Deflationary stablecoins

The forgotten dream of cryptocurrencies

Deflationary Currency vs Inflation Index

At Geminon we consider that we have been the first project to create a true deflationary stablecoin and not a simple tokenized inflation index. The differences between the two are subtle but important:

  • A tokenized index tries to exactly replicate the value of the index it follows, while the deflationary currency only takes it as a base to calculate its peg price.
  • The deflationary currency uses predictions of current inflation values as a reference to be on the curve, while the tokenized index trails the inflation curve with a lag of two periods.
  • The tokenized index can go down if there is deflation, losing value against fiat money, while the deflationary currency can only grow or hold its value stable, but never go down.

How do they work

Although the idea of inflation-indexed stablecoins is over a decade old, its practical application has not been possible until the development of smart contract technology and oracle networks such as Chainlink, which allow data to be imported from the outside world into the blockchain in a verifiable and reliable way.

  • Using a smart contract from the Chainlink oracle network, which reads the inflation data directly from the API of the government body that publishes it. The data is validated by the Chainlink network consensus protocol. This is the most decentralized and secure way of obtaining the data, although it is also the most complex and expensive.
  • Manually supplying the inflation values to the smart contract by the team. This way is simple and cheap but centralized. For security, the smart contracts check the received values and if they are outside the accepted limits, they reject the update.

Inflation index forecasting

In order to implement a prediction system in a smart contract, it must be extremely efficient since it is very expensive to store information and perform complex calculations on the blockchain.

Holt-Winters model equations
Harmonized Index of Consumer Prices (HICP) of the Eurozone (base 1996). Fitting of the Holt-Winters model and predictions.

Backup value

Geminon’s deflationary stablecoins have a built-in system that ensures that they continue to fulfill their function autonomously even if no one updates the reference inflation index values. If more than 60 days elapse without new data being provided to the contract, it is capable of slowly changing its monthly variation rate until it reaches a default value of 0.2% per month, equivalent to an annualized 2.68%.

How to get them?

Geminon Deflationary Coins can be obtained in two ways:

  • Giving GEX tokens in exchange to create new supply using the stablecoin minter (SC Minter) in our app.
  • Trading other Geminon stablecoins via our app’s StableSwap.

Further reading

To learn more about Geminon’s deflationary stablecoins, check out the project documentation:

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store