Coinbase asked the developers to work on an inflation-tracking stablecoin that can serve as a hedge for bad monetary policy decisions by the central bank.
Cryptocurrency exchange Coinbase has been working on some key projects and one of them includes inflation-pegged flat coins that will be built on top of its recently launched Layer-2 network foundation.
Coinbase views flatcoins as one of four critical innovations in the future of cryptocurrency. The other three projects include on-chain limit order book (LOB) exchange, an on-chain reputation system, and tools that make the DeFi ecosystem more secure.
Last month, cryptocurrency exchange Coinbase launched the Base Network, a network protected by Ethereum and powered by Optimism, a Layer 2 network. Last week, Coinbase discussed the above four areas that they would like developers to work on.
Are you a builder with a passion for growing the on-chain economy, but looking for where to start?
We just posted a request for builders: four areas we’d love to see builders explore in Base (with funding from the Base Ecosystem Fund) 🧵https://t.co/XSSdPnusyc
—Base (@BuildOnBase) March 24, 2023
One of the interesting concepts presented was, in fact, the development of inflation-linked flat currencies. Amid the ongoing banking crisis, Coinbase said it is more important than ever to build a stablecoin that tracks inflation and can serve as a hedge for poor central bank monetary policy decisions. The Coinbase Report grades:
“[We] They are particularly interested in ‘flatcoins’: stablecoins that track the rate of inflation, allowing users to have stability in purchasing power and, at the same time, resistance to economic uncertainty caused by the legacy financial system.”
Unlike other stablecoins pegged to a benchmark asset like the US dollar, flatcoins will be pegged to the “price of life” which tracks consumer price index and inflation data.
Coinbase said it is open to other ideas as well, such as something in between fiat-pegged stablecoins and volatile cryptocurrencies. Veteran investors like Ray Dalio have also extended their support for such a stablecoin. Dalio wants to see an “inflation-linked” currency, thus ensuring that consumers can secure their purchasing power.
Other Areas Coinbase Wants Developers To Focus On
Coinbase has also asked developers to focus on developing the on-chain reputation system. The crypto exchange believes it will play a “critical role” in establishing “on-chain trust” among users.
A reputation protocol will have a credit score or rank-like system that will ensure that certain criteria are met each time an on-chain identity interacts with a DeFi application. Coinbase noted:
“This might look like a FICO or Google page rank type score on ENS names, merchant ratings/reviews, and other measures that help build trust in the chain.”
Coinbase added that these reputation protocols should not compromise user privacy and autonomy.
The third area of focus for developers would be an on-chain limited order book exchange. This will be an “advanced exchange” as it would be able to carry out normal trades and eliminate counterparty risks through self-custody. Limit orders allow users to buy or sell the asset with a maximum price restriction.
By taking this on-chain, Coinbase believes it would give professional traders and institutions a new trading venue to execute their trading strategies. Coinbase added that “the high performance of Base opens up significant new opportunities to design new mechanisms for spot trading, limit orders, options, perpetuals, and more. And, builders can use open source tools like OP Stack to build L3 that give them even more speed and control, potentially allowing for even deeper liquidity, still accessible via L2.”
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Bhushan is a FinTech enthusiast and has a good knack for understanding financial markets. His interest in economics and finance draws his attention to the new emerging markets of Blockchain technology and cryptocurrencies. He is continuously in a learning process and stays motivated by sharing the knowledge he has acquired. In his spare time, he reads thrillers and sometimes explores his culinary skills.