Crypto Flatcoins and why they are better than normal stablecoins

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In essence, flatcoins are stablecoins. However, instead of following the price of an asset, like gold or the US dollar, flatcoins are pegged to the cost of living. Therefore, when the cost of living increases, the valuation of the coin also increases. As such, the purchasing power of these coins remains constant or flat.

Inflation has been a real threat to financial markets this year. Whenever stock or crypto prices gain an iota of momentum, the US Federal Reserve releases new Consumer Price Index data showing steadily rising inflation. Then the Fed is forced to prop up interest rates to fight rising prices. And whenever that happens, cryptos usually take a big drop. However, there is a new type of stablecoin in town. It’s called the flatcoin and could be the answer to runaway inflation.

But what is a flatcoin and how does it work? Follow us to find out.

What are flatcoins?

In essence, flatcoins are stablecoins. However, instead of following the price of an asset, like gold or the US dollar, flatcoins are pegged to the cost of living. Therefore, when the cost of living increases, the valuation of the coin also increases. As such, the purchasing power of these coins remains constant or flat.

Therefore, if you are able to buy a cup of coffee for 1 flatcoin today, you should also be able to buy the same cup of coffee for 1 flatcoin 10 years later. This is because a flatcoin is supposed to increase in value with the rate of inflation. As such, the depreciating effect of inflation is lost on flatcoins.

Say hello to Nuon, the very first flatcoin

On October 24, blockchain development firm Laguna Labs launched the testnet for the first-ever flatcoin, Nuon. It is an oversized flatcoin pegged to the value of $1 on July 1, 2022. The Nuons algorithm monitors inflation and continuously adjusts the coin’s valuation based on data from an oracle network known as of Truffle.

Truflation is a decentralized oracle network that uses millions of actual market prices to calculate the current inflation rate. Therefore, if the project were underway today, Nuon would be worth much more than its July 1 valuation of $1. If the value of Nuon rises or falls below its target, the algorithm creates arbitrage opportunities for traders, who then keep the token at its level. ankle.

Will Nuon replace other stablecoins?

Although Nuon is a type of stablecoin, its creators do not intend to compete with Tether (USDT) or USD Coin (USDC). Instead, the coin is meant to be an inflation hedge, like Bitcoin, but minus the volatility issues.

We try to blend the best of both worlds where we take the user experience from the stablecoin market and hedge against bitcoin inflation, said Laguna Labs CEO Stefan Rust.

When will we see Nuon on the market?

According to its whitepaper, the Nuon mainnet is expected to go live in the fourth quarter of 2022. However, for now, Nuon only has its live testnet (Ju), where users can connect their wallet and try installing mint. Perhaps, if all goes well, Laguna Labs will launch flatcoin in the first half of 2023, according to a Blockworks post.

Conclusion

The concept of flatcoins has been discussed positively by several crypto experts, including ex-CTO of Coinbase, Balaji S Srinivasan, co-founder of Ethereum, Vitalik Buterin and founder of Coinbase, Brian Armstrong. As such, flatcoins show real potential as a concept. However, it remains to be seen whether they are able to beat inflation or fall to $0 like their algorithmic counterpart, TerraUSD (UST).

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