Ask HN: Is inflation-resistant stablecoin possible? | Hacker News Reader

Ask HN: Is inflation-resistant stablecoin possible?

2 pointssamuel2463 comments

In page 92 of Messari's 2023 Crypto Theses, there's a paragraph stated that “As reserve currencies continue to inflate away purchasing power, we need new currencies that maintain their purchasing power. I believe we’ll get an inflation-resistant stablecoin in my lifetime. And it will be glorious.”

My understanding is that the author believed that inflation-resistant stablecoin is possible and well needed, but isn't inflation-resistant stablecoin impossible?

If the supply drops, inflation happens, every currency that can be used in trading is affected, included crypto coins.

On the other hand, if a crypto coin is not being traded, it's possible that its price wouldn't be impacted by inflation, then why would anyone need a coin that can't be traded.

My question is, how can an inflation-resistant stablecoin can possibly be designed?

Apparently inflation is measured with a consumer price index, which represents some predefined basket of consumer goods.

One could define a coupon, that may be exchanged for said basket and it would be an inflation stable currency, right?

The obvious problem is that most of the goods are perishable. Most coupons that I can think of are only valid for fixed period of time. Also each nation has a different basket and inflation. The entity issuing such coupons doesn't really gain from them. Contents of the basket change over time...

But hey, maybe a CPI basket coin will be created and will be exchangable to a standard measure of inflation. Who knows.

Another example of a thought leader making outlandish claims that are technically infeasible.

Inflation resistant relative to what? Individual currencies and investments will have their own rates of inflation. Inflation is also usually measured after the fact via various proxies, how is that going to track for a stablecoin? Any mechanism for handling inflation resistance is also going to introduce another level of counterparty risk on top of the risk inherent from whatever governance is in place for it and the risk of whatever exchanges are used to trade it.

Backed by I bonds?

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