“We see the integration of more exchanges, hedging strategies and currencies building resilience and optionality. Ultimately, we can unleash the ability for each Lightning user to choose their own account units without never leave the network.
The Galoy platform has also recently developed a digital wallet in Costa Rica and Panama, and has long been considering opening its business to other South American countries.
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