Inflation-Proof Stablecoins Call for Efforts by Coinbase‍

March 27, 2023

minute read

Developers working on Coinbase Global Inc.'s new blockchain were urged to concentrate on developing stablecoins that follow the inflation rate in order to maintain purchasing value.

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In a blog post on March 24, Coinbase stated that it is especially interested in these so-called "flatcoins," adding that given the current problems with the banking sector, investigating the possibilities of stablecoins is "more vital than ever."

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Stablecoins are meant to maintain a fixed value, usually $1, providing crypto investors with a location to store money while navigating the extremely volatile digital asset market. A layer of protection against inflation would meet the requirement for a buffer against increased post-pandemic price pressures.

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Last month, Coinbase released Base, such a layer-2 blockchain that seeks to speed up and reduce the cost of transactions on the well-known Ethereum network. It also disclosed the creation of a fund to aid Base projects in their first stages.

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Tether and USD Coin are two examples of stablecoins that are supported by physical assets like cash & bonds. An alternate strategy, TerraUSD, aimed to hold a $1 peg using algorithms and trading incentives, but it utterly failed, upsetting the crypto market and setting off a regulatory frenzy.

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In the blog article, Coinbase stated that it is open to "alternative forms of 'flatcoins,' which do not peg the fiat but rather bridge the gap between fiat tethered coins and unstable crypto assets."

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Also, Coinbase urges developers to concentrate on issues like increasing confidence in users' identities on blockchain systems and taking security precautions for decentralized financial applications.

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The Securities & Exchange Commission last week formally announced its intention to pursue an enforcement action in a letter it sent to the largest US cryptocurrency exchange. That was the most recent development in a protracted fight between the regulator and the industry for digital assets.

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