Background
Lately, there has been a lot of talk about the future inflation for US and many other countries.
Ray Dalio, Head of Bridgewater Associates which is the largest hedge fund, on coming inflation: Bridgewater Founder Ray Dalio Raises Inflation Concerns Over Federal Spending - WSJ
Larry Fink, BlackRock CEO on Inflation:
Also there has been some talks in the crypto community about stablecoins which are adjusted according to inflation to mitigate the drop in purchase power which is created due to inflation.
Proposal
I propose to add a new stablecoin, called flat UST or inflation adjusted UST, whose value is adjusted with the reported inflation on USD after every release of US CPI.
How it’s done
At the time of initiation, value of eash iaUST (inflation adjusted UST) will be equal to 1 UST. i.e., terra users can use mint 1 iaUST with burning 1 USD amount of Luna. Also they would be able to burn 1 iaUST and get an amount of Luna which is equal to 1 USD.
After the first period when the CPI of USA is reported the price is updated. Let’s say if we had 0.5% CPI inflation in a month, the price for minting 1 iaUST will be equaal to 1.005 USD and by burning 1 iaUSD, one can get 1.005 USD. and this price will be updated periodically based on the CPI reports for USD.
Why should it be implemented now?
Due to the rise of inflation in past months and coming days and drop of purchasing power of fiat, there will increased concerns among people. They will try to hedge inflation using various methods. Implementing an inflation adjusted algo-stablecoin will attract many users to the Terra ecosystem and increase demand for Luna which is used to mint this coins. this increase in demand and price of luna will also help with mitigating the risks and help with maintaining the peg between terra stablecoins and fiat.
Will be happy to hear your feedbacks!