The PAX token, which stands for Paxos Standard, is a token designed to be able to spend money quickly. It is a stablecoin that always has the same value as the US dollar. Now you will ask yourself what the difference is with all those other stablecoins. A fair question, because there are a lot of different stablecoins.
We’ll explain everything about Paxos Standard in this article, so you know exactly how it works and where you could buy it. But first a short video about Paxos Standard below.
- 1 What is Paxos Standard (PAX)?
- 2 History and founders of Paxos Standard
- 3 Cash alternative
- 4 How does Paxos Standard work?
- 5 iBit crypto exchange
- 6 Where can I buy Paxos Standard (PAX)?
- 7 User situations of Paxos Standard
- 8 Advantages and disadvantages of Paxos Standard
- 9 What is a stablecoin?
- 10 Different types of stablecoins
- 11 Paxos Standard Chart
- 12 Conclusion
What is Paxos Standard (PAX)?
Paxos Standard (PAX) is a stable token pegged to the dollar. For every PAX issued, the company freezes one dollar (or the equivalent in US Treasury bills) in bank accounts it maintains with regulated institutions. The PAX tokens can then be exchanged against Paxos Standard for one dollar each.
Paxos Standard is one of several projects that have emerged to provide a more transparent and robust alternative to Tether (USDT). Paxos Standard is headquartered in New York State. It is registered with the local regulators (New York State Department of Financial Services).
New York is one of the most active jurisdictions in the fight against questionable practices that may exist in the crypto ecosystem. The choice to settle in NY is no accident on the part of Paxos. It’s about proving that it meets the strictest standards.
History and founders of Paxos Standard
Paxos LLC, formerly iBit, was founded in 2012 by three partners: Charles Cascarilla (CEO of Paxos), Andrew Chang (CEO of Paxos), Richmond Two (CEO of Paxos Asia). The company has two offices, in New York (as mentioned earlier) and Singapore.
In addition, the company has the support of several private equity firms. These include Liberty City, RRE and Canaan Partners. In May 2015, Paxos entered the US market after obtaining a license from the authorities, the New York State Department of Financial Services (NYDFS), allowing the company to issue a stable coin. Three years later, the Paxos team created the Paxos Standard stablecoin (PAX), which officially began trading in September 2018.
It is mainly an alternative to cash, so can be said to be used to make transactions. In addition, it offers customers a much better protection of their assets than cash.
In summary, it can be said that the Paxos standard can also be used for consumer payments. More specifically, it concerns an infrastructure of highly regulated financial institutions. This is mainly to ensure and obtain the highest quality physical and digital transfers.
These are the main features of Paxos Standard to remember:
- Mobilizes – It enables the movement of assets through an ecosystem of services and products.
- 24/7 transaction support .
- Digitizes – Builds technology that allows assets to move across any blockchain .
- Decentralized Accounting .
- Immutability – The price of PAX is always equal to the US Dollar.
- Stores – Stores and protects physical and digital assets like a trust.
- Products – Advanced banking-supervised technology to buy, trade, sell and manage assets.
- Aftermarket – Streamlines workflows with service automation.
- Custody – Stores and protects assets with a regulated trust company.
- Instant and hassle-free global transactions.
- Price Stability – The price is always stable with the US dollar as the reserve currency.
How does Paxos Standard work?
The growth and popularity of cryptocurrency trading has been accompanied by its woes, prompting the Paxos team to develop a product that addresses the volatility of cryptocurrency prices. They also wanted to find a reliable alternative to blockchain-based digital assets or cryptocurrency transactions.
In addition, the infamous controversial Tether (USDT) made matters worse. In particular, the stablecoin Tether is said to have printed fake Tethers, creating mistrust. Because of these challenges and changing times, the Paxos team has been exploring other alternatives. Their research led to the creation of a more transparent and efficient stablecoin, Paxos Standard (PAX).
Paxos has opted for the legal form of a Trust. Unlike a bank that can use its clients’ deposits to fund itself or conduct financial transactions for its own benefit, a trust acts as a fiduciary who is obligated to keep its clients’ funds segregated. Paxos alone is responsible for tokenizing these dollars on the Ethereum blockchain. This means that PAX takes the form of an ERC-20 token.
The new product is based on Ethereum, which means that data can be stored in interconnected blocks, ensuring security. In addition, the Ethereum blockchain provided a decentralized environment for secure transactions and eliminated the risk of third-party interference. Unlike a regular stable coin, the Paxos Standard has the following superior features:
iBit crypto exchange
To facilitate the adoption of the Paxos Standard, the company has created its own exchange , itBit. This exchange also offers a custodial service. PAX wants to make its mark on cryptocurrency exchanges, but not only. The token can be used to make dollar payments without the friction of the banking system. In particular, it is possible to make a payment 24 hours a day, 7 days a week, in seconds or minutes.
Where can I buy Paxos Standard (PAX)?
It is not difficult to get PAX tokens. You can buy these tokens on most crypto exchanges. Still, it’s good to think about this first. After all, you don’t want to be scammed and lose your money. That is why we recommend that you do this at Binance . This famous international exchange is one of the players who introduced the Paxos standard. It is possible to convert Tether to PAX on Binance as well as a very long list of other cryptocurrencies.
