Could flatcoins replace stablecoins in the crypto market?

Are stablecoins USD's revival route Expert takeAre stablecoins USD's revival route Expert take

In this post:

  • Coinbase CEO Brian Armstrong describes flatcoin as the potential replacement for stablecoins
  • SPOT Flatcoin, created by Ampleforth and backed by Coinbase Ventures, recently launched on Ethereum and Base.
  • Stablecoin remains popular despite non-resistance to inflation with over 100 million addresses holding these assets.

An emerging form of crypto asset called flatcoins could one day replace stablecoins. Coinbase CEO Brian Armstrong said this in a post on X while endorsing the decentralized flatcoin SPOT protocol.

Also Read: TRON to enable gas-free stablecoin transfers in Q4 2024

SPOT is a flatcoin described as low-volatility commodity money that is decentralized and inflation-resistant. It is a commodity like gold or BTC but can be used for everyday transactions like stablecoins.

What are Flatcoins?

According to Armstrong, flatcoins is an important innovation and a good alternative to stablecoins, which suffer from inflation. Flatcoins are designed to maintain their purchasing power through various methods such as tracking the consumer price index (CPI), making them inflation-resistant.

He said:

“Stablecoins are great, but they also suffer from inflation. Having a medium of exchange that doesn’t suffer from inflation is an important update to the financial system.”

Armstrong’s comments are not surprising, given that Coinbase Ventures is one of the major investors in the SPOT protocol. The exchange’s venture arm invested $1 million in a strategic funding round for the protocol, which has already launched on Ethereum and Base.

Also Read: Russia to legalize stablecoins for international transactions

SPOT is the product of Fragments, the developer behind the DeFi platform Ampleforth. The Ampleforth native token AMPL serves as its collateral, and it is inflation-resistant through a complex design that involves reorganizing AMPL’s volatility. The volatility is shared between two derivatives: SPOT (low volatility) and stAMPL (high volatility).

As the project documentation explains, the core idea is for volatility to shift from SPOT to stAMPL so that SPOT maintains stability.

“AMPL is a decentralized unit of account, meaning that it is price-stable but supply-volatile. To achieve price stability, the AMPL Protocol targets a CPI-adjusted US dollar, making AMPL truly inflation-resistant and suitable for creating new derivatives like SPOT.”

Meanwhile, SPOT is not the first flatcoin to exist. Several other projects, including Nuon, International Stable Currency, and LendrUSD, have also being creating flatcoins. However, the asset class is still in its nascent stage.

Stablecoins rising popularity

While flatcoins might be pretty innovative, stablecoins remain one of the most popular use cases of crypto technology. Stablecoins are digital assets designed to remain stable and maintain a steady value relative to US Dollars. They are quite popular in emerging markets like Argentina, which heavily rely on them to hedge against their struggling national currency and are increasingly being used for payments.

Stablecoins market Cap
Stablecoins’ Total Market Capitalization (Source: DeFIllama)

Due to this high adoption rate, technological giants like Visa and PayPal have introduced different products designed to tap into the sector. Interestingly, reports revealed that Tether’s USDT, the foremost stablecoin, has a higher trading volume than those of major crypto assets like Bitcoin and Ethereum combined.

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Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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