EOS Gets Its First Stablecoin: CarbonUSD (CUSD)

Siamak Masnavi
  • 11 Nov 2018
  • /
  • In #EOS

On 9 November 2018, New York-based blockchain startup Carbon-12 Labs (better known as "Carbon"), which develops a stablecoin called CarbonUSD (CUSD), announced that CUSD was available on the EOS platform. In this article, we take a closer look at CarbonUSD.

Carbon, which was founded by Samuel Trautwein (CEO), Connor Linn, Gavin Mai (CPO), and Miles Albert (CSO), originally launched CarbonUSD on the Ethereum platform on 12 September 2018. CarbonUSD is a price-stable cryptocurrency that is fully-collateralized 1:1 by U.S. dollars held in FDIC-insured accounts.

However, the long-term plan, according to Sam Trautwein, the company's CEO, is to transition a "fiat-backed algorithmic hybrid approach" once "CarbonUSD reaches sufficient scale as a fully fiat-backed token." Here is how he explains it:

"While redeemable, fiat-backed tokens are generally trusted on day 0, they are intrinsically unscalable. Structurally these tokens are multi party bearer receipts meaning that their soundness depends not on a single fail point, but rather usually four to five. If the auditor, the bank, the trust company, the smart contract auditor, or the software provider fails (in any sense of the word), the entire structure comes tumbling down. As the stablecoin scales it undergoes significant strain. They draw increased regulatory scrutiny meaning that small things that were once overlooked now will draw the ire of governing bodies. In many ways Tether outscaled its compliance. They lost their ability to withdraw and deposit through Wells Fargo overnight. It’s difficult to build a new paradigm within the old paradigm."

"Combining the two presents the best route forward. We offer the optimal consumer product today and tomorrow. The transition will be gradual and transparent as we will leave the infrastructure in place for users to keep using fiat-backed solutions if they so desire."

On November 9th, Carbon announced that CarbonUSD had also become available on the EOS platform. In a blog post published on November 10th, Trautwein explained that "Carbon’s interoperability solution enables CarbonUSD users to transfer their tokens onto the EOS blockchain, where users can transfer CarbonUSD with even lower fees and faster settlement than on Ethereum." He added:

"“We are honored and excited to be the first stablecoin on EOS and to play such a crucial role in such a burgeoning ecosystem. Stablecoins are critical infrastructure for value and we think providing this to EOS further enhances the ecosystem."

Trautwein went on to explain how deposits/withdrawals work:

"To create new CarbonUSD tokens, users can make fiat deposits with the company’s partner bank, Nevada-based Prime Trust. Frequent third-party attestations by leading auditor Cohen & Co. verify publicly that each token is backed 1-to-1 by escrowed funds in a trust account."

Sam Kazemian, Co-Founder and President of Everipedia (an EOS DApp that calls itself "the world's largest encyclopedia on the blockchain"), stated:

“Stablecoins, as an asset class, are the next big thing in crypto and will lead to a new bull market in the next 6–18 months. Carbon’s unique hybrid approach for gaining stablecoin adoption is the most promising I know of. There’s no other project like it”.

Featured Image Courtesy of Carbon-12 Labs

Block.one Conceptualizes Passwordless Authentication & Authorization System

Block.one, a Cayman Islands-registered firm that publishes open-source software and protocols for EOS, one of the largest platforms for deploying enterprise-grade decentralized applications (dApps), has argued that “current methods of authentication suffer” from the “Hearsay Problem.”

Explaining what Hearsay means, in general, Block.one noted in its blog post, published on April 17th, 2019, that Hearsay is “any information received from one party about the statements or actions of a second party that cannot be adequately substantiated.”

Current “State-Of-The-Art Methods” Of Authentication May Not Be Reliable

Block.one also noted in its official blog that its stance on this matter is that “all information sourced from systems which rely on current state-of-the-art methods of authenticating users would qualify as mere hearsay if any of the involved parties were to call the validity of the information into question.”

Going on to mention that this “characteristic is referred to as repudiability,” which is a property whereby a statement’s claim or validity can be rejected, Block.one’s post explained that “two primary factors” could potentially “lead to this characteristic of repudiability.” According to Block.one, the “first factor is an authentication scheme that requires disclosure of a secret in order to validate the possession of that secret.”

For instance, “security schemes” such as “passwords” which are “subject to this factor,” make it “impossible to create logs of user activity that are verifiable by anyone other than the party and the counterparty,” Block.one’s blog stated. Moreover, the software publisher’s post noted that the “second factor is the lack of means to prove that the data within a system that actually represents the intent of the user,” which results in another issue, referred to as “The Blank Check”.

“The Blank Check” Problem

As mentioned in Block.one’s blog, the “Blank Check problem is present in any system that can take action on behalf of the user without needing the user’s explicit consent on that specific action.”

This same problem “is also present if the means of capturing the user’s consent is anything short of a log of proof that the user was informed of the implications of every individual action and explicitly consented to each action,” the software development firm wrote.

“Nothing Preventing Banks From Liquidating Or Locking User Funds”

From strictly a technical perspective, Block.one believes “there is nothing to prevent your bank from liquidating or locking your funds, and there would be no means of proving any wrongdoing, as the Bank could fabricate records of seemingly legitimate transactions. This would no doubt pose grave consequences that affect many stakeholders in a material way.”

These issues can be attributed to “the lack of provable auditable logs,” Block.one claims. It adds that technologies which “address this fundamental shortcoming” on existing platforms are not designed to be user-friendly.

According to Block.one, systems that “rely on passwords” for authentication and authorization are “subject to the Hearsay Problem and the Blank Check problem.” In order to provide robust security, while accurately determining whether a user should be allowed to access a system, Block.one proposes creating what they refer to as the “Pass Manager.”

Pass Manager: Ultimate Authentication And Authorization System?

As described in its blog post, Block.one noted that a Pass Manager could be implemented using “a blend of technologies [that could] work in tandem to produce superior security and usability for users, including cryptographic signing, hardware keys, and biometrics for credential security, as well as a transport-agnostic protocol for portability.”

Creating Non-Repudiable Logs

Going on to describe how an actual Pass Manager-enabled system would work, Block.one stated that “anytime a user’s consent is sought by a Pass Manager, human-friendly descriptions of the action should be shown to the user, and that description (or a cryptographically verifiable derivative of it) should be included in the signed response from the Pass Manager.”

The software publisher further noted that the “use of keys means that logs are non-repudiable and can be verified by third parties, and the inclusion of the human-friendly description in the signed response can serve as proof of the user’s intent. These characteristics solve both the Hearsay and Blank Check problems,” Block.one’s developers claim.

As explained, a Pass Manager-powered verification system would not require users to input passwords - which would arguably make the authentication and authorization process more secure.