Understanding DigiDollar: A Beginner’s Guide to a Proposed Stablecoin on DigiByte

Cryptocurrencies like Bitcoin and Digibyte are exciting, but their prices can swing wildly, making them tricky for everyday use like buying coffee or paying bills. Imagine wanting to use crypto, only to find its value dropped 10% overnight! This is where stablecoins come in—digital currencies designed to hold a steady value, often tied to something stable like the US dollar. In this beginner-friendly article, we’ll explore DigiDollar, a proposed stablecoin for the DigiByte blockchain, and explain how it aims to bring dollar-like stability to crypto without relying on banks or companies. Note that DigiDollar is not yet live—it’s a plan for the future, but an exciting one!

What is DigiDollar?

DigiDollar is a proposed stablecoin designed to work on the DigiByte blockchain, a fast and secure cryptocurrency network launched in 2014. Unlike regular cryptocurrencies that fluctuate in price, DigiDollar is planned to always be worth $1. It would achieve this by being backed by DigiByte (DGB) coins, which users would lock up as a kind of “deposit” to create DigiDollars. Think of it like putting money in a vending machine to get a token, except here, the token is DigiDollar, and the machine is the DigiByte blockchain.

What makes DigiDollar special is its goal to be fully decentralized. Unlike some stablecoins like Tether (USDT) or USDC, which are run by companies holding dollars in bank accounts, DigiDollar would not rely on any single organization. Instead, it would use DigiByte’s blockchain rules to ensure every DigiDollar is backed by DGB and can be swapped back for DGB worth $1 at any time, without needing permission. However, DigiDollar is still a proposal, outlined in a June 2025 whitepaper, and has not yet been built or launched on the DigiByte network.

Why Does DigiByte Need a Stablecoin?

DigiByte is a super-fast blockchain—its transactions confirm in about 15 seconds, compared to Bitcoin’s 10 minutes. It’s great for payments, but like most cryptocurrencies, DGB’s price can be a rollercoaster. This makes it hard for:

• Merchants to accept DGB without worrying about losing value.

• Users to use DGB for daily expenses like groceries or bills.

• Developers to build financial apps (like lending or trading platforms) that need stable prices.

The DigiDollar proposal aims to solve this by offering a stable, dollar-like currency that runs on DigiByte’s speedy and secure network. If implemented, it would combine the freedom and security of crypto with the predictability of the US dollar, making DigiByte more versatile.

How Would DigiDollar Work?

DigiDollar is still in the planning stage, but the whitepaper describes how it would work if built. Let’s walk through the proposed process in simple steps to understand how it would stay stable and secure.

Step 1: Locking DGB to Create DigiDollars

To get DigiDollars, you would “lock” some of your DGB coins in a special transaction on the DigiByte blockchain. This is like putting your DGB in a digital safe to back the DigiDollars you create. Here’s the plan:

• You decide how many DigiDollars you want, say 100 DigiDollars (worth $100).

• The system would check the current price of DGB using a price oracle (more on this later). Let’s say 1 DGB = $0.10.

• To keep DigiDollar safe, you might need to lock more DGB than the dollar value—for example, 150% of the value, or 1500 DGB (worth $150) to create 100 DigiDollars. This extra DGB would act as a safety cushion if DGB’s price drops.

• The DigiByte blockchain would lock your 1500 DGB so you can’t spend it normally until you return the DigiDollars. In return, you’d receive 100 DigiDollars in your wallet.

Step 2: Using DigiDollars

If DigiDollar is implemented, you could:

• Send DigiDollars to friends, merchants, or anyone with a DigiByte wallet, just like sending DGB. For example, you could pay 50 DigiDollars for a gadget, and the merchant gets exactly $50 worth.

• Hold them as a stable store of value, knowing they won’t lose value like DGB might during a market dip.

• Use them in decentralized finance (DeFi) apps on DigiByte, like lending or trading platforms, if developers build these in the future.

DigiDollars would move quickly on DigiByte’s network, with transactions confirming in seconds, and would cost only a tiny fee (paid in DGB) to miners who keep the network running.

Step 3: Redeeming DigiDollars for DGB

When you’re done with your DigiDollars, you could “redeem” them to get your DGB back. Here’s how it would work:

• You send your 100 DigiDollars back to the blockchain in a special transaction (called “burning” because the DigiDollars are destroyed).

• The blockchain checks the current DGB price. If 1 DGB is still $0.10, you’d get 1000 DGB back (worth $100).

• The blockchain unlocks your original 1500 DGB, giving you the 1000 DGB for your DigiDollars and returning the extra 500 DGB you locked as a safety cushion.

This process would be non-custodial, meaning no company or person holds your funds—you’re in control, and the blockchain’s rules ensure fairness.

Keeping the $1 Value with Oracles

To ensure 1 DigiDollar always equals $1, the proposal includes a decentralized oracle system. Oracles are like trusted messengers that would tell the blockchain the current price of DGB in US dollars. Here’s the plan:

• Multiple independent oracles (run by different people or groups) would check DGB’s price on exchanges like Binance or KuCoin.

• They would sign this price with a digital signature and send it to the DigiByte blockchain.

• The blockchain would pick the median price (the middle value) to avoid being fooled by a single wrong or fake price.

• This price would be updated frequently, so DigiDollar always knows how much DGB is needed to back or redeem DigiDollars.

By using many oracles and checking their signatures, DigiDollar would protect against anyone trying to cheat the system.

Why Would DigiDollar Be Decentralized?

Unlike Tether or USDC, where a company promises to hold dollars in a bank, DigiDollar would be backed by DGB locked on the blockchain. This means:

• No single point of failure: No company could freeze your DigiDollars or go bankrupt.

• Transparency: Anyone could check the blockchain to see the locked DGB backing every DigiDollar.

• Trust in code: The DigiByte blockchain’s rules, not a corporation, would guarantee you can redeem your DigiDollars for $1 worth of DGB.

This decentralization aligns with DigiByte’s mission of being a secure, community-driven network. However, achieving this depends on successfully building and launching DigiDollar, which is still in the works.

Potential Benefits of DigiDollar

If DigiDollar becomes reality, it could bring some exciting perks to the DigiByte ecosystem:

1. Stable Payments: Merchants could accept DigiDollars without worrying about price drops, making DigiByte better for real-world use.

2. DeFi Potential: Developers could build apps like lending platforms or exchanges using DigiDollar as a stable currency.

3. Hedging Volatility: If you think DGB’s price might fall, you could lock it to create DigiDollars, keeping your value safe in dollar terms without selling your DGB.

4. No Middleman Risk: You wouldn’t have to trust a company to hold your money—your funds would be secured by the blockchain.

How Would You Use DigiDollar?

The DigiDollar proposal plans to integrate it into the DigiByte Core wallet (version 8.22.0 or higher), making it easy to use if launched. Here’s what the wallet might look like:

• Dashboard: Would show your DigiDollar balance, locked DGB, and the current DGB price.

• Mint Button: Would let you lock DGB to create DigiDollars with a simple form.

• Send/Receive: You could send DigiDollars to others or receive them, just like DGB, with warnings if you’re sending to someone who might not support DigiDollar.

• Redeem Button: Would allow you to return DigiDollars and unlock your DGB.

The wallet would hide the technical details, so it feels as simple as using a banking app, but you’d be interacting directly with the blockchain.

Reference

https://github.com/orgs/DigiByte-Core/discussions/319