US crypto exchange Coinbase wants inflation-pegged “flatcoins” to be one of four “critical” innovations it hopes to see on its newly launched layer-2 network, Base.
The company also wants developers to explore an on-chain reputation system, an on-chain limit order book (LOB) exchange, and tools to improve safety in decentralised finance (DeFi).
Coinbase announced the four areas in a ‘Request for Builders’ post, published a month after launching Base – a network secured by Ethereum and running on another layer-2, Optimism.
The trading platform believes that an inflation-pegged flatcoin is “now more important than ever” given recent crises in the banking sector and that such a stablecoin would be resistant to poor monetary policy from central banks.
Coinbase described flatcoins as “stablecoins that track the rate of inflation, enabling users to have stability in purchasing power while also having resiliency from the economic uncertainty caused by the legacy financial system”.
Unlike most stablecoins which are pegged to national currencies such as the US dollar, flatcoins would be pegged to the cost of living, tracked through a consumer price index and inflation data.
Coinbase also outlined its interest in an on-chain reputation system, which it believes will play an important role in building “on-chain trust” between network users.
Essentially like a credit score or ranking system, this protocol would allow users to better understand the reputation of those they interact with on the network.
It could also require users to meet certain criteria before interacting with specific DeFi applications.
Coinbase described that this “could look like a FICO or Google page rank type score on ENS names, ratings/reviews for merchants, and other measures that help build trust on-chain”.
The trading platform said it will be important to ensure users’ privacy and autonomy are preserved with any measures that implement a reputation system.
For its third innovation, Coinbase said that an on-chain limit order book exchange could work as a more advanced exchange that removes counterparty risk via self-custody.
Limit order books are a list of orders for a given asset that allow users to buy or sell with a restriction on the price ceiling or floor that the user wants to trade at.
Coinbase thinks that having this on-chain would provide institutions and professional traders with a new means to execute digital asset trading strategies in a manner not dissimilar to the traditional financial system.
The company said: “The high throughput of Base opens up significant new opportunities for designing new mechanisms for spot trading, limit orders, options, perpetuals, and more.”
The final area of focus, according to Coinbase, is around making the decentralized finance (DeFi) ecosystem safer for users and developers on its layer-2 network.
The last area for innovation identified by Coinbase concerns making the DeFi ecosystem a safer place for both users and developers.
The exchange hopes to realise this by building tools that protect against vulnerabilities in smart contracts.
It sees stronger auditing and self-service security tools as the key to reducing security threats.
To help support these innovations, Coinbase has launched its Base Ecosystem Fund, helping early-stage projects to build on Base. The network already supports more than 30 blockchains, according to Base.
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