Market analysis

The future of stablecoins: Giving inflation a run for its money

8 min read

Think stablecoins are just cryptocurrencies pegged to the US dollar? Well, you’d be somewhat correct, because a staggering 98% of them are. However, there is a small, but growing list of stablecoins pegged to other assets, such as the Euro, Pound Sterling, Turkish lira, and gold. 


And then there’s the new kid on the block: the flatcoin. An inflation-resistant asset designed to preserve the purchasing power of investors, this concept is gaining traction with leaders in the cryptocurrency space like Coinbase CEO Brian Armstrong.

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A brief history of stablecoins

The history of stablecoins dates back to 2014, which saw the launch of BitUSD – the first-ever crypto asset pegged to the US dollar. Collateralized by crypto and backed by the BitShares core token, BTS, BitUSD was the brainchild of Dan Larimer, creator of EOS, and Cardano founder Charles Hoskinson. However, in 2018, BitUSD lost parity to the US dollar, drawing heavy criticism and ultimately cutting short its time in the limelight.

That same year saw another attempt at a stablecoin: NuBits, backed by the Seigniorage system, which uses complex mathematical formulae to maintain price stability rather than holding reserves in the treasury. Yet NuBits also suffered two major crashes in 2016 and 2018. The quest for an asset that would hold its dollar peg continued. 

READ: Stablecoins 101 - how do asset pegs work? 


The ultimate winner in the battle for this coveted role was Tether, which launched RealCoin – now USDT – in October 2014 USDT. Today, USDT is the biggest stablecoin on the market and the third biggest crypto asset, with $83 billion in market capitalization. Its biggest competitor, Circle’s USDC, launched in September 2018, currently has a market cap of $26 billion. In third place, the decentralized stablecoin DAI is much smaller at $3.9 billion. 

USDT vs USDC

The two largest stablecoins in the market, USDT and USDC, share certain similarities. They are both centralized and collateralized stablecoins, meaning they are fully backed 1:1 by reserves held in assets such as cash, US government debt and commercial paper. 

However, while USDC is backed solely by US dollars or dollar-denominated assets, Tether holds nearly 20% of USDT’s collateral in corporate bonds, funds and precious metals, with the rest in cash, treasuries and secured loans. The composition of USDT’s reserves has shifted away from cash over time, which has garnered concerns over its liquidity. 

However, over the past year, USDT’s market cap has increased by more than 20% from around $68 billion, while competitor USDC has seen its market cap nearly halve from $50 billion in September 2022, according to CoinGecko. 

This shift has been attributed to the crypto community’s diminishing trust in Circle as a result of its ties to the traditional financial system. What kicked this off was the collapse of Silicon Valley Bank in March, where Circle held $3.3 billion in deposits. USDC holders panicked, causing the stablecoin to temporarily depeg. Since these events happened over the weekend, Circle temporarily suspended withdrawals until traditional markets opened on Monday. Though the firm eventually met all redemption requests, the crypto community appears to have found this behavior difficult to stomach. 

TRYB and the rise of non-USD stablecoins

Meanwhile, the last couple of years have seen several attempts at non-US dollar-pegged stablecoins. Last year, Circle launched a Euro-pegged coin, Euro Coin (EUROC). Originally an ERC-20 token on Ethereum, EuroC is now also available on Avalanche, which boasts lower transaction fees. 

The launch of EuroC marked the first Euro-denominated stablecoin fully backed by the Euro. So far, however, EuroC has failed to gain significant traction, amassing just $52.5 million in market capitalization. 

Here, competitor Tether has also been more successful, with its Euro Tether (EURt), launched in 2020 and backed by the same pool of assets as USDT, garnering $220.7 million in market cap. However, this still remains a tiny fraction of the total stablecoin market, which currently sits at $123.7 billion. 

This year, meanwhile, has seen a stablecoin pegged to the Turkish lira overtake all but Tether’s non-USD pegged product. Earlier this month, the market cap of BiLira's TRYB stablecoin surged by 325% to $136.10 million in just three weeks. 

With Turkish inflation at 59% in August, alternatives to this rapidly devaluing currency are evidently in high demand. The lira-pegged stablecoin provides access to the cryptocurrency market, which often tends to be a refuge for countries with hyperinflation. For instance, Nigeria, where inflation hit 25.8% in August, came second in this year’s Chainalysis Global Crypto Adoption Index.


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READ: Banking the unbanked and solving hyperinflation

Inflation-proof stablecoins 

This brings us to the topic of inflation-proof stablecoins. They have garnered many names, including flatcoins, inflation-resistant and fiat-resistant currency. At the Stablecoin Summit in Singapore on 15 September, this was a hotly debated topic on a panel moderated by Andrew Chen, Chief Economist at Unitas Foundation. Here, Richard, Founder of International Stable Currency, and Stefan Rust, CEO of Truflation and Founder of the Nuon flatcoin discussed their offerings.


The Nuon flatcoin is a decentralized stablecoin that is soft-pegged to a basket of consumer goods and services that represent the rising cost of living, i.e. inflation. It maintains its peg via a dynamically adjusting algorithm and uses Truflation’s own independent on-chain inflation oracle, which provides a real-time daily estimate of US inflation.

International Stable Currency (ISC), meanwhile, is pegged to an underlying basket of real-world assets, such as commodities, bonds and equity instead of the US dollar. This allows ISC to increase in value along with inflation, protecting the wealth of its users.

READ: How to earn inflation-beating interest in a bear market

Both founders firmly believe that these types of assets are the future of money, especially at a time when most countries are fighting a prolonged battle against inflation. And so, it seems, does Coinbase CEO Armstrong, who named the flatcoin among the top ten investment ideas he is most excited about for the next cycle. 

Another project working on this is Ampleforth, which has designed SPOT – a decentralized flatcoin designed to survive black swan events. SPOT used zero-liquidation tranching to provide stability, which it says allows the asset to scale and “bend rather than break in extreme market conditions”. The asset also tracks the US CPI.

Key takeaways

The innovation in the stablecoin arena has the potential to revolutionize money as we know it. However, it is still early days for these developments. After the events of 2022, it will take time to build trust in any new crypto asset – especially stablecoins, given the leading role of decentralized stablecoin UST in the market’s collapse. 

Should flatcoins prove themselves in action, billions of people across the world may no longer need to worry about inflation. This really could be the next big thing in crypto – especially when combined with earning opportunities through staking.

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