The Ergo Foundation, EMURGO, and IOHK have announced AgeUSD, a stablecoin protocol based on the Ergo blockchain. Ergo is a revolutionary UTXO-based blockchain protocol built to be an efficient and secure financial contracts platform with radically new DeFi functionality. In 2020, ERGO partnered with EMURGO to jointly explore stablecoin R&D and the provision of DeFi applications by leveraging each other’s respective expertise in Cardano’s technical structures and UTXO-based smart contracts.
EMURGO, a multinational blockchain company tasked with developing solutions for the Cardano blockchain, has announced the launch of a new stablecoin called AgeUSD. The stablecoin, however, won’t be launched on Cardano, but on Ergo, a decentralized POW blockchain platform. Ergo's proof of work (PoW) blockchain platform with Turing complete smart contracts that employs a number of advanced features like zero-knowledge proofs, ring signatures, oracles, and adjustable block size.
What makes AgeUSD different from other stablecoins on the market is the fact that it’s not a fiat-pegged token, but a crypto-backed algorithmic stablecoin protocol. This means that AgeUSD doesn’t rely on collateralized debt positions (CDPs), essentially making liquidation events impossible.
Bruno Woltzenlogel Paleo, the technical project director at IOHK, shared a preliminary, high-level implementation of AgeUSD in Plutus during the “Ergo Summit 2021” on Jan. 24. During his presentation, he said that IOHK wanted to demonstrate the new capabilities and functionalities that open up when you combine Cardano’s Plutus smart contract programming language with Ergo’s ErgoScript.
Given the fact that Cardano’s upcoming Goguen phase will fully unlock the blockchain’s smart contract functionality, it’s safe to assume that AgeUSD could roll out by the third quarter of the year, when IOHK predicts Goguen would be fully complete. According to Roman Pellerin, the CTO of IOHK, the crypto-backed algorithmic stablecoin will also be available on Cardano once its smart contract functionality is unlocked.
ERGO’s Sigma protocols and blockchain architecture make it possible to do things that would be difficult on conventional smart contract platforms, enabling a high degree of privacy while ensuring security is not compromised. While the range of possible decentralised financial (DeFi) use cases is endless, examples include: stablecoins, non-fungible tokens (NFTs), oracle pools and the trustless mixing of funds (ErgoMixer) which enables participants to spend without anyone knowing who made the transactions.
The consensus protocol of Ergo — Autolykos — is based on the well-known Proof-of-Work (“PoW”) consensus algorithm. PoW was chosen for several reasons including that PoW protocols are widely studied, have high security guarantees, and are friendly to light clients. However, Autolykos has several meaningful differences from Bitcoin's PoW. It is memory-hard reducing the disparity between specialized hardware (ASICs) and commodity GPUs, allowing ordinary people to participate in mining to secure the network and receive the reward. It has storage rent to reclaim lost and forgotten coins, Sigma Protocols, and so much more.
References:
Ergo official website: Basics