The History of Paxos Standard Token (PAX)
During the last year, the crypto market’s total capitalization has increased threefold, from $500 billion to $1.5 trillion. This colossal growth happened because of Bitcoin, which attracted institutional investors’ attention, and the market followed. The demand for all types of crypto increased, and of course, investors also needed stablecoins to sit on the sidelines during market declines. At the beginning of 2019, the total capitalization of all stablecoins was $2.6 billion. Currently, in February 2021, it sits at $47 billion. Tether USDT amounts to $33.54 billion of this market cap. Still, there are also many other popular stablecoins, and one of these stablecoins is Paxos Standard Token that we’re going to analyze today.
What Is PAX
PAX is a centralized, regulated stablecoin, approved by the New York State Department of Financial Services. Technically it’s an ERC-20 token running on Ethereum. Its current market cap is $692 million, and every single token is backed with one dollar. Every PAX token can be exchanged for USD anytime. The smart contract for minting and destroying tokens is checked and verified by a security auditor company Nomic Labs.
How It Was Created
The Paxos Trust Company issued Paxos Standard Token in 2018 after getting approved by the New York regulator. It was created in response to Tether’s increasing instability, which is very untransparent, and nobody knows if it is really backed by anything or not. The funds of Paxos are held in US-insured banks, and every month they issue an audited report by Withum, a well-respected auditing company.
How PAX Can Be Issued
Given that PAX is a centralized stablecoin, its issuance is also very centralized. 1. Users have to send their USD to the Paxos Trust Company’s bank account.
2. Upon receiving these funds, Paxos Trust mints new tokens via its smart contract
3. Users receive new tokens to their Ethereum accounts
To exchange it back to dollars, the user has to go through the same steps, only backward. Tokens get destroyed in a smart contract, and then Paxos returns money to the user’s account. The whole process is free. Paxos doesn’t take any fee for converting PAX back and forth. However, users have to pay a banking fee if they use a wire transfer to send money. The minimal amount of tokens that can be purchased/converted is $100 worth.
Currently, the primary use case is value storage. People use stablecoins to take profits and to exit the market with the gains they made. However, the adoption gradually increases, and stablecoins will soon have many more use cases, such as real-time payments in e-commerce. Also, in 2019, they partnered with Binance to create a new deposit gateway. This gateway allows traders to exchange fiat currencies to PAX and move it between two platforms or even receive PAX directly in their accounts after completing the wire transfer.
PAX is the most liquid, fully-backed stablecoin available on Binance – that means PAX users benefit from optimal price discovery. On top of this, when you create or redeem PAX, there are no fees, no minimums or maximums, and instant processing. Changpeng Zhao, Binance CEO, said about this partnership: “PAX is a liquid, fully-backed stablecoin available on Binance.com. Easing the PAX gateway on Binance.com means traders will benefit from the liquidity of PAX trading pairs and move more easily between fiat and crypto. We look forward to working with Paxos to grow the ecosystem.”
The Future of PAX
PAX is going to be one of the top stablecoins on the market. It can be transferred across borders, it’s backed by real money, it can’t be stolen, and it’s available 24/7. It has a very professional team, including former Wall Street and Silicon Valley employees. The demand for stablecoins will continue to increase as crypto becomes deeply integrated with mainstream finance and fintech. Thus we see a very bright future for it. If you already have any PAX stored in your wallet, you can use them on the CoinLoan platform and earn interest on your holding or pledge them and get a loan that you can return whenever you want to.