Peg Calculation
The price of Nuon flatcoins is soft-pegged to the current value of a basket of goods that costs US$1 on the date Nuon is launched, in accordance with the Truflation index of real, unbiased, authentic and daily inflation data. Every day, the Truflation oracle provides Nuon with the flatcoin’s target peg, calculated by dividing Truflation’s daily year-on-year inflation rate by the number of days in a year. This target peg is Nuon’s inflation-adjusted representation of holders’ purchasing power, which is supported by cryptographically verifiable census level data.
The Peg formula is as follows:
P(d) on Day d with Truflation Index of T(d) is:
P(d) = P(d-1) + (P(d-1) x (T(d)/365.2425)
What is a Soft Peg?
Nuon’s target price is soft pegged to the value of inflation data provided by Truflation, which means that it allows for a limited degree of price movement. Whereas hard-pegged stablecoins maintain their price on a 1:1 ratio with their peg, Nuon is designed to let its price fluctuate around the target peg supplied by Truflation. Nuon’s dynamic soft peg peg allows it to adjust to changing market conditions, a vitally important aspect in our volatile modern economy.
The Truflation Oracle
The goal of Nuon is to protect people’s wealth and purchasing power by using the most unbiased, transparent, independent, authentic, and current data available. To this effect, Nuon’s smart contracts use the independent on-chain inflation oracle Truflation to gauge daily inflation levels using the most current and accurate market data. Truflation is a census-level index of true inflation rates that updates daily and tracks price data across the economy, using data from over 30 data sources and more than 10 million data points.
The basket of goods used to determine Nuon’s peg comprises a broad spectrum of actual physical goods, as well as services, that are deemed important to modern society. There are twelve categories of goods included in this calculation — including food and non-alcoholic beverages, household durables and daily use items, recreation and culture, alcohol and tobacco, clothing and footwear, housing, transportation, utilities, health, communication, education and other — with each category breaking down into multiple sub-categories and including multiple data sources. Details of this basket of goods can be explored on the Truflation web-app.
Why Use Truflation?
Truflation’s calculation of inflation rates is far more reliable than official inflation rates reported by world governments for a number of reasons. It is also updated daily, as opposed to the monthly updates from the official US Bureau of Labor Services (BLS).
As an example, let’s compare the Truflation rate with the “official” US inflation rate. The American government reports that the rate of inflation in the USA is currently 9.1% (as of June 2022). This number represents the average rate at which the prices of chosen goods and services have increased in the past 12 months. However, the corresponding inflation rate measured by Truflation ranges between 10-11% (for the month of June 2022).
Using the official inflation rates reported by the CPI, Nuon’s target peg would be calculated by 9.1/365.2425=0.024% daily to help prevent its loss of purchasing power.
Using the Truflation oracle alternative (and a daily average inflation rate of 10.5%), Nuon’s target peg is calculated by 10.5/365.2425=0.028% daily to protect its purchasing power.
In some months, the difference between the official US inflation rate and Truflation’s rate has been even greater. For example, one day in May 2022 Truflation reported a whopping 12% inflation rate, compared to a reported US inflation rate of 8.3%. Variance this large is simply too drastic to go unnoticed.
In the future, the community may suggest other inflation metrics to use for the calculation of the Nuon peg, but for now, Truflation is deemed to be the most accurate, unbiased and trustworthy source there is for the measurement of true inflation rates.
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