Cryptocurrency

Paxos Standard Token, or PAX, is a cryptocurrency that is in the class of stablecoins. Stablecoins are a cryptocurrency that is backed with real-world assets, either a country's currency such as the U.S. Dollar, or with a commodity such as gold or silver. PAX is backed with U.S. Dollars, and they maintain a 1:1 ratio between PAX and U.S. Dollars. There are many other stablecoin cryptocurrencies, and they all offer roughly the same advantages to those looking to invest in cryptocurrency but don't like the volatility that is inherent in many, if not most, cryptocurrencies. These advantages include being able to do transactions 24/7, having a decentralized accounting, immutability, and providing for instant worldwide transactions.

Why Did PAX Come About?

PAX was developed, and continues to operate transparently, because of a major controversy in the stablecoin marketplace in 2018. At that time, another stablecoin cryptocurrency by the name of Tether made claims of having more than $1.8 billion in real-world assets. There were many that were skeptical of this claim, and many were convinced that Tether was inflating their numbers by essentially making up Tether coins from nothing. The detractors claimed that Tether did not actually have the real-world assets to back up their claims. Tether released a letter supposedly from a bank in the Bahamas that confirmed the amount of assets in a bank account that would have backed up the cryptocurrency.

Because of this controversy in the stablecoin world at that time, PAX was developed and put forward that they were going to be transparent to a fault. The team that developed PAX saw an opportunity to gain market share by transparently showing that they always had the real-world assets to back the useage claims they put forward. They did this by issuing and burning their tokens using a smart contract that is audited regularly. Additionally, PAX also has a well-known U.S. auditing firm verify the reserves that they have. By doing these steps, the hope is that they can build trust in stablecoins, and in particular PAX.

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