Deep Dive into Flatcoin (ISC)
As inflation rates go to the moon, so-called “Flatcoins” are coming along for the ride.
With inflation, the cash we have continues to lose its value day by day. This situation can become more difficult, especially if you live in countries that cannot fight inflation well. Let's move on to our content.
I live in Turkey. The annual inflation rate in Turkey is 64%. As you can imagine, this rate is very high. I can explain it to you this way. Imagine that the 100 TL purchase you made in January 2023 is 164 TL in January 2024. You can also think of it this way. Think about the markets you go to regularly and imagine that the prices in these markets increase every day you go. This gets a little annoying.
There is also annual inflation in America. This rate is 3.4% annually. At this rate, it may seem small to you right now, but it means that you can shop for 103.4 dollars at the end of the year with your 100 dollars at the beginning of the year. This rate of inflation increases every year, reducing your purchasing power.
I'll give you an example right away. In 1960, a soldier bought a Rolex GMT Master with $120 and learned that it could fetch around $65,000 at an auction in 2016. Then, if he had put $100 in his pocket, this $100 would still be the same $100. But in this way, apart from maintaining its value, it has already increased it. USD stablecoins are exposed to inflation.
Since 1971, major fiat currencies have suffered a dramatic decline, losing over 98% of their purchasing power.
Now we will examine with you a more technological way to protect yourself from inflation.
The International Stable Currency (ISC)
The International Stable Currency (ISC) is a stable cryptocurrency offered to protect us from dollar inflation. ISC aims to provide a stable and appreciating currency by pegging its value to various assets such as bonds, bonds, gold and more.
In this way, it can stay above inflation.
Benefits Offered by ISC:
Innovation meets stability:
International Stable Currency (ISC), a pioneer in the flatcoin revolution, stands as a testament to the fusion of time-tested concepts and forward-thinking innovations. ISC is not just another stablecoin; it represents a return to hard money, a reliable store of value that grows without compromising stability. Its peg to an on-chain basket of goods ensures that it remains immune to the inflation risks associated with fiat-backed stablecoins.
Why Flatcoins better than USD stablecoins:
Inflation resistance: Flatcoins, such as ISC, prioritize maintaining the purchasing power of your money. In contrast to USD stablecoins that mirror the fluctuations of traditional currencies, flatcoins are built to resist inflation, offering a superior hedge against economic uncertainties.
Zero smart-contract risk: Unlike some stablecoins that rely heavily on smart contracts, flatcoins like ISC eliminate smart-contract risk entirely. By pegging the value to a tangible basket of real-world assets, users can enjoy the benefits of stability without exposing themselves to the vulnerabilities inherent in complex smart contract systems.
Community-driven stability: The shift towards flatcoins is not just a trend; it's a collective decision to create better money. By embracing flatcoins, the community takes a stand against the traditional fiat system, aligning with genuine thought leaders like Brian Armstrong, Balaji, and Ray Dalio, who advocate for inflation-resistant currencies.
A return to hard money principles: Flatcoins signify a return to the principles of hard money – a currency that maintains its value over time. USD stablecoins, tied to fiat currencies, are susceptible to the same pitfalls that plague traditional money. In contrast, flatcoins offer a more reliable, long-term solution.
ISC Investment Assets
The initial ISC Reserve allocation is designed to give it the broadest possible exposure to the global financial markets, thereby tracking its performance. At the core of this proposal is the belief that it is a fool’s errand to try and outperform the market.
1. Cash - 20%
2. Gold - 20%
3. Global Equity and Shares - 20%
4. Global Bonds - 20%
5. Short-Term Treasuries or T-Bills - 20%
ISC Targets
ISC's supporting team wants to ensure that the interests of the community are always front and center and that ISC Reserves are managed with sustainability. The allocation of ISC reserves continues to grow stronger every day as the number of token holders increases as they vote on proposals and work for the collective good of the community.
The main objectives of ISC can be summarized as follows:
1. Prioritize Stability, Embrace Incremental Growth
2. Optimize Returns to realize the value of ISC
3. Ensure the Ecosystem is Community Controlled and Community Friendly.
ISC Work Mechanism
The whole setup consists of 4 key entities:
ISC Issuer: Its job is to give and recall ISC loans to the ISC Reserves at a certain interest rate.
ISC Reserves: Its job is to ensure that there is enough liquidity for ISC and maintain the reserves for ISC.
Traditional Financial Markets: This includes the markets for bonds, equity, commodities, etc. where the ISC Reserves buy and sell assets to maintain reserves.
Digital Assets Market: This includes the markets for cryptocurrencies where the ISC Reserves can create liquidity for ISC by buying and selling them.
When Market Price > Target Price
The target price is equal to the aggregate market value of the reserve assets behind 1 unit of ISC
When the market price of ISC exceeds the target price, the ISC Issuer issues ISC loans to the ISC Reserves. The ISC Reserves in turn sell this ISC in the Digital Assets Markets and use the received asset to buy reserves from the traditional financial markets. The net effect of this is that the supply of ISC increases and thus the market price falls back to the target price.
When Market Price < Target Price
When the market price falls below the target price, the ISC Issuer recalls the ISC loans from the ISC Reserves. The ISC Reserves in turn buy ISC which would be given back to the ISC Issuer. And it also sells equivalent amounts of reserves to compensate for the purchase of ISC. The net effect is that the supply of ISC decreases and thus the market price rises to the target price.
How Is Price Stability Maintained?
Suppose the price of reserve 1 drastically increases while the price of other reserves remains constant at the end of the day. This may sound great as it increases the target price of ISC. But, this also opens up ISC to price volatility for the price of the given asset which swiftly rose might just fall just as swiftly. In such a case, the next day the reserve basket of the asset which rose in price is reduced and the reserve basket for other assets is increased. This is called Daily Reserve Basket Rebalancing which ensures that the value of ISC is not overwhelmingly influenced by any one asset.
Conclusion
Flatcoins are superior to USD stablecoins in terms of inflation resistance, optimization, and reliability. Innovative stablecoins like ISC are an important step towards overcoming the risks posed by fiat currencies and offering users a safer store of value. At Solana Maxi, by embracing these advantages of Flatcoins, we can secure our future financial stability and create a more solid economic foundation. It was a great research for me. I hope you enjoyed reading it. See you in another article
Reference: