DeFi platform, Truflation, has revealed that it is working on developing an indicator that can provide real-time inflation tracking analytics for the crypto space. Truflation further state that the new tool would be completely decentralized.
A CPI Tool Developed With Blockchain Technology
While speaking with the media, Truflation CEO, Stefan Rust, said, “the current framework is nearly a century old. Sadly, the government is trying to modify it instead of overhauling it.” Rust added that “the truth is, no matter the level of modification, this tool can no longer serve its intended purpose because things have changed drastically compared to the time this tool was created.”
Truflation became a reality after ex-Coinbase CTO (Balaji Srinivasan) claimed that there is no decentralized inflation tool in the market. At that time, Srinivasan promised to support the development of such a tool with $100K after stating that “we can’t get reliable inflation data from a censored inflation feed.”
On Friday, Truflation revealed that it had won the challenge to build a Web3 decentralized inflation feed. However, there is one crucial difference between the CPI and Truflation index. The CPI’s inflation data is determined through survey data, while price data is the basis of the Truflation index.
The CPI determines inflation data following a collation of data from 95K monthly prices for services and commodities and 8K rental housing units. Rust also said, “the CPI is like a black box where the determinants of the survey are unknown. Also, there are secrets behind how these data are interpreted and many other issues.”
“In summary, there is no transparency regarding the interpretation of this survey data. This is quite different from what our tool does. The Truflation index gathers real-time price data from sales points, and they would be the same as those of real merchants or aggregators.”
Another difference between the Truflation index and CPI is that the former considers and reports daily inflation changes using real-time market price data from reliable sources such as Nielsen, Penn State, and Zillow. However, both indexes utilize a similar calculation model. 40% of data being used by the Truflation index is the same goods data used by the labor statistics bureau, with the remaining data obtained from several other sources.
Different Inflation Rates Measured By The Two Indexes For March 2022
The current inflation rate measured by the Truflation index is 13.3% which is in stark contrast to the 7.8% inflation rate measured by the CPI for last month. Inflation has become the subject of heated discussion among lawmakers, business owners, and residents, especially as nations continue to deal with the consequences of the COVID-19 pandemic. The pandemic has negatively impacted supply chain logistics, crucial in goods data.
Many people have remained skeptical about CPI and PCE data for many years, even though it is the major index that the Fed uses to measure inflation rates. Critics opined that the CPI neglects several crucial data points. There is a remarkable difference between the basket of goods data that the index considers and the one it neglects.