TrustToken

  • Cryptoasset Report
  • January 7, 2019

TrueUSD, a stablecoin backed by the US dollar, is the first token on TrustToken’s asset tokenization platform, which links real-world assets to tokenized counterparts to increase liquidity.

Overview

TrustToken is an asset tokenization platform, linking real-world assets to tokenized counterparts in order to increase liquidity. TrueUSD, a stablecoin backed by the US dollar, is the first ‘TrustToken’ on the TrustToken platform, which plans to expand to precious metals, real estate, and commodity-backed tokens. The TrustToken network offers a set of legal and technical standards for this tokenization process, including a set of fiduciaries that attest to the existence and proper accounting of the underlying asset. The network’s cryptoassets pays these fiduciaries and serves as collateral for all asset contracts.

TrustToken was co-founded by Danny An, Rafael Cosman, Stephen Kade, and Torry Reiss. Many of these co-founders have previous experience at Kernel, and some whom have co-founded ventures such as StreetCode Academy, NeuroTechX, and Harvest. The project’s legal frameworks for collateralized tokens were developed in collaboration with WilmerHale and White & Case.

Protocol Details

As an asset tokenization platform, TrustToken enables users, primarily crypto exchanges, crypto traders, and financial institutions, to issue tokens upon collateralizing assets and to redeem tokens for their underlying collateral. TrustToken relies on escrow accounts to do so, citing escrow’s wide adoption and ease of use and banks’ current reluctance to allow smart contract signatures, while also acknowledging that, for those desiring fully decentralized money management, their approach comprises some decentralization for the sake of immediate operability.

Independent, third-party trust companies hold the US dollars corresponding to the TrueUSD TrustTokens issued in escrow. Regulators for these third-party partners include the State of Nevada Financial Institutions Division, Delaware’s Office of the State Bank Commissioner, and Ohio’s Department of Commerce, while the platform’s smart contracts have been independently audited by Certik, SlowMist, and Zeppelin.

A key way TrustToken aims to distinguish itself from Stablecoin competitors is through the manner which it conducts its business: TrustToken released a Stablecoin Code of Ethics articulating its ideals for trustworthy stablecoin issuer conduct, and is implementing practices designed to realize them. Issuer practices TrustToken criticizes include:

  • Minting unbacked tokens; TrustToken alleges its competitor Tether issued $2.5 billion in cryptoassets while holding only $1.9 billion in assets. TrustToken evidences its own token backing through publishing audits made by Cohen & Co, an independent third-party U.S. certified public accounting (CPA) firm, and through legal agreements purportedly preventing token minting until banking partners verify deposits to escrow accounts.
  • Destabilizing a token’s value through promotional offers. TrustToken argues that promoting a token through exclusive discounts—offering market-makers the chance to buy $1 stablecoins at $.99—passes the financial loss onto the other token holders, rather than being funded by the benefiting issuer. TrustToken pledges to include controls, such as signed legal agreements and market monitoring, to prevent such losses in any of its promotional efforts.
  • Discouraging Stablecoin redemption on inadequate grounds. TrustToken views withdrawal fees and periods as potentially discouraging token holders from claiming their legitimate holdings for wrong or incidental reasons, though recognizes the need for anti-money laundering measures. The project pledges not to limit the amount of fiat withdrawable, and has publicly published its redemption criteria.
  • Being indifferent to illicit stablecoin usage. TrustToken thinks such indifference is antithetical to the long-term survival of stablecoins, so implements enterprise-grade KYC/AML system to meet all customer identification and anti-money-laundering requirements.

Asset Details

TrusToken’s first offering is the TrueUSD Stablecoin, an ERC20 token designed to keep parity with the US dollar through public, auditable escrow accounts. The project plans to issue additional token types backed by precious metals, real estate, and commodities. TrueUSD’s total supply is variable, with new tokens issuing when collateral is added, and tokens removed from the supply upon token redemption. In early 2019, Trust Token launched the TGBP stablecoin pegged to the British pound.