Last month, US-listed crypto exchange Coinbase revealed plans to support the creation of flatcoins on its recently launched layer-2 network called Base.
Flatcoins are inflation-pegged stablecoins that negate the negative effect of price rises on the purchasing power of the currency they track, thereby helping to preserve and grow an investor’s wealth regardless of prevailing market conditions.
The tokens will enable users to “have stability in purchasing power while also having resiliency from the economic uncertainty caused by the legacy financial system,” the release said.
“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,” Coinbase said in its statement.
Stablecoins are crypto tokens that derive their value from another asset. Flatcoins are hypothetical stablecoins that would keep pace with the rate of inflation, rather than fiat currencies like the US dollar or the euro or precious metals like gold or silver.
Inflation surged to four-decade highs last year amid supply-chain disruptions caused by COVID-19 and as Russia’s invasion of Ukraine squeezed commodity markets.
The Federal Reserve responded by aggressively raising interest rates – which has cratered the value of stocks, bonds, and cryptocurrencies as well as fueling the collapse of high-profile companies like SVB and FTX.
Bridgewater Associates founder Ray Dalio – who’s slammed other cryptocurrencies like bitcoin in the past – is one big name who’s previously backed the idea of a flatcoin, which he’s suggested as an alternative to bonds that pay out a yield in line with inflation.
“I think that what would really be best is an inflation-linked coin,” the billionaire investor told CNBC’s “Squawk Box” last month.
“The closest thing to that is an inflation index bond, but if you created a coin that says OK this is buying power that I know I can save in and put my money in over a period of time and transact in anywhere, I think that would be a good coin,” Dalio added.
As well as building flatcoins, Coinbase’s priorities for its Base network are to develop blockchain-based reputation and limited order book systems and to build tools that make the decentralized finance (DeFi) space safer, the exchange said in its Friday blog post
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