Gemini dollar

What is Gemini Dollar (GUSD)?

Gemini Dollar is a cryptoasset on the Ethereum blockchain pegged to and backed 1:1 by fiat US dollars by Gemini Trust.

GUSD was one of the first regulated stablecoins to hit the market, giving traders a viable alternative to either less transparent or more difficult-to-understand stablecoins.

Stablecoins are a crucial part of the cryptocurrency industry that form trading pairs with most other assets. This is especially true in decentralized finance, where innovative solutions for trading exist but require ample liquidity.

When Was Gemini Dollar Launched?

Gemini Dollar launched on the 10th of September, 2018. It was deployed to the Ethereum blockchain as an ERC-20 token on the same day that it received regulatory clearance from the New York Department of Financial Services.

Who are the Founders of Gemini Dollar?

Gemini is one of the twelve zodiac signs, and it is symbolized by twins. The firm behind GUSD is also called Gemini and was founded by one of the world’s most famous pairs of twins.

Tyler and Cameron Winklevoss, often known playfully as The Winklevii, are former Olympic rowers who shot to fame following their lawsuit against Facebook founder and Harvard classmate Mark Zuckerberg.

Classmates of Zuckerburg at Harvard University in the early noughties, the Winklevoss twins created a social media platform called ConnectU along with another classmate, Divya Narendra. They approached Mark Zuckerburg to help them develop their platform. Zuckerberg allegedly entered an oral contract with them, choosing to be compensated via an interest in the enterprise.

Emails obtained by the press revealed that Zuckerberg had a conversation with the Winklevii about the project in late 2003. They also revealed that he seemed to stall on contributing to it in any meaningful way. Unknown to them at the time, he registered the first Facebook domain, thefacebook.com, in January 2004. Facebook then launched the following month.

Only learning of Facebook’s launch through a Harvard publication, the Winklevii sued Zuckerberg, claiming he stole their ConnectU idea to create Facebook.

Facebook countersued, and a settlement was reached in 2008, granting the Winklevoss party $20 million in cash and a supposed $45 million in Facebook stock. Further controversy followed, but the legal dispute ended for good in 2011.

The entire saga has made its way into pop culture thanks to Ben Mezrich’s The Accidental Billionaire and its film adaptation, The Social Network. Author Mezrich even wrote a second book about the Winklevii titled Bitcoin Billionaires.

When was Gemini Trust Company Founded?

Now armed with significant capital following the Facebook settlement, the Winklevii founded Winklevoss Capital Management in 2012 and then dove into cryptocurrencies. According to various reports, the Winklevii were introduced to Bitcoin while vacationing and bought a staggering $11 million worth at $8 per BTC. They then announced Gemini in mid-2013, and the company went live in 2015.

Gemini began as a broker and custodian for Bitcoin but expanded its registered offerings to include Ethereum, then Ethereum Classic, and Bitcoin Cash as well. In September 2018, Gemini received regulatory approval from the NYDFS for its new product, the Gemini Dollar.

How Does Gemini Dollar Work?

GUSD is a stablecoin—a cryptocurrency pegged to the value of another currency (in this case, the US dollar).

Stablecoins come in various forms. Many interesting stablecoin projects are algorithmic and use complex mathematical computations to stay pegged to the value of the dollar. Others, such as DAI, are backed and even overcollateralized by treasuries that contain other cryptocurrencies.

GUSD is backed by fiat dollars and dollar equivalents stored in US-based banks. These deposits are insured by the Federal Deposit Insurance Corporation (FDIC).

To mint—or create—GUSD tokens, users have to register with the Gemini platform. They are then able to send USD to Gemini, which mints GUSD into their accounts. Redeeming fiat USD works the same way, as users send GUSD back to Gemini and withdraw USD.

What Makes Gemini Dollar Unique?

When it comes to stablecoins, the pegging mechanism is of prime importance. This is especially so given the high-profile failure of one of the industry’s previously most reputed hybrid stablecoins in Luna’s UST.

Algorithmic stablecoins are complicated for many to understand, but those that can make sense of the code can quickly decide if the protocol is sturdy. Crypto-backed stablecoins could suffer from rapid drawdowns in their collateral, but this risk is often mitigated by overcollateralization and preemptive liquidation via smart contracts.

That leaves centralized fiat-backed stablecoins, where rather than code or transparent on-chain treasuries, users have to trust the claims of institutional custodians that their funds are “SAFU.”

This is where regulation, especially stringent regulation from the likes of NYDFS, comes in. Most regulators have some sort of mandate that includes consumer protection somewhere in the fine print.

Regulated Trust companies like Gemini have to make attestations as to their depositors’ funds, and they are frequently audited. GUSD is audited by an independent accounting firm, BPM LLP, and these audits are published monthly.

According to Gemini, GUSD’s cash and cash equivalent 1:1 backing comes in the form of three assets:

• Deposits in US FDIC-insured banks, including Silvergate, State Street, and Signature Bank
• Money-market funds invested only in US Treasury Obligations
• US Treasury Obligations

How is the Gemini Dollar Network Secured?

