At Paxos, we’re steadfast in our mission: Open the world’s financial system to everyone by enabling the instant movement of any asset to anyone in a trustworthy way. Stablecoins are a powerful, real-world example of how we will make this happen.
Our panel of experts from our Engineering team, Senior Software Engineer Liz Rodan, Engineering Managers Ilan Gitter and Henryk Sarat sat down with Simon McKelvey, Director of Engineering Operations, for How it’s Made: Stablecoins at Scale. They chatted about how Paxos builds, scales and safeguards the world’s leading regulated stablecoins. We rounded up the five key takeaways from the event in case you missed it.
1. Stablecoins 101
The team kicked things off with the fundamentals of stablecoins, including what stablecoins are and how they function with smart contracts. Liz detailed each of the five steps in Paxos’ stablecoin lifecycle, starting with minting within the Signing Ceremony — a tool used to mint and burn tokens — and ending with secure cold wallet storage.
Above: the stablecoin lifecycle
Henryk pointed out a crucial distinction between stablecoins and speculative crypto:
Ultimately, this means that unlike other cryptocurrencies, stablecoins from Paxos — a regulated stablecoin issuer— are always available for 1:1 redemption.
2. Transformative, real-world use cases
For some, it’s eye-opening to hear how important stablecoins are for the global financial system. Financial inclusion, the protection of wealth and the efficient movement of money were just three important real-world use cases discussed by our panel.
Use Case 1: Financial inclusion
Henryk stressed the transformative power of crypto in enabling financial inclusion, sharing a staggering statistic: “In 2022, an estimated 1.7 billion adults were unbanked.” He underscored how crypto’s accessibility is crucial — requiring only a smartphone and internet connection —and enables easy access to US-backed stablecoins like PYUSD and USDP, especially in underserved markets.
Use Case 2: Protection of wealth
While people worldwide have access to their local currencies, these currencies may be volatile, leading to unpredictability in how people can use and benefit from their local currency. This scenario often leads those users to seek stability outside their local currency – where access to the US dollar (USD) via a regulated stablecoin can make a real impact. These individuals can move their wealth into a USD-backed stablecoin and convert it back to their native currency once volatility eases.
Use Case 3: Efficient money movement
As Henryk described, traditional international remittances involve time-consuming and expensive wire transfers. However, stablecoins and blockchain technology have revolutionized this process. Transfers can now be conducted 24/7, instantaneously and with minimal fees.
3. Paxos’ customer safety is paramount
In addition to explaining what a smart contract is and how it factors into the stablecoin equation, Ilan emphasized the importance of rigorously auditing and testing our code to ensure customer funds remain highly protected and secure. The team conducts internal and external audits, creating highly vetted smart contracts with trusted industry-standard tools like OpenZeppelin. For an added layer of security, Ilan also detailed how he and the team prefer to complete more complex work off-chain, which ensures ease of upgrades before developers migrate them on-chain.
Also noteworthy is the team’s use of a proxy upgrade pattern, allowing them to make important updates to smart contracts without interrupting a customer’s service. Ilan explained how we partner with various transaction monitoring platforms to watch for suspicious activity.
4. Regulation is at the core of our business
It’s no secret that Paxos and regulation go hand-in-hand. As Henryk highlighted, we operate under the oversight of the New York Department of Financial Services. Our reserves are held entirely in US dollar deposits, US treasuries and cash equivalents – meaning that customer funds are available for 1:1 redemption with Paxos. All customer assets are fully separate from corporate assets and are protected from bankruptcy. Paxos releases monthly reserve reports for all our issued assets to ensure full transparency.
We also heard that Paxos’ regulation-first approach mattered to the panel – not only because of the impacts on our partners but also because of how it made Paxos a top choice to work with within the industry. Specifically, Liz noted that Paxos’ focus is not just on innovation but also on regulation and compliance – which drew her to join the company. Henryk, too, moved to Paxos, in part due to the regulatory aspect. He stressed that working on a platform that enables the seamless movement of digital assets, including stablecoins, is a great fit for anyone interested in gaining exposure to federally regulated financial instruments.
5. Our team is growing
Paxos is tackling some of the most challenging engineering problems, not just within the stablecoin space but also beyond. As a result, our team is growing. Hear from our panel about what gets them most excited about being part our Engineering team:
Liz: “I was really excited about the tech stack here at Paxos. I think the people are amazing to work with. Overall, [they] have a great commitment to excellence, curiosity, and intellectual curiosity. That’s refreshing.”
Ilan: “Paxos has been amazing at growing with the individuals. And so everyone has an opportunity to shine on their own and grow in their career and for themselves as well.”
Henryk: “The things we’re doing are extremely impactful. People that would join would possibly be working on launching new white label stablecoins…[and] new blockchain integrations, because we’re looking at becoming multi-network, multi-regulatory and multi-asset.”