On Thursday, Frax Finance, a developer of algorithmic stablecoins, announced it would launch the Frax Price Index, or FPI, on the Partisia blockchain. The benchmark would have its stablecoin pegged to it and serve as a competitor to the standard Consumer Price Index, or CPI. Although the latter is a near-universally adopted inflation gauge, skeptics have claimed that its methodology does not account for items such as housing prices, college tuition, healthcare, etc. All of which have risen significantly in the past decade in the United States.
Brian Gallagher, co-Founder at Partisia Blockchain, elaborated on the development:
Together with Partisia Blockchain’s advanced privacy oracles, a variety of crowdsourced demographic purchasing data are converted into trustworthy indexes enabling FPI to disrupt the non-transparent methods so far used to report inflation data.
In a previous interview with Cointelegraph, Sam Kazemian, co-founder of Frax, explained that the FPI stablecoin will have a staking component. As a result, there will be an interest-bearing yield on the FPI in addition to the core function of performing to the CPI standard, thus improving the value proposition of a stablecoin pegged to it. “And with, with the FPI, you can kind of think of it as essentially as a commitment to a peg in monetary policy,” said Kazemian.
According to CoinGecko, Frax is currently the seventh-largest stablecoin with a market cap of $1.35 billion. Unlike fiat money stablecoins, algorithmic stablecoins balance funds held on the blockchain via smart contracts with supply and demand instead of relying on reserves.