Understanding Flat Coin

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Hi guys! How are you all...I trust you're keeping well. Welcome to my blog once again. I do not need to tell you again that am always super glad each time you come around....

Today we would be looking at yet another topic centered on Asset Stability in the crypto world. We would precisely be looking at what we call the Flat Coin. Am very sure many of us here are not really familiar with what this is.

But do not worry I would do my best to bring you into this knowledge in a very simplified and comprehensive manner. So guys let's journey together.

Introduction

The Crypto world has so many innovative stuffs, although some of these innovations are not fully blown but they are sure doing well, we can only hope we see a steady improvement in them. One of these innovation is the stable coin, which aims to stabilize the price of crypto asset by pegging it to an underlying asset like gold.

But our focus is on a concept called Flatcoin which works similarly to a stable coin but then they both have their striking differences which we would of course be exploring in this post. Let's get to know what Flatcoins are, how they work and how it's different from the stable coins.

What is Flat Coin?

Flatcoins are cryptocurrencies that has it value pegged to the cost of living instead of the the usual fiat or commodity like that of a stable coin. The goal of flat coin it to maintain a steady and constant purchasing power. Hence the name flat.

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The First notable flat coin is called Nuon which uses an unusual algorithm that tracks inflation via Truflation. Truflation is a oracle network. I hope you know what an Oracle does. Well oracle is a technology that helps a blockchain networks get information from the realm outside it, it's like a link or bridge between the blockchain world and the outside world.

Truflation is used to track the prices of the goods we have in the real world and the information gotten from it can help gauge what the standard of living is like, if it's changing positively or negatively, I mean increase or decrease. This then helps the algorithm adjust the coin supply in such a way that it maintains the $1 peg it has been designed to function with.

Flatcoins seem to have an edge over stable coin in that stablecoins seem to be affected when inflation hits the underlying assets it's pegged to. The price obviously becomes unstable and fluctuates and this is the very problem flatcoin aims to proffer solution to by maintaining a flat value against inflation.

How Does flat coin maintain their peg

There are quite a number of ways to peg the value of a flat coin but my focus will be just on one. The common ways are Basket of asset approach, smart contracts and the Seigniorage approach. My focus will be on the basket of asset approach which seems to tbe the most common one amongst them all.

Basket of Assets : In this approach, what the developers do is that they draw their facts and figures from the Truflation tool which of course gives them the cost of living index or consumer price index which in turn helps them gauge the changes in the economic state and standard of living.

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Here is where the basket approach comes in, the basket of asset is used to collaterize the flat coin. Another important thing is that the asset selected must be a liquid kind of asset, that is, it should be the kind that can be easily bought and sold, if not, it would be difficult to maintain a stable value. In additional, the assets in the basket must be the kind with low risk because the riskier the asset, the more tendency for it to be volatile.

Now the bottom line is that for a flatcoin to be pegged, there need to be a check on the value of the coin. If it rises above $1 which is suppose to be the base value, more coin would have to be minted and sold to bring it down to the pegged amount and when it goes below $1, they would have to be bought and burned to maintain the pegged value.

But let's not forget that all of these measure are from the information gotten from the Truflation oracle which in is supposed to give us the accurte view of the cost of living and consumption price index.

Bottom Line

I believe by now you know what Flat coins are and how they function, I would really love to delve more deeper, but it think it's wisdom to keep it simple and comprehensive, I just hope in my next post, am able to bring you more value.

I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.

Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!

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^{Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.}

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Regards
@lhorgic♥️

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