Spatial Arbitrage – Louth Online Tue, 22 Nov 2022 18:26:22 +0000 en-US hourly 1 Spatial Arbitrage – Louth Online 32 32 Inflation-linked ‘flatcoin’ launches testnet to track cost of living Tue, 25 Oct 2022 07:00:00 +0000

Blockchain tech firm Laguna Labs has launched a testnet for its developing “flatcoin” — a stablecoin spin-off — pegged to the cost of living rather than a fiat currency or commodity.

In an October 24 announcement, Laguna Labs said the Nuon flatcoin is different from tokens linked to fiat currencies, like the US dollar, because it is pegged to the cost of living via “unbiased, authentic, on-chain daily inflation “. The data.”

The firm said the idea is inspired by discussions and Twitter feeds from big players in the space, such as Coinbase CEO Brian Armstrong, former Coinbase CTO Balaji S. Srinivasan, and co-founder of Coinbase. ‘Ethereum Vitalik Buterin, all of which call for alternative ways to peg. an asset to maintain purchasing power over time.

However, while the concept of an inflation-linked crypto token is not new, it remains relatively untested.

In April, Frax Finance launched a consumer price index (CPI) tracking stablecoin called the Frax Price Index (FPI) which uses oracle data from ChainLink.

Launched at around $1.02, the price hit an all-time high of $1.18 on July 19, but has since fallen 10.6% to $1.05. Since the asset is less than a year old, it’s hard to judge its success in beating inflation rates until more time has passed.

The Volt Protocol (VALT) token also follows the IPC tracking route, but its price history is difficult to obtain as platforms such as CoinMarketCap and CoinGecko do not actively track the asset. It is not listed on any major exchange like Binance and Coinbase.

There’s also the aptly named Inflation Hedging Coin (IHC), launched in October 2021, which uses a burning mechanism “based on annual US inflation data” and the monthly CPI rate to determine the burn rate of the asset and, in theory, increase its value over time.

However, someone acquiring IHC a year ago will see their holdings drop in value by up to 96.4% to date, according to data from CoinGecko, with IHC priced at $0.00009529 at the time of writing.

Nuon’s white paper says it uses an independent inflation index oracle to calculate Nuon’s peg daily and uses “over-collateralization and arbitrage to maintain peg while compensating for inflation.”

He also claims that oversizing the asset will prevent it from falling off its peg. However, it is unclear to what extent this theory holds if the value of the secured assets were to drop significantly.

Details are scarce on the testnet, but the company says people can now use the testnet to try out the Nuon flatcoin minting mechanism.

Related: UK Inflation Rate Hits 10.1%, British Bitcoin Community Responds

Annual inflation rates in the United States have increased significantly since the onset of the COVID-19 pandemic, rising from 1.4% to around 8.2% in 2022 according to the US Inflation Calculator.

As such, the purchasing power of the USD has taken a significant hit with the general price of goods and services continuing to rise.

Crypto, and especially stablecoins, have also been an important tool for citizens of countries facing high inflation and economic hardship.