What is Gemini Dollar GUSD? World's First Regulated Stablecoin

Last updated: Mar 30, 2023
11 Min Read
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In the search for a more trustworthy and transparent stablecoin, a number of companies and issuers have entered the fold. One of the most prominent is that of the Gemini Dollar (GUSD).

Issued by the Gemini exchange that bears the name, this stablecoin is trying to usurp market share away from the increasingly embattled Tether (USDT) stablecoin. There have been questions surrounding Tether that have recently come to a head.

The Gemini Dollar will be facing up against other new entrants to the space including Paxos Standard (PAX) and TrueUSD (TUSD). In this post, we will take an in-depth look into the Gemini Dollar stablecoin. We will give you what you need to know about the technology, use cases and holder protections.

Gemini Dollar Overview

The Gemini Dollar stablecoin (GUSD) is one of the latest stablecoins, and was released on September 10, 2018. It is an ERC-20 token operating on the Ethereum blockchain and was created and released by the Gemini cryptocurrency exchange owned by the Winklevoss twins.

Gemini Dollar Stablecoin Use Cases
Use cases for the Gemini Dollar Stablecoin

Based on the information in the tokens whitepaper, it will be “strictly pegged 1:1 to the U.S. dollar.”

Because it is pegged to the U.S. dollar, Gemini will use State Street bank to hold the USD assets, and has retained a pass-through insurance product to provide FDIC insurance within specific limits.

The Gemini Dollar is also unique among stablecoins because it will be regularly independently audited by BPM Accounting and Consulting. The audits will be done to ensure Gemini is holding a matching amount of U.S. dollars to its GUSD, and the results of each audit will be publically released.

The rest of this article takes a deeper look at the specifications of the token as laid out in its whitepaper, as these provide the framework for improving trust in this stablecoin implementation.

GUSD Issuance and Redemption

Because Gemini Dollars are created on a blockchain it will always be possible to view the tokens, and the amount in circulation on the Ethereum blockchain. Dollar holdings to back those tokens will be regularly audited and confirmed.

The accounting audit will confirm the USD holdings, while the blockchain ledger itself will confirm the supply of coins.

Gemini Dollar Network of Trust
The Gemini Dollar "Network of Trust"

New Gemini Dollars are created anytime a customer withdraws the tokenized dollars from the Gemini exchange. They are then destroyed anytime a customer redeems them or deposits them back to the Gemini account.

The Gemini Dollars retain all the features of the ERC-20 protocol, meaning they utilize smart contracts and can be stored on any Ethereum address and in any ERC-20 compatible wallet.

Governance, Logic and Ledger via Smart Contracts

One of the uses for stablecoins is to offer an alternative to the USD on exchanges that don’t feature fiat currencies. This means there can be heavy trading volumes for stablecoins on these platforms.

Gemini created the GUSD with strict controls over the token so they are able to perform upgrades whenever necessary. The whitepaper states that Gemini is looking to offer the following with the GUSD:

  1. Resolve vulnerabilities;
  2. Extend the system with new features;
  3. Improve the system and optimize its operational efficiency; and
  4. Pause, block, or reverse token transfers in response to a security incident (i.e., catastrophic event) or if legally obligated or compelled to do so by a court of law or other governmental body.

They accomplish this using layers of smart contracts to perform various functions. The “Proxy” layer is responsible for the creation and transfer of coins, and also provides a mechanism to halt coin issuance and transfer if there is an security incident or legal obligation to do so. The Proxy layer is the governance layer, specifying what can take place on the blockchain and allowing smart contract logic in the following “Impl” to be executed.

Gemini Dollar Contract Seperation
Contract Separation on Gemini Dollar. Source: Whitepaper

The “Impl” layer is where the data and logic for the smart contracts resides. That includes the logic for token creation, destruction and transfer. The logic on this layer is similar to that seen in most ERC-20 tokens. The main difference is that the smart contract features in this layer will only work when allowed to do so by the Proxy layer.

The third and final layer is the “Store.” This is the actual ledger, where balances are mapped to their owners. It is also where coin transactions are made public for viewing on the blockchain.

This setup is much the same as the way a local server works to “serve up” network resources. The Proxy layer is the local server itself, where files execute. The files themselves are the Impl layer, and they keep information is a database, which is the Store layer.

That’s a pretty simplified explanation, but the three-tier explanation shows how each layer performs a different function. The architecture is deliberate, giving developers the flexibility they need, while also providing central control when necessary.

Offline Approval via Custodians

When contract developers attempt to add new smart contracts they will need to receive approval from a custodian or keyset. From the developers perspective these can be offline or online, but the custodian itself will continue looking for another custodian until it reaches an offline keyset. This is the offline approval mechanism for the smart contracts action. Or, as the whitepaper states:

If a smart contract’s custodianship terminates to an offline keyset, an offline approval mechanism for its actions has been created

This forces any chain of custodians to end at the centralized offline keyset to approve new smart contracts.

