Why “stable” in “stablecoins” rarely means what it claims – and what the next generation of digital money must solve.
The stablecoin industry is booming. With over $300 billion in circulation, stablecoins have become a major pillar of the crypto ecosystem. They serve as rails for trading, payments, DeFi and cross‑border transfers. But despite the name, “stable” is a misnomer. These tokens are pegged to fiat currencies – most commonly the U.S. dollar – and while that may provide short‑term price certainty, it does not protect against the slow, steady erosion of value caused by inflation.
Close-up of shredded US one dollar bill.
getty
Inflation also impacts stablecoins
Consider the U.S. dollar’s purchasing power. According to the Bureau of Labor Statistics, from 2021 to 2022 the purchasing power of a dollar declined by about 7.4 percent. Over decades, this effect compounds: research shows the dollar has lost nearly 97 percent of its purchasing power since 1913. So while a stablecoin pegged at 1:1 to the dollar may avoid volatility relative to other crypto‑assets, it fails to preserve real value over time. In other words: you aren’t buying “stability” – you’re buying a fiat standard that is slowly, but surely, shrinking in value.
Flatcoins can be the solution to existing stablecoins
This is the moment for a new class of crypto instrument: flatcoins. Unlike classical stablecoins, flatcoins aim to preserve purchasing power, not a fiat peg. Instead of tracking $1, they track the cost of a basket of goods – adjusted for inflation or global cost of living – and in some proposals this value is denominated in hard‑money assets like Bitcoin. The key shift: you move from “stable relative to fiat” to “stable relative to real‑world value”. The idea of flatcoins has been around for some time, with Balaji Srinivasan coining the term in a X (at the time still Twitter) post in 2021 and newer proponents including Brian Armstrong, the CEO of Coinbase.
Flatcoins “New Thing On the Horizon”
Why does this matter? Because as inflation‑adjusted value becomes the benchmark, the monetary asset changes its role: from payment facilitator to unit of account and store of value. In a world where money does not lose purchasing power, pricing, savings and contracts become meaningful. A flatcoin may still redeem for collateral or backers – but its value baseline is anchored not to the dollar, but to what you can actually buy.
Consider this rough comparison: stablecoins may navigate crypto volatility, but they cannot avoid inflation. Flatcoins aim to solve both. They protect the saver not only from crypto swings but also from the devaluation of the reference currency. If you believe that monetary sovereignty matters – or that Bitcoin, hard money or global purchasing power should matter – then flatcoins are conceptually the next frontier.
Of course, building a true flatcoin presents challenges: reliable inflation indices, global basket design, collateralization mechanics, governance frameworks and ensuring redemption integrity. Yet the international stablecoin market – now systemically relevant and larger than many money‑market funds – demands innovation.
In short: stablecoins solved the volatility problem of crypto, but not the erosion problem of fiat. Flatcoins propose to solve the full problem of value preservation for a new era of money. For the billions seeking escape from inflation, the next‑gen crypto model must deliver more than “stable relative to fiat” – it must deliver real‑world, long‑term purchasing power.
Some projects are already trying to tackle this challenge and create the next generation of stablecoins – but many more iterations are needed to create a new financial primitive – a true stablecoin, aka flatcoin.
