Christensen-backed Bluechip launches stablecoin ratings, USDD gets an 'F'

Quick Take

  • Non-profit organization Bluechip launched a stablecoin rating platform to assess the safety and risks associated with popular stablecoins.
  • The platform offers letter-grade ratings for 15 initial stablecoins, with BUSD, LUSD, PAXG and GUSD getting an “A” rating, while USDD gets an “F.”

Bluechip, a non-profit dedicated to evaluating stablecoin safety, unveiled its rating platform that aims to provide transparent and unbiased evaluations of the most popular stablecoins in the crypto market.

The ratings are provided at no cost, allowing anyone to assess the safety of stablecoins regardless of their technical expertise, Bluechip said in a statement. 

Bluechip's Chief Economist, Garett Jones, said there was a need for a simple tool and a clear grading system that allows users to make informed decisions when choosing stablecoins after a volatile year for the crypto industry. 

"Last year’s Terra/Luna collapse demonstrated that many people who were using stablecoins were unaware of risks that were obvious to many experts. People who want a safe, legal and easy way to make and receive payments, but aren’t experts on monetary economics, need a simple tool and a clear grading system so they can decide which stablecoins to use,” Jones said. 

“Stablecoins offer a way to potentially reduce the risks of inflation and even hyperinflation, but users need better information about which coins are more reliable," he added.

How the ratings work

Bluechip launches with ratings for 15 stablecoins and gold-pegged tokens initially: Binance USD (BUSD), Liquidity USD (LUSD), Pax Gold (PAXG), Gemini Dollar (GUSD), Pax Dollar (USDP), USD Coin (USDC), XSGD, Dai (DAI), Rai Reflex Index (RAI), Frax (FRAX), Tether Gold (XAUT), Tether (USDT), Euro Tether (EURT), TrueUSD (TUSD) and USDD. The platform plans to expand its list of rated stablecoins over time.

Of the initial list, no stablecoin has achieved Bluechip’s top rating of “A+,” according to a screenshot of the new platform shared with The Block ahead of the launch. BUSD, LUSD, PAXG and GUSD achieved the highest rating, each given an “A” grade. USDD came last, with Bluechip grading it an “F.”

The stablecoins are rated based on Bluechip’s SMIDGE rating framework: Stability, Management, Implementation, Decentralization, Governance and Externals.

The stability of a stablecoin is evaluated based on how well it has and is likely to continue maintaining its peg. Management assesses the competence and trustworthiness of the stablecoin project's team. Decentralization examines the concentration of control. Governance looks at the measures in place to protect users from bad actors. Finally, Externals focuses on third-party indicators that might offer additional insights into stablecoin risks.

Bluechip also shared its framework with Ethereum co-founder Vitalik Buterin before the launch and incorporated his feedback into the methodology, Jones told The Block.

Bluechip’s backers

The launch of Bluechip is supported by MakerDAO co-founder Rune Christensen, Reserve’s co-founder Nevin Freeman and StarkWare co-founder Eli Ben-Sasson. MakerDAO is the project behind the Dai stablecoin and Reserve is a permissionless platform for creating asset-backed currencies like the Electronic Dollar (eUSD) and ETHPLUS (ETH+). Jones declined to confirm the donation amounts but said the donation tiers will be disclosed on its website.

“We really need something like this. It’s great that the Bluechip team has stepped up to make it happen, and I hope others will donate too and make this new approach to stablecoin evaluation possible as a non-profit," Christensen said in the statement.

“Everyone says crypto needs to self-regulate, but nobody ever does anything because there’s no big money to be made. Stablecoin ratings are an obvious necessity after the UST collapse, and it’s great to see such a credible and well-meaning team taking on the challenge,” Freeman added. “They have my full support, and I really hope they become as popular as CMC and CoinGecko, so that the next UST isn’t able to swindle so many people.”

Economists, such as Tyler Cowen, Robin Hanson, Alex Tabarrok and Lawrence H. White, along with Ameen Soleimani and Nic Carter, also serve as advisors to the project. The Bluechip team who designed the rating system consists of CEO Benjamin Levit, Chief Economist Garett Jones and Ratings Director Vaidya Pallasena.

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