DeFi
A cryptocurrency linked to a price of residing index is now obtainable to pick customers on Ethereum scaling answer Arbitrum.
DeFi protocol Nuon introduced in a weblog submit that it could be progressively rolling out its NUON flatcoin over the course of a month-long trial.
As soon as operations are confirmed to run easily, the cryptocurrency might be obtainable to all customers for permissionless minting by way of added collateral.
The protocol has chosen this “guarded launch” strategy to reduce monetary dangers and repercussions.
“The guarded launch implies that the WebApp might be alternating between Open and Closed states in order to higher handle and management the launch and protest person’s funds,” the corporate mentioned in a weblog submit.
What’s a flatcoin?
Flatcoins function equally to stablecoins, however fairly than being pegged to the worth of an asset — such because the US greenback or gold — it’s pegged to an impartial measure of the price of residing and its buying energy stays “flat.”
The idea of this sort of cryptocurrency is just not fully new. It has been mentioned by the likes of Brian Armstrong and Vitalik Buterin, who famous in a podcast in August final 12 months that “there’s worth in having some form of cryptoasset that’s deliberately designed to be as steady as potential.”
Within the case of Nuon, its flatcoin is designed to hedge in opposition to inflation by recalibrating its day by day worth to account for the rising value of residing, utilizing the Truflation Index as an oracle.
Stability and design
Nuon maintained its peg via what the crew calls a “triple redundancy mechanism” the place the protocol incentivizes customers to “mint or burn NUON.”
If the worth goes above the peg, the liquidation ratio drops, creating an incentive for customers to mint extra and promote the token. Then again, when the worth of the token dips, the liquidation ratio will increase, urging customers to extend collateral or burn NUON to take care of secure collateral.
Meaning minters must have a cause to threat their collateral and watch the liquidation ratio carefully.
Nuon CEO Stefan Rust acknowledges the chance however stays optimistic.
“Our imaginative and prescient for Nuon — inflation-proof cash — is formidable to say the least,” Rust mentioned.
The mechanics differ from the failed Terra USD design in that NUON is barely minted from collateral. In idea, that ought to put a buffer for the arbitrage mechanism to maintain the peg.
Simply as decentralized protocols are the reply to dangers posed by centralized currencies, and over-collateralization is the reply to sustaining worth within the face of market instability, inflation-proof flatcoins are the answer to preserving worth over time.”
