This morning, UK inflation of 9% was announced – a 40-year high. This follows the CPI metric in the US setting similar records, with the latest measure of 8.3% for April. This has put markets on notice, and the rampant rise in the cost of living has forced the Fed to turn hawkish, with a series of interest rates already priced in before the end of the year.
It’s important to note, however, that the headline number reported in the US, such as the 8.3% from April, is via the much-maligned CPI metric. Most Americans scoff when looking at the 8.3% figure, feeling the squeeze significantly more in their wallet. Substitution bias, new items being added to the basket of measured goods, and changes in quality all contribute to what critics say is a misrepresentative CPI number.
That takes us to Truflation, a novel way of offering independent and censorship-resistant US inflation calculations based on census-level price information. This data is then put on-chain, for the world to see.
Yesterday, they announced the successful closing of their first private token sale, the latest step in turning this project into a fully democratic, decentralised and on-chain database for financial and economic metrics. A data DAO, if you will.
We sat down with Stefan Rust, CEO of Truflation, to get some answers on the launch, talk about the highly topical topic of inflation, and ascertain what the benefit of tokenising this information is.
CryptoAdvisor (CA): Can you elaborate on how the data is censorship-resistant?
Stefan Rust, CEO of Truflation (SR): Once the data is on-chain, it can’t be changed or tampered with. Truflation is also working on making our data and algorithms as autonomous and decentralised as possible. Additional we are an independent company
CA: How would you describe the shortcomings of the CPI as a measure of inflation?
SR: The CPI measurement was put in place many decades ago and has the same general approach today compared to when it was launched. Truflation provides an inflationary measurement tool that leverages multiple data sources for each item, using millions of records from each data source to ensure robustness and updates daily.
CA: How does Truflation get around these shortcomings? What new benefit does Chainlink bring to the table?
SR: Beyond the comments above, Truflation is an independent organization with a mission to offer more accurate and frequent inflation data on actual sales prices. Chainlink empowers our economic data feeds by making them accessible to DeFi and blockchain application developers on different blockchain eco-systems.
CA: What is the advantage of tokenising this information? Would using a superior metric to measure inflation not work just as well off the blockchain?
SR: Superior metrics are of course our focus whether it is accessed off- or on-chain. We feel the world would benefit from having decentralised and censorship-resistant economic and financial data available for developers to build into their applications. For example, if someone was developing inflation-protected assets or stablecoins. The next wave of DeFi applications might use Truflation data to combat the loss of consumers’ purchasing power.
CA: What is the utility of the token on the Truflation platform, and will there be a public sale?
SR: No details of the token or sale mechanics have been released yet. For now, we’re just completely focused on building out our products in the US and internationally.
CA: How bad a problem do you believe inflation to currently be? Do you think Fed hikes will rein it in?
SR: According to official data, inflation is at a 41 year high. Across our data we see the actual prices have been at an all-time high in multiple categories. The inflation rate (i.e. the percentage change reported vs a year ago) might be holding steady or marginally decreasing but the actual prices the consumers are paying remain high. If the Fed hikes the interest rates another 0.5 basis points in June it is likely to have an impact on reducing the US inflation rate and having a cooling effect elsewhere.
CA: Follow up to the above question: If inflation is much worse than what is being reported, do you have a strategy to present your findings to the public? If so, what is it?
SR: We have built a completely free dashboard that shows the current rate as well as breaking down category numbers, for anyone to see and use at https://app.truflation.com
We are working on enhancing its capabilities with a new version to be released in late May.
CA: Do you believe the inflation was unavoidable to get the economy back on its feet during COVID, or would you have pursued a different approach?
SR: It’s an interesting question for economists to debate. Our goal is to inform the public and empower researchers to create and test new hypotheses using independent data so all of us can better understand the mechanisms behind inflation.
CA: Do you plan to offer other economic data beyond inflation statistics?
SR: Yes, we are working on releasing other financial and economic data while simultaneously expanding the Truflation index into other markets around the world. Ultimately our goal is to become the de-facto standard for financial and economic data globally.