Stablecoin issuer TrustToken is bringing its proof of reserves system for TrueUSD (TUSD) collateralization levels on-chain. Adding Chainlink to an existing partnership with accounting firm Armanino makes it possible.
The transparency measure is meant to provide additional certainty for decentralized finance (DeFi) traders who often rely on asset-backed stablecoins – even without a clear understanding of whether the assets are fully backed.
Pulling from Armanino’s TrustExplorer API, the Chainlink integration makes the data available on-chain, which then lets app builders develop preventative measures against fractional reserve banking or other potential red flags.
Related: Total Value Locked in DeFi Sector Hits Record $13.6B
“One of the things that we think will be immediate will probably be on Aave – they’ll build-in risk circuit-breakers,” said Noah Buxton, Armanino’s blockchain director. “They’ll look at if the token is collateralized – is it a stable stablecoin – and then be able to build risk functionality around that.”
One of the problems that lending protocol Compound has with listing stablecoins is ensuring that stablecoin issuers are actually capable of minting the coins and keeping them properly collateralized, said TrustToken CEO Rafael Cosman.
TUSD is the seventh-largest stablecoin by market capitalization, according to CoinGecko. In June the stablecoin was approved as a collateral asset for generating dai on the Maker lending protocol.
- MakerDAO’s DAI Stablecoin Breaks $1B Market Cap
- Flash Loans Aren’t the Problem, Centralized Price Oracles Are
- Ethereum Heavyweights Launch LiquidStake Loans to Ease Eth 2.0 ‘Lockup’
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.