There is no bank account, just the smart contract. It holds the Ether, OMG, or whatever other cryptocurrency you send to it when you buy Unum. There's a function on the contract to return the total reserve in USD, or you can check the actual values of the variables being used. Anything on a smart contract is public.

You're right that relatively few people have the technical skills to query a smart contract, but that relative few is still a LOT of people who can verify the reserves independently. Versus the almost 0 people who can audit Tether.

If you're interested in interacting with the smart contract (or any smart contract), you may want to install Mist. It's non-trivial to get started, I admit, and the tooling around smart contract is incredibly immature, but..man it's cool ;)

https://github.com/ethereum/mist/releases

It seems to me that your currency loses its peg the minute that the cryptocurrency price collapses.

The parent comment (empath75) sounds correct to me. If people deposit a bunch of cryptos, but cryptos are highly correlated in downward movement, and the general crypto market suffers, then this new crypto is no longer pegged to USD.

EDIT: looks like this is covered under "Reserve Deficit Sell Penalty". I don't really understand this part but regardless this won't be pegged to the dollar.

Stupid question - how do you peg your currency to the dollar if you're holding ETH, etc?

When you buy Unum, the smart contract looks up the price of ETH and gives you a dollar equivalent of Unum. So if you send in $400 worth of ETH, you get 400 Unum.

Then, a month from now, if you want to sell Unum and get ETH, maybe the price of ETH is $500. So you send in your 400 Unum, and get .8 ETH.

So isn't it possible that Unum becomes insolvent? Forgive me if there's an easy place to read up on this :)

In other words, you send in $400 of ETH for 400 Unum, and if the price of ETH goes down to $300 and they try to cash out all 400 Unum...?

Yes it is possible. That doesn't make it meritless.

You might equally say "isn't it possible that Tether could just print Tethers out of thin air"? And the answer would be "yes", but people still find utility in it.

I wasn't saying it was meritless, I'm just a big finance noob.

So basically Unum is trading "risk of value going down/up" for "risk of smart contract bank run"?

EDIT: Also, I'm really interested since this is the first smart contract use case that I've managed to understand. Which is good since I'm all-in on ETH :)

EDIT 2, for anyone reading this thread: here's the announcement thread, answers all the questions I had here: https://bitcointalk.org/index.php?topic=2473877.0

Compared to holding ETH, yes, that's the tradeoff.

Compared to holding USDT, the tradeoff is that Tether can't print themselves free USDT's, but you have a risk of a smart contract bank run.

But isn't this just a fractional reserves in this case?

How will you have the reserves to pay out everyone who wishes to cash out all of their Unum 1 month later if the price of ETH as dropped by 50%? Where will you have the funds to do so?

Edit: I see from your website you have a penalty in place for when your reserves drop below Unums in circulation - clever play! (https://unum.one/#!/learn#reserve-deficit-sell-penalty)

> Can I check your bank account to see if the amount is equal to the price*qty of your token?

People deposit BTC and ETH and other cryptos, and the smart contract uses the conversion rate between these and USD in order to gauge its reserve in USD.

Sounds risky but definitely sounds useful and like a step in the right direction!

You answered the question yourself below but you cannot peg a currency to another if you don't have the reserves, less with cryptocurrencies where you don't have a central bank who can rescue you. This is economy 101 not an opinion. Fractional reserves can work in fiat currencies but not in the cryptocurrency world. For more information you can check research about this topic: https://scholar.google.com.ar/scholar?hl=en&as_sdt=0%2C5&q=c...

It's a different set of tradeoffs compared to Tether.

You gain the risk of insolvency, but you lose the risk of corruption.

Are you saying this to the average "non-professional" investor? When people read about a cryptocurrency that represents fiat money they think about something simple and they assume you have the money to convert back and forth.

The first page clearly says "A decentralized cryptocurrency pegged the U.S. dollar". This message is a scam, plain scam, you don't need to bring the SEC to realized that. After reviewing all this thread I flagged the top comment.

I'm not saying it to any investor, I'm arguing it from a purely disinterested perspective.

I think it's a fascinating project.

That the SEC thinks risk of insolvency is more of a problem than risk of corruption is irrelevant.

words have meaning. "pegged" is a wrong and highly misleading term because it implies a level of safety that is not there. Whether it's fraudulently so is indeed a question for the courts and the SEC.

Not even central banks can provide the guarantee you’re looking for - they can only print money to devalue their currency, but they can’t make it appreciate [1]!

[1] https://en.m.wikipedia.org/wiki/Black_Wednesday