Of course you can also choose to use a decentralized crypto exchange. However, this is not recommended if you are still a novice crypto trader. You have to go through quite a few steps when using a DEX, and therefore there is a chance that things will go wrong.
User situations of Paxos Standard
PAX has various uses. The most useful are inflation hedging, volatility reduction, elimination of fees for cross-border transactions, payment for digital assets, and blockchain-based cryptocurrencies.
First, PAX stablecoin offered an alternative to mainstream cryptocurrencies, which was a great relief to investors. It is not subject to market conditions, so it is not volatile, unlike other cryptocurrencies that are subject to market conditions.
Second, the PAX stablecoin is a limitless digital asset that anyone can transfer and store as value or wealth. Cryptocurrencies are becoming very popular and most people are generally more open to them, which is why PAX is gaining popularity.
Paxos can also be used as a payment solution for cryptocurrencies and blockchain-based digital assets. This coin is also useful in converting physical assets into digital assets.
Although Paxos Standard is maturing, most companies that accept cryptocurrencies as a means of payment are open to PAX. With the growing popularity of cryptocurrencies, stablecoin certainly has a bright future in e-commerce.
Advantages and disadvantages of Paxos Standard
Let’s take a look at the pros and cons of Paxos Standard. It’s up to you to weigh the pros against the cons. This way you can determine whether you want to use the token.
These are the benefits of PAX:
- Ethereum base makes it convenient, transparent, efficient and safer.
- Availability on major exchanges, leading to greater liquidity.
- Periodic audits that promote transparency.
- NYDFS regulation, which makes it safe.
- FDIC-insured customer balances held by US banks.
These are the known disadvantages of PAX:
- Centralization that can lead to censorship or seizure by authorities if there is a suspicion of malpractice or non-compliance with the terms and regulations.
- Low confidentiality as most trading platforms require KYC information to handle large amounts. The same is necessary when you need to exchange or buy Paxos Standard with Fiat.
What is a stablecoin?
A stablecoin is literally a stable cryptocurrency. This addresses one of the biggest problems in the cryptocurrency sector: high price volatility. The price of a cryptocurrency can vary by 10-20% or even 100-200% in one day (however, this is less and less the case for the most valued cryptos such as Bitcoin ).
The operation of a stablecoin is simple. If the price of Bitcoin is $6,000 and you exchange 1 Bitcoin for a dollar-backed stablecoin, you will have 6,000 units of that stablecoin. If the Bitcoin price drops to $5,000, you still have $6,000 in stablecoin. On the other hand, if Bitcoin climbs to $7,000, you would still only have $6,000 worth of stablecoins .
Crypto traders mainly use stablecoins to protect their wealth against price changes. Suppose you have earned a lot of money with an investment, you can convert it to Bitcoin, for example. However, when the price of Bitcoin subsequently falls, your profits will disappear like snow in the sun.
That is why it can be smart to use a stablecoin. By converting your profits to a stablecoin, you can protect them against price drops. And you don’t have to take your winnings off the blockchain for that. Another option would be to cash out your winnings directly into euros or dollars. You will understand that this is not the most ideal option, because it takes quite some time and actions to realize this. That is why stablecoins are widely used.
Different types of stablecoins
All stablecoins serve the same purpose, but each has a different mechanism. There are three types of stablecoins. The first is fiat-based (fiat is a traditional currency like the dollar and the euro). This model means that the entity issuing the stablecoin must have a bank account that holds the value of the issued tokens in fiat currency. For example, if it puts 1 million dollar coins into circulation, it must have 1 million dollars in a bank account. This is also the mechanism used by Paxos Standard.
The second is crypto-collateralized, meaning a coin is backed by another cryptocurrency. To compensate for the volatility, stablecoin is being over-supported. For example, the equivalent of $1,000 in Bitcoin may be needed to spend the equivalent of $500 in stablecoin. Even if the Bitcoin loses 30% of its value, the stablecoin remains covered.
The third is not against collateral. In this case, the stablecoin is only backed by its value through a smart contract (a contract that is automatically executed). If the aggregate demand for the stable coin rises or falls, the contract will automatically change the number of coins in circulation to keep the price stable.
Paxos Standard Chart
The Paxos team identified the need for a stability-oriented cryptocurrency by eliminating volatility and sustaining itself, without traditional financial institutions. In addition, they wanted to integrate convenience, security and efficiency into a single protocol. This has resulted in a decentralized, stable and reliable cryptocurrency.
With PAX, investors have the ideal opportunity to save, invest, trade or exchange without having to worry about volatility due to unforeseen market conditions and bad practices. Although the PAX stablecoin is based on Ethereum, transactions are not affected by the high fees and scalability of Ethereum.
PAX can be traded entirely in dollars or in any other cryptocurrency of your choice, including Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH). After purchasing PAX, the user can convert it into other cryptocurrencies without the involvement of third parties and without the risk of volatility fluctuations.
PAX is trying to become the largest stable coin in the crypto world. Compared to other stable currencies, its performance (market capitalization and trading volume) can only compete with Tether (USDT) and USD (USDC). In addition, its liquidity has increased significantly, which has led to its popularity. In addition, the Paxos team strives for a cordial relationship with the financial regulators to ensure the smooth running of the company.
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com