Last month we had the pleasure of Hosting Stefan Rust, the CEO of Truflation, on our Staking Mondays episode to discuss how Truflation offers independent and censorship-resistant inflation calculations based on census level price information from more than 50 data sources in real time.
- The acceleration of inflation worldwide
- Why censorship resistant inflation data is needed
- How staking can protect against inflation
- The Truflation methodology
- Non-Fiat ‘Flatcoins’ whose exchange rate remains flat against a basket of goods
- And more!
We summarised the entire episode for you in a 5-10 minute read. If you would like to watch the whole episode, you can find it on our Youtube channel. Let’s dive in!
- We are entering an era where higher inflation will become normalised
- 2% inflation will be unrealistic for most countries going forward
- Government cannot report on their own inflation, it needs to be done in a censorship resistant way
- Truflation tracks over 18 million items on a daily basis, from over 50 sources
- ‘Flatcoins’ are a new stablecoin design that provide an innovative way to fight inflation
What is Truflation?
Truflation is a mission to create an aggregated data feed that most closely resembles what is true in the real world. The team has developed the Truflation Index, which is updated daily and is measured based on the price data of millions of items across the economy. Additionally each item’s price is gathered from multiple different sources to ensure veracity. The Truflation indexes are a premium source of independent censorship resistant financial and economic data on-chain. Truflation is the engine that powers inflation protected web3 applications and blockchain economies.
When you founded Truflation, did you think that inflation would accelerate as much as it has in the past year?
Two years ago when governments were printing vast amounts of money, it was clear that this money printing would lead to widespread inflation across world economies. We anticipated double digit inflation to follow, and for higher levels of inflation to remain sticky over the coming years. The world is entering into an era where higher inflation will become normalised across developing economies and 2% inflation will be a dream for most countries. Inflation is structurally embedded in these economies and there are bottlenecks in the system that prevent it from coming down.
What was the moment that made you build censorship resistant Truflation data?
The realisation that the regulatory frameworks and government participants are highly aligned and coupled with monetary policy drew me to crypto and the possibilities that it brings for censorship data. The core problem that we saw was that governmental institutions are recording and reporting on the state of the economy, which creates a bit of a conflict of interest. It is in their best interest to report ‘good’ data that shows them in a good light, which has led to censorship of economic data to hide the true state of an economy. It is akin to a student at school marking their own test. Truflation believes that a modern economy needs to have independent data sources and audits.
Do you see staking as a way to protect against inflation?
Crypto can be an inflation hedge, however, it helps to look at it not as an investment class but rather as utilities that allow users to make use of the services and infrastructure that blockchains are providing. If people want to take part in that, they need to buy the tokens of those networks. The development of PoS protocols allows people to contribute in securing the network, and in return they receive a yield for doing so. The key is to take out the middlemen that each take their cut of staking yields, native staking allows token holders to receive the maximum return for supporting the network. In doing this, people can achieve capital efficiency and fight the effects of inflation on their investments.
How do the Truflation data indexes work and how does the Chainlink Oracle fit in?
The Truflation indexes now track over 18 million items on a daily basis, from over 50 sources. The sources range from Twilio, Zillow, McDonalds, Nielsen, Kelly Bluebook and many more. The data is aggregated and put onto a decentralised ledger daily. It is available on Ethereum, Binance, Polygon and Avax. The data is made available on-chain through the help of the Chainlink network. By leveraging Chainlink oracles, Truflation is able to offer its custom inflation index data directly on-chain for immediate use within smart contracts. Any smart contract developer can look at the indexes and draw data from there to build other dApps. Below is an outline of their approach:
These categories come together to create the CPI. Truflation is also developing inflation tools that apply to different people, these tools can then be integrated into different investment calculators and expense managers.
How does new technology affect inflation?
If it weren’t for technology, inflation would be much higher. Technology has brought down inflation across the board by adding features to things like smartphones which takes away expenditures elsewhere. The development of software that automates tasks ultimately speeds up supply chains, E-commerce processes and delivery backlogs – which in turn helps to bring down inflation.
Do you have any integrations already?
Truflation recently did a Hackathon with Chainlink, where 29 project submissions were made by companies building with the Truflation oracle. The most innovative projects were:
- Inflotto: a decentralized inflation lottery
- Plation: inflation prediction market
- I-Bond: inflation-linked bonds
Each team created innovative solutions on the back of Truflation data and showcased how developers can use their data.
What are ‘Flatcoins’?
Crypto natives are looking at new ways to innovate in the stablecoin market. Many people are moving away from a concept of stablecoins pegged to the US dollars, but rather ‘Flatcoins’ that are pegged to the purchasing power of individuals. Some projects that are building on this concept are:
Rather than being pegged to FIAT, you are pegged to a basket of goods – which is drawing its data from Truflaiton feeds.
But how will this work?
Every coin has a different model, Frax has fractional collateralisation, Nuan has overcollateralization, and Minor token has gold as its backing. The idea behind these flat coins is that they will be worth the amount + inflation at the end of the year. So if inflation was 10% it will be worth 1.1 at the end of the year.
This means that the outstanding asset has grown significantly against the collateral, so what do you do with your collateral and how do you make up that 10%? This is primarily solved through yield farming, fees from treasury, mint and burn fees to the collateral, LP rewards to an AMM facility, which will be distributed to collateral holders.
You are with Trusted Node and you are a validator on 12 networks, what makes a good validator in the crypto ecosystem and how do you contribute to that?
Commission rates, reward yields, and trust. Users can usually sort teams by looking at the following:
- Is the team Doxxed
- How much is their TVL?
- Is the user experience good?
- Is it non-custodial?
Users are starting to look at features like transaction records to help them report on their taxes. This includes features like:
- How much have I staked?
- How much did I earn?
- How much did I claim?
- Did I make a profit?
- How long did I stake it for?
These are important metrics for tax purposes and are a nice draw for users. Validators are looking at how to build one user interface that gives users an overview of all their staked assets, similar to what projects do to aggregate Defi information.
Are you working on a liquid staking product?
We have a team dedicated to building out Trusted Node, unfortunately we did a lot of liquid staking on Terra Chain which set us back a bit, but Ethereum presents a good opportunity to build new solutions. The team is primarily looking at how liquid staking derivatives can be used as collateral to mint flatcoins, and how this can be scaled.
You launched a Dao for Trusted Node, what is the economics behind the DAO and the TNode token?
There is profit sharing and governance for holders. TNode holders can also vote or ask for Trusted Node to vote on their behalf for governance proposals on the 12 blockchains they support. It is a proxy service for voting on behalf of users.
Truflation is pioneering in the inflation data space and bringing transparency, neutrality and accurate data to provide independent and censorship-resistant inflation calculations to the world. The team is revolutionizing century-old models and methodologies that are no longer relevant. Check out their inflation dashboard on their website here or follow them on Twitter to stay up to date with their latest developments.