GUSD is an ERC-20 token deployed on the Ethereum blockchain, so account state and transactions are taken care of by Ethereum’s consensus.

As of September 2022, Ethereum is a proof-of-stake (PoS) blockchain. This means that holders of its ETH native token can stake them to the protocol to secure the network.

The participants responsible for running the network infrastructure and validating transactions submitted by users are called Validators. These Validators have to stake, or bond, a minimum of 32 ETH to the protocol. This represents a significant investment, and the threat of slashing (confiscation of their 32 ETH) is a big reason to behave.

As a matter of fact, behaving according to the protocol—validating transactions and maintaining uptime—is also rewarded. Validators receive a share of network fees and emissions, which makes it a worthwhile source of income.

Ethereum is a huge, widely decentralized network and is considered extremely secure. While several protocols atop it have seen smart contract hacks and failures, Ethereum itself has never been compromised.

To this end, Gemini has taken measures to ensure that its own smart contracts for the issuance and burning of GUSD are sturdy. You can examine the GUSD code on its GitHub repository and read the results of a Trail of Bits audit on its smart contracts.

What is the Use of GUSD?

GUSD is a US dollar stablecoin, which means that it has a very wide variety of use cases. One of the simplest uses of any stablecoin is found right in its name—”stable coin.” Cryptocurrencies are considered volatile. In comparison, fiat currencies like the US dollar are relatively stable.

This stability gives cryptocurrency trades a way to escape periods of short-term volatility in the cryptocurrency markets. GUSD represents a quick and easy way to book profits or wait out a downturn.

It also represents the US dollar, which remains the world’s reserve currency in 2022. Residents of countries facing hyperinflation, therefore, tend to consider the US dollar and stablecoins like GUSD as a store of value.

GUSD’s deployment on Ethereum is also a big factor in its utility. While many supposed “Ethereum killers” have been touted, Ethereum remains one of the most widely used blockchain networks, especially for decentralized finance (DeFi).

GUSD allows Gemini users to transact and earn yield on various DeFi platforms by using different tools and protocols. Many of these avenues are unavailable to users of ordinary fiat currencies without access to bespoke brokerage services. And even then, DeFi is on-chain, and you can trust the code rather than banks or other financial intermediaries.

Who Controls Gemini Dollar?

Gemini Dollar is controlled by Gemini, a company founded in 2014 by the Winklevoss twins. Gemini, or the Gemini Trust Company, LLC, operates in the United States, Canada, the United Kingdom, South Korea, Hong Kong, and Singapore.

How Much GUSD Is In Circulation?

The circulating supply of GUSD is variable since it depends on how many Gemini users have requested the minting or burning of GUSD at any given time.

Gemini publishes monthly reports on circulation supply and reserve backing, audited by independent accounting firms.

On the 30th of September 2022, there were over 330 million GUSD tokens issued and in circulation. As per the company’s attestation, these tokens were backed by over $314 million in cash and $16 million in money market funds.

How Do You Buy GUSD?

You can buy GUSD from various markets, including DeFi platforms like Curve Finance. While other centralized exchange platforms do offer GUSD trading, the best place to buy and use it across various trading platforms may well be the Gemini Exchange.

How Do You Store GUSD?

You can store GUSD on a centralized exchange platform like Gemini if you’re just going to use it as a safe haven or in day or swing trading. These platforms allow instant trading and usually have low fees compared to gas on Ethereum.

However, using GUSD in DeFi and for things like liquidity, yield farming, and staking usually isn’t possible on most platforms outside of Gemini itself. Gemini Earn offers GUSD holders the opportunity to earn yields from their tokens.

For this reason, you might want to look into an ERC-20 compatible wallet to store your GUSD in. For use on DeFi dApps, it’s hard to go wrong with the likes of Metamask.

Gemini Dollar Energy Consumption

Gemini Dollar is an ERC-20 token on the Ethereum blockchain, so it doesn’t really have any sort of meaningful power consumption from the network side of things. In fact, Ethereum has slashed its own power consumption sharply following its switch from proof-of-work to proof-of-stake consensus.

Is GUSD a Good Investment?

GUSD could certainly be a good investment for anyone living in a country that is experiencing severe inflation, especially considering GUSD’s cash reserves. Forex trading is sometimes difficult to get access to, but an Ethereum wallet is easy to create, and DeFi is borderless.

Traders can also enjoy the benefits of a stable dollar equivalent, given that GUSD is on-chain and settles immediately, unlike fiat.

However, it’s wise to remember that across the long and even medium term, cash isn’t king. In mid-2012, the median home price in the USA breached $180,000. Ten years later, the median home price was $200,000 more. This means that the US dollar lost a significant portion of its value in this relatively short space of time.

In contrast, the Winklevoss twins bought Bitcoin in 2012 for just $8 a coin. Now, they’re billionaires.