• The post-COVID-19 era has sparked interest in flatcoins, a close “cousin” of stablecoins designed to mitigate inflation risk.
• Flatcoins are indexes of the buying power of a fiat currency obtained through oracles that collect data on economic indicators such as the Consumer Price Index (CPI).
• Flatcoins will not be better than stablecoins or fiat currencies as mediums of exchange and units of account because their existence depends on the superiority of those options.
The Need for Flatcoins
The post-COVID-19 era has brought the issue of inflation to the forefront, leading to increasing interest within the Web3 space for creating flatcoins, a close “cousin” of stablecoins designed to mitigate inflation risk.
Conceptual Problems with Flatcoin Design
Examining the potential use cases of flatcoins is indeed crucial. While often presented as an asset that can help users preserve their purchasing power amid inflation and economic uncertainty, this idea could be misleading. Stablecoins are digitized versions of fiat currencies, and their value as a medium of exchange and unit of account is the same as that of fiat currencies. In contrast, flatcoins are indexes of the buying power of a fiat currency obtained through oracles that collect data on economic indicators such as the Consumer Price Index (CPI). As a result, the unit value of flatcoins will diverge from the fiat currency they track over time as long as inflation is not zero. Therefore, there will not be a situation where flatcoins are better than stablecoins or fiat currencies as mediums of exchange and units of account because their existence hinges on these existing options being superior.
Flatcoin Token Economics Design
To date, some existing flatcoin white papers — including Coinbase’s offering — do not appear to deliver on their envisioned promise in their current state. In particular, token economics designs may pose an even higher risk than contemporary stablecoin designs.
Flatcoin Distribution Models
In order for flatcoins to reduce market volatility and provide greater stability than traditional money systems, developers must create balanced distribution models that ensure supply remains consistent with demand while also adequately incentivizing holders so they don’t just dump tokens onto exchanges when troubled times arrive. This could include implementing staking rewards from fees generated by transactions carried out using flat coins but also requires great care when setting parameters like minting/burning rates so markets remain orderly during periods when demand fluctuates drastically due to macroeconomic conditions or other factors outside its control..
Conclusion
The success for many proposed projects hinges upon developers delivering on promises made in white papers and finding ways to balance parameters so incentives align with holders’ best interests over time instead of short term gains only . Ultimately , it is up to them if they can find ways around these issues , but until then we must remain skeptical about how well they really perform compared against traditional money systems .