Blockchain tech agency Laguna Labs has launched a testnet for its in-development “flatcoin” — a spin-off of stablecoin tokens — pegged to the price of residing reasonably than a fiat forex or a commodity.
In an Oct. 24 announcement, Laguna Labs mentioned that the Nuon flatcoin is in contrast to tokens tied to fiat currencies, akin to the US greenback, as it’s pegged to the price of residing through “each day unbiased, genuine, and on-chain inflation knowledge.”
The agency mentioned the thought is impressed by discussions and Twitter threads from huge gamers within the house, akin to Coinbase CEO Brian Armstrong, ex-Coinbase CTO Balaji S. Srinivasan and Ethereum co-founder Vitalik Buterin, who all name for other ways to peg an asset in order that it maintains its buying energy over time.
Nevertheless, whereas the idea of an inflation-linked crypto token shouldn’t be new, it stays comparatively untested.
In April, Frax Finance launched a client value index-tracking (CPI) stablecoin referred to as the Frax Value Index (FPI) that makes use of oracle knowledge from ChainLink.
Launching at round $1.02, the value hit an all-time excessive of $1.18 on July 19 however is down 10.6% since then to $1.05. Given the asset is lower than a 12 months outdated, it’s onerous to guage its success in beating out inflation charges till extra time has handed.
The Volt Protocol (VALT) token additionally follows the CPI-tracking route, however its value historical past is tough to return by as platforms akin to CoinMarketCap and CoinGecko should not actively monitoring the asset. It isn’t listed on any main exchanges like Binance and Coinbase.
There’s additionally the aptly named Inflation Hedging Coin (IHC), launched in October 2021, which makes use of a burning mechanism “based mostly on the annual United States inflation knowledge” and month-to-month CPI price to find out the asset’s burn price and, in concept, improve its worth over time.
Nevertheless, an individual snapping up IHC a 12 months in the past will see the worth of their holdings fall as a lot as 96.4% as of at present, in accordance with knowledge from CoinGecko, with IHC priced at $0.00009529 on the time of writing.
The Nuon white paper states that it makes use of an unbiased inflation index oracle to calculate the Nuon peg each day and makes use of “over-collateralization and arbitrage to take care of the peg whereas offsetting inflation.”
It additionally claims that the asset’s over-collateralization will cease it from falling from its peg. Nevertheless, it’s unclear how nicely that concept holds up if the worth of the collateralized belongings had been to tank considerably.
Particulars are sparse on the testnet, however the agency states that folks can now use the testnet to check out the Nuon flatcoin’s minting mechanism.
Associated: UK inflation price hits 10.1%, British Bitcoin neighborhood responds
Annual U.S. Inflation charges have surged dramatically because the starting of the COVID-19 pandemic, going from 1.4% to round 8.2% in 2022 in accordance to U.S. Inflation Calculator.
As such, the buying energy of the USD has taken a big hit with the final value of products and providers persevering with to extend.
Crypto, and notably stablecoins have additionally been an vital instrument for residents in international locations coping with vital inflation and financial hassle.
