Paxos Treasury’s BUSD Burn: A Step Towards Stablecoin Sustainability

02/21/2023 18:46 • Digital Disruptors • 92 views

According to reports, according to Etherscan data, Paxos Treasury destroyed 93823673 BUSDs one hour ago (18:10:47 UTC on February 20).

Paxos Treasury destroyed nearly 94 million BUSDs

Analysis based on this information:

In the world of cryptocurrencies, stablecoins play a crucial role in providing a stable value proposition. One such stablecoin is BUSD, which is pegged to the US dollar in a 1:1 ratio. BUSD is issued and backed by Paxos, a regulated financial institution that operates a cryptocurrency exchange and offers custodial services for digital assets. To maintain the stability of BUSD, Paxos follows a strict protocol of issuing and redeeming BUSD based on the underlying USD reserves held in its bank accounts. In addition to this, Paxos also conducts regular “burns” of BUSD, which involves destroying a certain number of BUSDs from circulation, thereby reducing the overall supply of BUSD.

According to reports, Paxos Treasury destroyed 93823673 BUSDs one hour ago (18:10:47 UTC on February 20). This was confirmed by Etherscan, a blockchain explorer that allows users to view real-time data about transactions and addresses on the Ethereum blockchain. The equivalent value of these burned BUSDs is around $93.8 million, which is a significant amount. The reason behind this burn was not stated by Paxos, but it is speculated that it was done to maintain the peg of BUSD to the USD and to increase the overall sustainability of the stablecoin.

The burning of BUSD has become a common practice among stablecoin issuers, as it helps to maintain the peg of the stablecoin to the USD and ensures that the supply of the stablecoin is regulated. For example, Tether, the largest stablecoin by market capitalization, regularly burns USDT tokens to maintain the value of USDT. Burning of stablecoins ensures that they remain stable and reliable for the users who want to use them for transactions or store them as a hedge against volatility in other cryptocurrencies.

In conclusion, the burn of 93823673 BUSD by Paxos Treasury is a step towards the overall sustainability of BUSD. It ensures that BUSD remains a reliable and stable value proposition for users who want to use it for transactions, trading, or store of value. Regular burning of stablecoins has become a norm to maintain the stability of the peg and to regulate the supply of the stablecoin. Paxos, as a regulated institution, has used this practice to show its commitment to maintain the value of BUSD and to provide a credible and transparent service to its customers.

References:

1. https://www.paxos.com/busd/
2. https://www.coindesk.com/tether-destroyed-500-million-usdt-tokens-in-2020#:~:text=Tether%2C%20the%20issuer%20of%20USDT,its%20announcement%20on%20May%206.

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Paxos Treasury’s BUSD Burn: A Step Towards Stablecoin Sustainability

Paxos Treasury d…

Paxos Treasury destroyed nearly 94 million BUSDs

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