The ICO trend has not died out, and it seems there is always a hunger for new projects. Enter Basecoin, the upcoming ICO from Intangible Labs. Basecoin was created by a group of Princeton students, including Nader Al-Naji, Lawrence Diao and Josh Chen.
Basecoin promises to be "a robust, price stable cryptocurrency with an algorithmic central bank," according to a recently released white paper. This means that the native programming of the cryptocurrency would alter the money supply, just like a central bank, and thus control inflation, but also work against deflationary spirals.
Cryptocurrencies operate without a central bank, and their value fluctuates. Basecoin wants to achieve price stability, but instead of a central bank entity, it would entitle the software to control the money supply.
Currently, only USDT, or Tether, is a price-stable cryptocurrency, although there have been severe criticisms to the mechanism used. While Tether issues new coins when the price rises, it does not seem to buy back and destroy coins when the price falls, so in the end its dollar reserves may not back up all existing coins.
Basecoin will aim to link its protocol with an index of the real economy, and adjust its money supply accordingly, contracting or expanding it.
"Well, at Basecoin we believe the main blocker to mainstream adoption of cryptocurrencies as a medium of exchange lies in their price volatility. For example, it's very hard to denominate prices in Bitcoin because the purchasing power fluctuates massively on a day to day basis. Much worse, it's impossible to have rich credit and debt markets if the underlying currency is volatile."
Al-Naji believes Basecoin will work similarly to the Federal Reserve, providing price stability.
The project has attracted the attention of Digital Currency Group, as well as several others: 1confirmation, Andreessen Horowitz, Bain Capital Ventures, Digital Currency Group, MetaStable Capital, Pantera Capital and PolyChain Capital. The exact investment figures are undisclosed, but the pre-ICO sale entitles the investors to some amount of Basecoin when it is issued in the future.
"The problem we’re solving is simple: because bitcoin is so volatile, your mom is never going to buy her morning coffee with it," Al-Naji said for Reuters.
Currently, cryptocurrency Steem has shown similar mechanisms of stabilizing a crypto asset, the Steem Dollar. By tweaking rewards and the issuance of Steem tokens, the Steem Dollar always hovers around $1, without backing, merely by altering the money supply.