Coinbase Working on ‘flatcoins’ that will be Tethered to Inflation

Photo by PiggyBank on Unsplash

Trade in cryptocurrencies Coinbase has been hard at work on a number of important projects, one of which is the development of inflation-pegged flatcoins that will be built on its recently released Layer-2 network Base.

Flat coins are one of the four most important developments that Coinbase believes (1) will shape the future of cryptocurrency. The other three initiatives are

  1. an on-chain reputation system,
  2. an on-chain limit order book (LOB) exchange, and
  3. tools that make the DeFi ecosystem safer.

The cryptocurrency exchange Coinbase introduced the Base Network one month ago. The Base Network is a network that is secured by Ethereum and powered by Optimist, another layer-2 network.

The previous week, Coinbase discussed the four areas above as places where they would prefer some work to be done by developers.

The creation of inflation-pegged flatcoins was one of the fascinating ideas discussed throughout the event.

Coinbase has stated that it is more crucial than it has ever been to develop an inflation-tracking stablecoin that can act as a hedge against the poor monetary policy decisions made by the central bank in light of the current banking crisis that is still occurring. According to the report provided by Coinbase:

“[We] are particularly interested in ‘flatcoins,’ which are stablecoins that track the rate of inflation. This enables users to have stability in their purchasing power while also having resilience against the market instability caused by the heritage financial system.”

A “price of living” that records the CPI and inflation data will be used to peg flatcoins, in contrast to other stablecoins that are pegged to a benchmark asset such as the U.S. Dollar.

 

Coinbase has stated that it is open to other ideas as well, including the possibility of introducing something that would act as an intermediate between fiat-pegged stablecoins & unstable cryptocurrencies.

The support of seasoned investors such as Ray Dalio has also been extended to such a stablecoin recently. Dalio advocates for the creation of an “inflation-linked” coin, which would allow people to maintain their purchasing power over time.

 

Other Key Areas That Coinbase Would Like Developers to Concentrate On

Moreover, Coinbase has requested that developers prioritize the construction of an on-chain reputation system.

The cryptocurrency exchange is confident that it will play a “critical role” in establishing “on-chain trust” between users.

When an on-chain identity interacts with a DeFi application, a reputational protocol will have a credit rating or a rank-like mechanism that will verify that specific requirements are met. This will be done in order to protect the integrity of the blockchain. Coinbase mentioned that:

“This could appear like a FICO / Google page rank style rating on ENS names, ratings/reviews for retailers, and other metrics that help create trust on-chain.”

Coinbase noted that these reputational protocols must not infringe upon the users’ right to autonomy and privacy.

The creation of an on-chain stop order book exchange would be the third area of concentration for developers. This will be considered an “advanced exchange” since it will be able to carry out standard activities while simultaneously removing counter-party concerns through self-custody.

Users can buy or sell an item with a cap placed on the highest possible price using limit orders.

Coinbase believes that taking this on-chain would provide professional investors and corporations with a new trading environment in which they could put their trading methods into action.

Coinbase stated in an additional statement that “the high throughput of Base opens up considerable new opportunities for developing novel methods for spot trading, limit orders, options, perpetuals, and more.”

And builders can leverage open source tooling like OP Stack to construct L3s that provide them even more speed and control, perhaps enabling even deeper liquidity, while still making it available through L2.”

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