Coinbase Ventures committed $1 million to fund a new digital asset called SPOT. The new cryptocurrency is a flatcoin and an alternative to stablecoins, allowing users to store value regardless of fiat currencies.

Coinbase Invests in Development of SPOT Flatcoin

The venture capital arm of crypto exchange Coinbase invested $1 million in the development of a new decentralized digital asset called SPOT, developed by Fragments’ Ampleforth Foundation team. This is reported by The Block.

The asset will be launched on the Base L2 protocol network built by Coinbase as a part of deal. Users can access the asset via decentralized exchange Aerodrome Finance.

According to Evan Kuo, CEO of Fragments, SPOT is the result of five years of research and development. He also noted that stablecoins pegged to fiat currencies often suffer from volatility due to inflation of the underlying assets. In contrast, SPOT is a flatcoin, meaning its value is tied to the Consumer Price Index (CPI) rather than fiat currency.

A flatcoin refers to a digital asset designed to maintain a stable value. Flatcoins track consumer prices or a basket of goods, allowing holders to maintain purchasing power regardless of inflation. The term was coined by Balaji Srinivasan, ex-CTO of Coinbase, in 2021.

SPOT combines the characteristics of fiat money, such as the U.S. dollar, and hard commodities, such as gold, creating a fully decentralized and low-volatility asset that can be used in the on-chain economy. 

According to the white paper, SPOT’s stabilization works through the volatility segmentation mechanism of AMPL, the native token of the Ampleforth protocol, through a process known as tranching. Essentially, the process splits the token into two tranches, a senior one with low volatility, which is SPOT, and a junior stAMPL, which absorbs the bulk of the network’s volatility. Users can deposit AMPL to create SPOT and stAMPL and exchange back to AMPL at any time.

Tranches have a fixed term of one week. After this period, they’re automatically converted back to AMPL. To maintain continuity, the protocol constantly recycles tranches that are close to maturity, replacing them with new tranches. AMPL’s volatility is segmented so that the bulk of the fluctuations occur in stAMPL, protecting SPOT quotes from significant changes, allowing the asset to remain stable.

Flatcoin technology was praised by Brian Armstrong, CEO of Coinbase, back in 2023. In an interview with Yahoo Finance, Armstrong called the assets “the next iteration of stablecoins,” noting their advantages over all existing cryptocurrencies. 

Tether recently introduced a new digital asset Alloy (aUSDT), a synthetic stablecoin backed by the Tether Gold token (XAUt) and pegged to the value of the U.S. dollar.

Author: Nataly Antonenko
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