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Whether backed by fiat, gold or crypto, interest-yielding, non-collateralized or decentralized, stablecoins have become a major part of the digital asset ecosystem in recent years.
Created as an alternative to the inherent volatility of cryptocurrencies like Bitcoin and Ethereum, stablecoins are marketed as viable payments solutions for enterprise blockchain use cases, since merchants should – in theory – have no qualms about accepting them. Speaking of merchants, there are rumors that PayPal (NASDAQ:PYPL) could implement its very own stablecoin having recently announced support for a range of cryptocurrencies.
The emergence of decentralized finance (defi) – a subset of the crypto market comprising tools for trustlessly interacting with open finance protocols like savings and lending – has shone a spotlight on stablecoins such as DAI and USDT, providing them with myriad use cases.
One of the latest stablecoin examples is BXTB, a defi-based protocol that collateralizes other stablecoins to create its own CHIP token, hosted on a low-energy, high-throughput consensus mechanism called Proof of Capacity (PoC). CHIP, in other words, inherits the stability of tried and tested stablecoins deposited as collateral, while benefiting from faster speeds and lower transaction fees.
Bringing Stability to E-Gaming
An anonymous, community-driven defi protocol, BXTB wants to transform the stablecoin market via a yield-generating currency suitable for enterprise use cases. Initially, its ambition is to unify the payment and settlement systems of the multi-billion dollar gambling industry, partnering with operators, platform providers and publishers to ensure a seamless, trustworthy betting experience.
The BXTB mainnet launched earlier this year, and the platform has already teamed up with several gaming operators including JustBet and GameWorks Technologies (GWX).
One vocal supporter is Nigel Hughes, one-time Principal Consultant for NEM (New Economy Movement) and current Chief Technical Advisor for crypto mining firm R3V.lab. Hughes first came across the defi platform in 2018 and was immediately intrigued.
“Through the course of my work on NEM I met the people behind BXTB, which was then just an idea that was being considered,” Hughes remembers. “I was impressed by the fact that the core team took the Satoshi Nakamoto approach by remaining out of the spotlight, and I felt that their vision very much aligned towards the long term – something you can’t say about too many projects in the defi and stablecoin space.”
In the years following that fateful meeting, Hughes has played a key role in pushing BXTB and driving adoption. While many community members prefer to remain anonymous, the blockchain veteran is happy to go to bat for the platform, which he believes can “move blockchain technology towards greater inclusivity,” while at the same time addressing the lack of value being created by existing use cases.
“Enterprise companies are looking for stablecoin solutions that can process transactions cheaply, quickly and with high velocity and volume,” Hughes observes. “By creating a collateralization mechanism that turns existing secure and successful stablecoins into high-throughput CHIPs, it’s possible to provide an enterprise-ready stablecoin solution and network that can be immediately implemented for real-world use cases.”
A Triple Token Model
Though the CHIP stablecoin is the central plank of the BXTB ecosystem, the platform does in fact feature multiple tokens. BXTB are governance tokens that can be mined or purchased then staked, alongside supported stablecoins like USDT, to mint CHIP and yield yBXTB. Holders of the latter, meanwhile, earn yield by receiving a portion of the network and transaction fees generated on the sidechain.
“Because BXTB uses a Proof of Capacity sidechain capable of high throughput and low fees, BXTB can be mined on very small and inexpensive devices,” Hughes explains.
Proof of Capacity mining works by precomputing answers to cryptographic challenges and storing them on memory devices such as hard disks before the physical mining process begins. The answers are then checked, without the need for an intensive computational process.
“Anyone with a hard drive and internet connection can contribute towards validation and consensus – this is entirely different to Proof of Work (PoW) and Proof of Stake (PoS) blockchains,” says Hughes. “As a result, BXTB is accessible to the larger community, strengthening decentralization and increasing the integrity of the network.”
As for the advantages of using CHIP rather than the stablecoins BXTB collateralizes, Hughes points to prohibitive transaction fees and lengthy confirmation times.
“I have met plenty of businesses that have expressed the need for such a solution in their plans to utilize blockchain. The gaming industry happens to be the one vertical market with an immediate need for BXTB, and is a natural fit in view of increasing need for transparent settlement.
“Companies can simply adopt CHIPs as an integrated solution on top of their existing technology stack – BXTB’s infrastructure can handle the rest. By allowing the output of games to be provably verified on the blockchain, players can interact with operators in a trustless manner, something that has been needed for a very long time.”
From Gaming to Defi
Although BXTB is primarily envisaged as an enterprise-ready stablecoin solution for the gambling industry, there’s no denying its defi characteristics. Indeed, many stakeholders will be attracted to the platform purely to earn yield – online gaming won’t enter their minds. This is something Hughes readily acknowledges, but he sees BXTB as being a serious upgrade on existing defi protocols.
“Today’s yield systems are not generating value through sustainable means. Many defi projects that are offering high yields are doing so at the risk of presenting a musical chairs scenario, where early adopters receive the highest yields and late adopters put their underlying collateral and funds at risk.
“BXTB, on the other hand, derives yield by offering utility and solutions for existing real-world use cases, such as the gaming industry. In the simplest iteration, every transaction happening with CHIPs will be charged a small processing-based fee, which is paid out as incentive to yBXTB holders. This incentive mechanism, or “yield,” promotes the liquidity of CHIPs and makes it even more attractive for businesses.”
“The intention in the long run is to move from being a foundation-operated blockchain to a fully on-chain governed protocol, similar to that of a DAO in other blockchains,” explains Hughes. “BXTB tokens will be utilized in some form as governance tokens, as they are readily available through Proof of Capacity mining.
Whether BXTB transforms the stablecoin, online gambling or defi landscape remains to be seen. What is clear is that defi is breaking out of its vertical and beginning to shape other industries, from gaming to payments.
Disclosure: No positions.