Updated: Dec 20, 2019
Paxos Standard was launched by Paxos Trust Company, as the world’s first regulated crypto asset. PAX can be best described as a regulated ERC-20 stable coin, which is fully collateralized to maintain 1:1 parity with the U.S. dollar. The crypto coin is one of the first cryptocurrencies to be approved and regulated by the New York State Department of Financial Services.
This guide will explain why Paxos Standard was designed, the team behind it, how it works, and its uses and applications.
What Is Paxos Standard Designed For?
Paxos Standard was designed as a fully collateralized digital currency, which would stay unhampered by limitations of other crypto coins. The stable coin was created to be an absolute liquid, digital alternative to cash and to be available 24/7 for any kind of instantaneous transaction settlement. It was also intended to be fully redeemable.
Paxos Standard was developed, with the vision of lending financial markets and individual institutions the power to transact in a crypto-ecosystem, which is a fully USD-collateralized asset and allowed them the benefits of blockchain technology. The team envisioned all this to happen under oversight from financial regulators as mentioned in their whitepaper.
Who Is the Team Behind Paxos Standard?
PAX was issued by the Paxos Trust Company in September 2018. Co-founder Charles Cascarilla, who is the CEO of Paxos, also co-founded Cedar Hill Capital Partners (an institutional asset management complex) in 2005, and its venture capital subsidiary called, Liberty City Ventures, in 2012. He is an integral part of the Governing Board of the Hyperledger Project as well.
Paxos Trust is a fiduciary and qualified custodian of funds, which allows it to offer greater protection, in terms of consumer assets than any other existing stable coin.
How Does Paxos Standard Work?
Paxos Standard is designed as per the ERC-20 protocol, making it easier for anyone holding an Ethereum wallet to send and receive PAX. Verified customers can purchase tokens or redeem them directly through the company’s website on a 1:1 basis with USD, at any given point of time.
The corresponding amounts of dollars are always held in reserve, equaling the amount of Paxos Standard tokens in circulation. These tokens are immediately destroyed upon their redemption. This means that only those tokens are in circulation, for which, there's a corresponding amount of dollars in custody.
The best way to look at Paxos Standard is to think of it as the blockchain version of Venmo, where the sender deposits $1 in a Paxos Trust account, and then waits for Paxos to mint a PAX Token. This token can be sent to a recipient using an e-commerce platform, social media, or email. The recipient can then either spend the PAX Token or cash it in for $1.
Investors looking forward to trading digital assets, through the OTC desk or itBit exchange, have the option to withdraw their digital assets to Paxos Standard instantaneously.
It is important to understand that even though PAX equivalent dollar deposits are always held in segregated accounts, at different FDIC-insured U.S.-domiciled banks – at the heart of it, the coin is still a cryptocurrency.
What are Current and Future Applications of Paxos Standard?
The current uses of PAX are distinct from future use cases since the crypto-asset space is still in maturation. Currently, Paxos Standard can be used towards sending cross-border payments, reducing volatility in crypto trade, and as an exchange for moving between different crypto assets. It can also be used as payment for other blockchain-based assets.
In the future, PAX is expected to be used for consumer payments and also as a storage currency for third world countries, facing currencies with unpredictable volatility.
Recently, Paxos Trust partnered with Binance, which is touted as the world’s largest crypto exchange, to integrate and implement a new “Deposit Gateway.” The portal is intended to allow traders to exchange fiat for PAX directly, and use the liquidity of stable coin on the Binance exchange.
The beauty of Paxos Standard is that it is a regulated crypto coin, with the ability to move instantaneously on a global scale. The coin is built on the Ethereum blockchain, which offers all the regular uses of other cryptocurrencies, such as immutability and decentralized accounting.
Paxos Trust is a long-time partner to institutional investors, with a focus on financial compliance. It has been providing the financial industry with trading and custody services for digital assets since its genesis, as the first NYDFS-approved Trust company, with one of the leading crypto asset exchanges, itBit.
PAX is labeled the “The New Digital Dollar” and for good reason too. The crypto coin held street credit with a market capitalization of $108.456 million, in April 2019. It has not yet made it to the top 50 cryptocurrencies but is close enough, at 62nd place.