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Q&As with Trust Token

Stephen, Rafael, and Danny will be answering questions live on Thursday July 19th at 10:30am pst. A high level overview of Trust Token over here: https://blog.trusttoken.com/trueusd-faq-18dbc563fb67

posted 10 months ago

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Sam Campbell
Can you please describe the economics incentives of a stablecoin (such as TrueUSD) pre-sale or ICO? Based on the SAFT, it appears the early investors can buy in at <$0.16. If all token holders can redeem for $1.00, where does this money come from?

Also, what type cash management (i.e., short-term T-bills or other fixed income investments) will Trust Token employ for the collateralized USD? Who will the marginal value accrue to, token holder or Trust Token?

Thanks!
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Stephen Kade
@campbellcapital Good question.
First, it's important to understand the difference between TrustToken and TrueUSD.

*The TrustToken Platform* is a platform to create asset-backed tokens that you can easily buy and sell around the world. For example, gold to gold tokens or dollar to dollar tokens.

*TrueUSD* is the first asset token built on the TrustToken Platform. TrueUSD is a stablecoin that you can redeem 1-for-1 for US dollars. You can see more about TrueUSD here: www.trueusd.com, and see the list of attestation reports verifying the US dollars backing the funds here: https://blog.trusttoken.com/trueusd-attestation-reports-86f693b90a4.

*TrustTokens (TRU)* are the native token of the TrustToken Platform. TrustTokens enable the trustworthy sale and trade of assets. In order to tokenize an asset, the issuer needs TrustToken holders to stake on the real value of the asset with TrustTokens as collateral. You can learn more about the TrustToken Platform and Token in the Overview document here: https://docsend.com/view/zkddhrv.

This year, we will bootstrap the usage of the TrustToken Platform by issuing more currency and commodity-backed tokens, such as TrueEuro, TrueYen, and TrueGold.

When the platform is launched in 2019, it will enable even more asset classes to be tokenized.
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StoreOfValue Blog
@campbellcapital great question :o
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Dennis Stücken
From your medium faq it is not 100% clear to me how you really maintain or guarantee price stability for TrueUSD, could you be more precise about that?
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Stephen Kade
@dstuecken There is a growing of traders and funds who purchase and redeem TrueUSD to provide liquidity to markets and arbitrage away price fluctuations. If you wire $10,000 to the escrow account holding the funds, the fiduciary will approve the TrueUSD smart contract to mint 10,000 TUSD to your Ethereum address. Likewise, if you send the smart contract 10,000 TUSD, the fiduciary will wire you $10,000. (Note that there are are small wire fees and transaction fees.)

Say that the price of TrueUSD goes to $1.001 on an exchange. If you've purchased TrueUSD for $1.00, you can now sell it on that exchange for a slight profit. If the price of TrueUSD dips to $0.999, you can buy it off the exchange and redeem 1-for-1 for $1.00, making a slight profit.

You may notice that the price of TrueUSD has become even more stable as it is listed on more exchanges and as more people purchase and redeem TrueUSD directly for USD dollars, creating higher liquidity and tighter spreads.
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Soona
Thanks for joining us!

What have been tangible effects of this recent bear market (if any)? What's the upside and/or downside to this "quiet" period in crypto?
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Stephen Kade
@soonaorlater The bear market has driven healthy demand for stablecoins like TrueUSD. Generally, we stay focused on the long run, and believe there will be a strong market for compliant stablecoins backed by USD and other currencies. We're focused on executing well to build those.
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StoreOfValue Blog
What's the biggest challenge w building TrueUSD?
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StoreOfValue Blog
What's the plan to grow TrueUSD adoption and compete w Tether?
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Stephen Kade
@SovCryptoBlog
Publish regular proofs of the underlying funds. Collaborate with our fiduciary and banking partners to use world-class technology that performs KYC/AML checks on direct purchasers of TrueUSD, to ensure regulatory compliance. Partner with great exchanges, traders, and funds to proactively identify and serve their business needs. Learn and correct course if we make a mistake. Work with excellent people.
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Myles Snider
We saw somewhat recently that the price went far above the peg as a result of exchange listings (possibly from bots auto-buying new listings?) Do you have any plans to negate the effects of this kind of thing in the future? Will the company step in and arbitrage at all?
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Stephen Kade
@myles_snider Good question. The situation with Binance was somewhat unique.
I anticipate that as the total supply of TrueUSD naturally increases, the market will naturally absorb increases in demand.
As more traders and bots learn that TrueUSD isn't an altcoin, there will be less speculation on the price of TrueUSD following an exchange listing.
We wrote additional thoughts on that here: https://blog.trusttoken.com/demand-for-trueusd-may-exceed-supply-during-large-exchange-listings-80b881d19d8d

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Stephen Kade
@myles_snider Here's a quote from our blog post on the Binance launch:
In The Long Term, Redeemability Leads to Stability
It might appear tempting for a stablecoin project to print more tokens in reaction to a spike in demand. Tether is an example of a collateralized stablecoin that appears to arbitrarily print tokens to meet demand — a practice that has not proven trustworthy.

Sometimes, new exchange listings might cause bots and misinformed investors to buy TrueUSD at higher prices. Don’t buy TUSD for more than $1.05 worth of other coins — you may lose money. You will only be able to redeem TrueUSD tokens for an equal number of escrowed US dollars.

The TrueUSD token structure is such that we have no incentive to arbitrarily increase the supply of TrueUSD, even during times of temporarily excessive demand. The regular independent attestations by Cohen & Co. would alert the community to any arbitrary printing of TUSD.

