The eternal debate surrounding cryptocurrency gave birth to the following question: are cryptocurrencies living up to their promises of bringing a new world currency, fully secure and private for everybody? Many believe cryptocurrencies are not fulfilling its original purpose, being used just as a technical channel to make fiat payments, which make it lose its decentralized and permission-less benefits. Augmint is a project that may have a solution for this problem, using a Euro-pegged cryptocurrency to decrease volatility while still ensuring financial decentralization.
Back To Basics
First, we must explain how the bank system works around the globe.
Modern currencies work based on credit. Summarizing, the supply (amount of money in circulation) is automatically adjusted by banks. These institutions are creating money when issuing loans, hence burning money when a loan is repaid. Central banks are meant to secure (or at least try to fortify) stability within the financial system, adjusting some base parameters.
The market also depends on how the banks will adjust their loan conditions, so the “stability cycle” can be ensured.
The problem is this traditional system has lots of flaws, such as corruption among governments and banks, as well as a strong effort to have control over people’s money by centralized means.
How Does Augmint Work?
This video explains what is Augmint.
Augmint is a digital token based on the logic of creation and supply of currency, based on a look-a-like credit situation, having an underlying fiat currency.
The supply of Augmint tokens is automated to be adjusted as other modern fiat currencies.
Platform’s native token is A-EUR, their only crypto coin implemented so far. It is targeted to EUR, which makes it a stablecoin.
The platform was built on the concept of automatically adjusting the supply of each native token in a similar way modern fiat currency does, however choosing to do it transparently and securely, all based on a decentralized model.
Using a fully automated and decentralized process, the platform only issues new tokens when a new collateral-based loan is created, thus other tokens are burnt on repayment.
Augmint works to ensure its stability reserves through blockchain smart contracts, which helps in the case of loan defaults.
Understanding The Process
Augmint uses several mechanisms to ensure its native token price always remains on pair with EUR.
First, to ensure extra demands are met in the very place of the demand for new tokens, the system’s loan origination will be only be activated where there is a specific demand for money.
The platform also accepts an eclectic collateral base to maintain stability and a low correlation between different kinds of collateral.
Users can lock up their tokens for some time to impact the price, and there are also other internal market interventions whenever is necessary.
If the A-EUR token begins to deviate from parity with the EUR, automatically loan parameters are adjusted to make it somewhat compelling to get A-EUR loan for another digital asset. This directly affects the native tokens’ supply and demand.
How The Governance Model Adapts To The Idea?
Many people may question if Augmint is really decentralized or if it is no more than empty promises.
It is a true challenge, indeed, for the team behind the idea to build a scalable and flexible system to guarantee, at the same time, token stability while running decentralized-fashioned governance.
The platform runs an open governance model, using smart contracts as their primary decision-making means.
When it is not possible to use the smart contracts, a community elects a special board designed to do the necessary changes as it is needed. As we can see, being able to adapt itself to the situation is Augmint’s number one resource.
As other projects like Tether did before, Augmint brings the idea of a cryptocurrency that is stable but decentralized by nature.
To decrease volatility and to maintain the core privacy, as well as the decentralized-approach typical of cryptocurrencies, is the main concern for the platform.
To turn the idea into reality, the platform based its native tokens on traditional credit money principles, allowing it to be used just like regular money.
A-EUR is pegged to EUR, which makes the platform to use several different tactics within to system to ensure parity between the two coins.