This also allows Gemini to enact a system that allows them to pause the network if the Impl layer ever needs to be replaced. The network is paused, the new Impl layer is put in place of the old layer, and the old smart contracts are brought to the new Impl layer.

This is much like a soft fork, and both the Proxy and Store layers will treat the new Impl layer as the authoritative layer, ignoring the old layer.

Limited GUSD Tokens

Because of the controversy and questions surrounding the Tether stablecoin, the printing of new coins is a tough topic. Each new GUSD token printed needs to have 1 USD in reserve backing it up. The custodian system will ensure that the amount of tokens in circulation never exceeds the USD balance in reserve.

This function is handled by something built into the Impl layer called the PrintLimiter. This function sets a hard cap on the number of GUSD tokens that can be created. It uses a procedure of checks and balances to determine if new tokens can be created anytime the token supply is being called to change. If there is a limit increase request there must be approval from an offline keyset. Decreases can be approved by an online custodian.

Print Limiter Smart Contract
Print Limited Contract in the 'Impl' chain of Custody

This means coins cannot simply be printed without limit. Any increase must be approved by the chain of custodians, and they will adhere to the built-in hard cap on the number of coins.

Gemini Dollar Listings

Since the September 2018 release, the Gemini dollar has already being listed on a multitude of exchanges. The market cap of the coin has gone from around $14m to over $23m in the span of a little more than a month.

These exchanges are using the Gemini Dollar as they want an alternative stablecoin that is fully regulated and provides them with the necessary protections. Moreover, when it comes to stablecoins it is often a confidence game. The less confidence a user has with the coin the harder it becomes to maintain the peg.

Exchanges Listing GUSD
An expanding List of Exchanges that are Listing GUSD

There have also been a number of other payment platforms and wallets that support the GUSD including the likes of BitPay, Coinomi and Coinsbank. This could make it easier for users to store and send their GUSD.

It of course remains to be seen whether any of the other larger exchanges such as Binance or Bittrex are likely to list GUSD. We know that Coinbase will not be listing GUSD as they have developed their own stablecoin in conjunction with Circle called the USDC.

Controversy in the Code

You might have recognized this already from the description in the Gemini Dollar whitepaper, but the GUSD definitely has some centralized features. This was almost immediately pointed out by the cryptocurrency community. Alex Lebed, the founder of another stablecoin called Stableunit, reviewed the Gemini Dollar codebase and the day after it was released he made a post to the Good Audience blog with his findings.

Basically he found that the way GUSD had been implemented allowed Gemini the ability to print an infinite number of tokens, to freeze accounts, or to make all of the tokens non-transferable. He found that the custodian is able to change the implementation of the token every 48 hours.

“This project has another single point of failure: the company — They can just say one day: ‘you know what, sorry, we don’t want to change your tokens for dollars anymore,’” Lebed states.

It's possible Lebed is simply throwing FUD at a competing stablecoin.

This element of control isn’t unique to the Gemini stablecoin. Instead it is a part of the centralization required by the stablecoin model. The fully-collateralized stablecoin does offer stability in price, but there are regulatory guidelines and other external pressures that Gemini has to adhere to.

The centralized model is one method to protect from security incidents.

Consider that last year when the treasury address of Tether was hacked, the company had to release an emergency fork to block the roughly $30 million in stolen tokens from being spent. In this case the hard fork worked since the node operators followed the new fork, but even if they hadn’t Tether could have simply refused to honor the tokens from the old chain.

Gemini Dollar Fiat Conversion
Cashing Out Gemini Dollars into USD goes through Gemini

Gemini has similar protection in place, because GUSD can only be redeemed at Gemini. This gives them absolute censorship over the underlying assets, and allows them to maintain control even without the ability to lock accounts or freeze funds. However, this ability id more convenient should Gemini need to protect from theft, money laundering or some other illicit activities.

Ultimately it isn’t surprising that Gemini included these features, as they are a necessary evil in a stablecoin.


You can clearly see that Gemini put great thought and development into the Gemini Dollar before releasing it. With a number of new stablecoins all hitting the market it’s hard to say if GUSD will be one to stand the test of time, but it certainly makes a strong case for its implementation.

If it is proven to be more transparent than Tether it should almost certainly gain increased acceptance and usage from the cryptocurrency community. It does have a long climb ahead of it however, as Tether has been universally accepted as the stablecoin at most exchanges.

Steve Walters

Steve has been writing for the financial markets for the past 7 years and during that time has developed a growing passion for cryptocurrencies.

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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