Basecoin

Unraveling Basecoin: A Deep Dive into the Cryptocurrency That Aimed for Stability

Exploring How Basecoin Operated

Basecoin, launched in 2018, was envisioned as a cryptocurrency offering stability by pegging its value to an underlying asset, initially the U.S. dollar. Founded by Nader Al-Naji and his Princeton classmates, Basecoin aimed to mitigate the price volatility commonly associated with cryptocurrencies like Bitcoin.

Deciphering the Mechanism Behind Basecoin

Basecoin's protocol revolved around a decentralized system adjusting token supply based on market valuation. This complex mechanism involved three token types: Basecoin, Base Bonds, and Base Shares. While Basecoin pegged its value to the USD, Base Bonds and Base Shares played roles in maintaining the peg through supply adjustments.

Scrutiny and Closure

Despite its ambitious goals, Basecoin faced skepticism from economists like John Cochrane, who questioned its economic theory. The cryptocurrency community criticized Basecoin's mechanism for lacking a true one-to-one relationship with hard currency reserves.

Comparing Basecoin with Tether (USDT)

Unlike Tether (USDT), a fiat-collateralized stablecoin, Basecoin didn't have reserves backing it. Instead, it relied on supply adjustments to match fluctuations in the dollar exchange rate.

Regulatory Challenges and Shutdown

Basecoin's rebranding to Basis in 2018 didn't shield it from regulatory scrutiny. The Securities and Exchange Commission (SEC) intervened, prompting Basis to announce its shutdown in December 2018 and return investors' funds due to unsustainable operational requirements.