PegNet — Consensus Based Stablecoins
How Proof of Work Can Secure Oracle Prices For Stablecoins and Beyond
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Three Generations To Decentralization
I’ve had a dream since 2012, that real world assets would live on the blockchain and they would be fully decentralized and available to all.
I supported many projects along the way that worked to fulfill this promise.
1.0 First came the centralized custody platforms issuing tokens in 2014.
2.0 Second came the smart contract based systems in 2016- 2017.
3.0 Now in 2019 with the launch of PegNet, we see Consensus Based Stablecoins.
These new consensus based stablecoins are the first non custodial, fully audit-able, self issued and therefore fully decentralized stablecoins available to the world.
Below I’ll review how PegNet (ticker PEG) works based on CPU mining, the 30 assets available on PegNet, how arbitrage is used to maintain prices and the fair start is designed to maximize the number of participants in the network.
How To Participate In CPU Mining
Mining in PegNet is based on the ASIC and GPU resistant LXRHash. CPU miners provide proof of work and at the same time submit current market prices (oracle price records “OPRs”) for the 30 assets on the Pegged Network.
How PegNet Assets Works
Here are the presentations that explain PegNet both in English and Chinese.
In short the PegNet works by having CPU miners publish prices for different assets including crypto, fiat and metals. Those published price oracles tell the network what price a user can generate a gold token for example at. So a user can take Factoids (FCT) and burn them into pegged Factoids (pFCT) and from there convert them into any of the 30 assets currently supported by PegNet. So if you had $1,500 USD worth of pFCT you can then easily convert into 1 pegged ounce of Gold which is called pXAU. The token will then follow the price of Gold as published by the Oracle Miners.
Stability Via Arbitrage
Part of the elegantly simple design of PegNet is to allow arbitragers the ability to benefit from the differences of exchange prices and the reference price for the pegged assets. So for example if pUSD are trading for $1.01 on an exchange a trader has an incentive to burn Factoids, generate more pUSD on the PegNet for $1.00 and then deposit them on the exchange and get paid the $1.01 rate. You basically have a guaranteed way of generating liquidity in any of these assets and adding or subtracting them from exchange as supply and demand fluctuates.
No ICO, No Pre-mine, Just Fair Start CPU Mining
Part of the goal with PegNet is to make it as open and inclusive as possible for anyone with commodity hardware. By selecting a CPU / Ram bottlenecked algorithm PegNet gives everyone the ability to participate in securing the network.
Risks & Disclaimers
The PegNet is an early ALPHA stage and is an experimental system and all software has bugs. Test the software, be careful to download your copy of the PegNet software from the correct Github repository, and convert assets into pegged assets as you develop confidence in the process and understand the mechanisms involved.
While PegNet is a decentralized autonomous open source community project, I know many of the developers involved, I know and hold shares in companies that are involved in donating code to PegNet and I hold FCTs, so I consider my opinion to be highly informed, but also bias given my proximity to the project.
PegNet is worth researching, understanding and since its an open system participating in. You can mine PEG and convert your tokens into pegged assets with no risk of a counter party and no slippage during the conversion.
If you don’t want to run mining software its easy to buy some Factoids (FCTs) and convert them into these pegged assets. You can then balance your portfolio any way you like by converting into any of the 30 assets available on PegNet.
This type of self issued and self custodial digital asset that tracks real world value has never been possible before. This is truly something new under The Sun and I believe will fulfill much of the promise of blockchain we have so long desired to become reality.
Credit to Adam B. Levine for the term “Consensus Based Stablecoins”.