- Most stablecoins are tied to the US dollar (USD) or another fiat currency.
- The “price of living” may serve as a backing for Coinbase’s flatcoins.
Companies have continued to develop despite widespread regulatory monitoring. A leading cryptocurrency exchange, Coinbase, is investigating “flatcoins” on its Base network. Inflation-pegged stablecoins, or “flatcoins,” were recently disclosed by Coinbase to be necessary for development on the Base network. This is one of three important breakthroughs the company plans to implement on its layer-2 network.
The new exchange activity is being seen as strange since most stablecoins are tied to the US dollar (USD) or another fiat currency. The “price of living” may serve as a backing for Coinbase’s flatcoins. The CPI and other measures of inflation will be monitored to ensure this is the case.
Inflation Tracking Stablecoin
There was a lot of buzz around the debut of the Base network. The first phase of the layer-2 network is to issue a flatcoin tied to inflation. According to Coinbase, developing an inflation-tracking stablecoin that challenges central banks’ erroneous monetary policy choices is the need of the hour, in light of the present financial crisis.
“[We] are particularly interested in ‘flatcoins’ — stablecoins that track the rate of inflation, enabling users to have stability in purchasing power while also having resiliency from the economic uncertainty caused by the legacy financial system.”
In addition, since their value would be pegged to inflation, these holdings would be safe investments. Because of the uncertainty of the local currency, this feature is especially helpful in countries or jurisdictions with significant inflation rates.
Developers are encouraged to create not just flatcoins, but also an on-chain reputation system and an on-chain limit order book (LOB) exchange. Tools to increase the safety of the DeFi environment have also been sought.
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