This means the price of TUSD could fluctuate a bit during scenarios such as new exchange listings, but will quickly return to baseline because TrueUSD is truly redeemable 1-for-1 for US dollars.

For example, after Binance announced they would list TrueUSD on May 16th, there was suddenly more demand for TrueUSD compared to the liquidity that market-makers had available, which led to a temporary increase in price. Within 24 hours, the price of TrueUSD was back within 0–1% of $1.00.
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Elena Nadolinski
How would you address the centralization aspect of only one entity (Trust Token) selling and buying back TrueUSD?
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Stephen Kade
@Elena-Nadolinski Actually, there are many traders and funds who directly buy and sell TrueUSD! In that sense, the issuance and redemption of the tokens are decentralized. We often hear that funds prefer TrueUSD because it's a convenient fiat-to-crypto on-ramp to exchanges, and it helps them fill their fiduciary responsibilities as professional money managers (as compared to stablecoins that don't have proof of funds).
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Elena Nadolinski
It seems the price stability is achieved due to traders being able to trade TrueUSD for the equivalent USD on TrueUSD.com. Not only is that a clear single point of failure, it expects your user base to put heavy trust on TrueUSD.com being always available to honor those trades. What happens when that is not an option? e.g. when a user's country bans TrueUSD -> USD conversion through some regulation (which is already the case in Venezuela), doesn't that give incentive for TrueUSD holders to dump their TrueUSD tokens to other cryptocurrencies at a lower rate?
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Stephen Kade
@Elena-Nadolinski Fair question. We've structured the escrow accounts so that even if our company and website were to disappear, token-holder could *still* redeem TrueUSD for US dollars. Holding TrueUSD makes the token-holder a beneficial owner in the escrow account, and our fiduciary partners have signed legal agreements to distribute funds to token-holders (after a KYC/AML process and generally abiding by the Terms of Use https://www.trusttoken.com/terms-of-use/). See more here: https://blog.trusttoken.com/how-to-purchase-and-redeem-trueusd-a-guide-for-traders-ad8b141a9039
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Elena Nadolinski
Looking at the code for your CompliantToken.sol which is used in the main TrueUSD.sol there is a blacklist that allows you to blacklist addresses you deem "bad" according to your terms of services. However, both in the code https://github.com/trusttoken/trueUSD/blob/master/contracts/CompliantToken.sol#L16 and in the documentation https://github.com/trusttoken/trueUSD/blob/1e3b6fba4765f62289e6021f88d52f14f84b45d5/README.md#complianttokensol the link to explain what exactly those terms of services are that can get you blacklisted all point to a 404 page. So the question is: how do you determine bad actors to be blacklisted?
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Stephen Kade
@Elena-Nadolinski Fair question. Our Terms of Use says we can use that when commanded by a court of competent jurisdiction. https://www.trusttoken.com/terms-of-use/

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Stephen Kade
@Elena-Nadolinski From a compliance perspective, bad actors would include those individuals, entities and countries appearing on various government sanction lists, including the U.S. Department of the Treasury’s FinCEN lists. We also conduct enhanced due diligence on any potential consumers that get flagged for criminal backgrounds or other factors.
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Stephen Kade
Hi everyone, welcome to the TrustToken AMA on Token Daily.

We're glad for the surprising amount of support and enthusiasm for the project that has poured in from the TrustToken community around the world.
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MarkthaShark112
Why would TUSD arbitrage with the likes of Tether when it could be seriously undermined?
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MarkthaShark112
Say the project is broadly adopted in a few years, which I am sure will happen. We'll probably have a few hundred thousand tokenized assets - in hundreds of categories, both fungible and non-fungible.

To drive adoption and get to these numbers, what is the mechanism you're enabling people to trade on? I imagine these tokens won't just be listed on CMC & exchanges like Binance, Bittrex, etc - since they would probably flood the market.
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Stephen Kade
@MShark112 Good question. I think that regular exchanges could list a handful of major currencies and commodities, such as TrueEuro, TrueYen, and TrueGold.

As of the "long tail" of asset tokens, such as individual art pieces or real estate properties, I anticipate that custom exchanges will develop for trading those asset classes. Several security token exchanges are scheduled to go live in 2019, which will be necessary for many of those asset tokens.

Eventually, I imagine that specialized exchanges will emerge- for example, an exchange dedicated to real estate tokens, or art tokens - since each of those will involve a different type of user interface and different investor audiences.
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MarkthaShark112
If I invest in TrustToken today, does it mean that I cannot sell the TrustToken until July 20 2019 next year?
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Stephen Kade
@MShark112 Please see the sale materials in the CoinList sale for information on token distribution.
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MarkthaShark112
Are you guys building any product that would allow owners of such tokenized assets (say an apartment) to earn from its usage? (e.g. like rent split amongst them)?

Or any tool that would allow an investor to redeem all tokens of an asset if they plan to buy it and own it by themselves for example? Curious to know how you plan to build product on top of these assets once available.
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Anna Arpilleda
With Tether as the incumbent and new stablecoins emerging regularly, how does TrustToken plan to win?
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Stephen Kade
Signing off now. Thanks for a good conversation!

Join the TrustToken sale CoinList: https://coinlist.co/trusttoken/

To stay connected, join us on Twitter and Telegram:
https://twitter.com/trusttoken
https://t.me/joinchat/HihkMkTja1gIyBRM1J1_vg
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Regan Bozman
Any insights on the Circle stablecoin launch?
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