Coinbase asked developers to work on an inflation-tracking stablecoin that can serve as a hedge to the poor monetary policy decisions of the central bank.
Crypto exchange Coinbase has been working on some key projects and one of them includes inflation-pegged flatcoins to be built over its recently launched Layer-2 network Base.
Coinbase sees flatcoins as one of the four critical innovations in the future of crypto. The other three projects include on-chain limit order book (LOB) exchange, an on-chain reputation system, and tools that make DeFi ecosystem safer.
Last month, crypto exchange Coinbase launched the Base Network, a network secured by Ethereum and powered by fellow layer-2 network Optimism. Last week, Coinbase spoke of the above four areas where they would like developers to do some work.
Are you a builder passionate about making the onchain economy grow, but looking for where to start?
We just published a Request for Builders: four areas we’d love to see builders explore on Base (with funding from the Base Ecosystem Fund) 🧵https://t.co/XSSdPnusyc
— Base (@BuildOnBase) March 24, 2023
One of the interesting concepts presented was indeed the development of inflation-pegged flatcoins. Amid the ongoing banking crisis, Coinbase said that it’s more important than ever before to build an inflation-tracking stablecoin that can serve as a hedge to the poor monetary policy decisions of the central bank. The report from Coinbase notes:
“[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.”
Unlike other stablecoins pegged to a reference asset such as the U.S. Dollar, the pegging of flatcoins will be to the “price of living” that tracks the consumer price index and inflation data.
Coinbase said that it’s also open to other ideas such as something intermediary between fiat-pegged stablecoins and volatile cryptocurrencies. Veteran investors like Ray Dalio have also extended their support to such a stablecoin. Dalio wants to see an “inflation-linked” coin thereby ensuring that consumers can secure their buying power.
Other Areas Where Coinbase Wants Developers to Focus
Coinbase has also asked developers to focus on developing the on-chain reputation system. The crypto exchange believes that it will play a “critical role” in establishing “on-chain trust” between users.
A reputation protocol will have a credit score or a rank-like system that will ensure that certain criteria are met whenever an on-chain identity interacts with a DeFi application. Coinbase noted:
“This could look like a FICO or Google page rank type score on ENS names, ratings/reviews for merchants, and other measures that help build trust onchain.”
Coinbase added that these reputation protocols shouldn’t compromise user privacy and autonomy.
The third area of focus for developers would be an on-chain limit order book exchange. This will be an “advanced exchange” as it could carry out normal operations while eliminating counter-party risks via self-custody. Limit orders allow users to buy or sell the asset with a restriction on the maximum price.
By taking this on-chain, Coinbase believes that it would give professional traders and institutions a new trading venue for executing their trading strategies. Coinbase added that “the high throughput of Base opens up significant new opportunities for designing new mechanisms for spot trading, limit orders, options, perpetuals, and more. And, builders can use open source tooling like OP Stack to build L3s that give them even more speed and control, potentially enabling even deeper liquidity, still accessible through L2.”
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.