Flatcoins are emerging as potential competitors to stablecoins and are considered a possible solution to the rising inflation rates hitting various countries.
This new sub-category of stablecoins is characterized by low volatility, resistance to inflation, and decentralized money pegged to the cost of living rather than real-world assets like fiat currencies or gold. Several blockchain developers have begun creating digital assets in this new category, with Nuon and SPOT being notable examples.
Flatcoins emerge as potential competitors to stablecoins
Many people in the industry view flatcoins as a potential remedy for high global inflation rates, believing that these digital assets could function as legitimate cryptocurrencies for hedging against inflation.
People involved in these initiatives argue that the rationale behind creating flatcoins is rooted in the fact that traditional fiat currencies provide stability in the short term but lose value due to inflation, are vulnerable to censorship, and are directly impacted by the fortunes of sovereign states.
Fiat-pegged stablecoins such as Tether’s USDT or Circle’s USDC are only as stable as the underlying currency, typically the US dollar. The buying power of fiat has decreased substantially over the years, impacting pegged stablecoins and diminishing their ability to maintain their purchasing power.
Similarly, assets like Gold or Bitcoin are highly resilient, immune to censorship, and limited in supply, but their supply cannot be arbitrarily expanded, leading to price inflation. As a result, they are not sufficiently stable for transactions, giving rise to a new category of digital assets that claim to blend some of the most desirable characteristics of these currencies.
Coinbase CEO Brian Armstrong is bullish on flatcoins
Many supporters and specialists also argue that flatcoins could replace stablecoins because they remain stable and resistant to inflation without depending on bailouts. Brian Armstrong, the CEO of Coinbase, is among the proponents of Flatcoins. He believes that having a flatcoin that retains its purchasing power is a crucial innovation for the global economy.
Armstrong specifically highlighted the Ampleforth Foundation, a group actively working on its own flat coin. They are developing SPOT Protocol, a decentralized low-volatility commodity money garnering increasing attention in the industry.
Meanwhile, AMPL, the native token of Ampleforth, acts as the backing for SPOT and features resistance to inflation due to a sophisticated design that involves restructuring AMPL’s volatility. This volatility is divided between two derivatives: SPOT (low volatility) and stAMPL (high volatility).
In September 2023, during an interview with Yahoo Finance, Brian Armstrong, the CEO of Coinbase, stated that flatcoins are seen as the next generation of stablecoin. He elaborated that this concept represents a more advanced form of currency in the crypto sphere than existing cryptocurrencies and stablecoins.
The same year, Armstrong identified the idea of flatcoins as one of the ten crypto concepts he was particularly excited about, hinting that the company’s venture investments might explore similar initiatives.
Most recently, Coinbase Ventures, the corporate venture capital arm of the cryptocurrency exchange Coinbase, revealed its involvement in a strategic funding round for Ampleforth Foundation’s SPOT, with a $1 million investment.
This demonstrates that the cryptocurrency Brian Armstrong-led company holds an optimistic perspective on the Flatcoin ecosystem.
