IRMA Pre-Mint

In a few weeks, Rock Stable will be doing a "pre-mint" of IRMA.

What is a pre-mint?

It's a way for you to take advantage of IRMA's inflation resistance even before we complete the IRMA program in Solana. You can mint IRMA, which is just a standard Solana token, and your original stablecoin (whichever it is - USDT, USDC, PYUSD, USDS, USDG, or FDUSD) will be stored in a vault by the trading system (OpenBook V2).

What is the advantage to you if you mint IRMA now?

This is our promise: if you mint IRMA now: you will be able to redeem back whatever and however much you used to mint IRMA with, within a year after minting. This is almost a guarantee because whatever you used to mint IRMA with, will simply be stored in a vault.

There are risks, of course. The biggest risk is if Solana dies as a blockchain.

There is practically no downside.

What is the upside?

If USD inflates after you mint IRMA, then you can redeem or sell IRMA in the open market at a price that's more than when you minted. IRMA protects your money from inflation.

How is this possible? What makes IRMA different?

The simplest explanation is that IRMA mint price is independent of its redemption price.

The top USD-backed stablecoins out there are USD "substitutes" and the promise is that for every USD that you mint the stablecoin with, you get one stablecoin unit when you redeem. In other words, a substitute simply has its mint price equal to its redemption price, at any time.

There is a third price that the issuer has no control over, and that is the market price. The market price can deviate from the mint price and redemption price, but not by much. Generally, market price deviations greater than 1% (up or down) is considered a "de-peg".

It's quite possible that the top USD-backed stablecoins will de-peg on the upside when USD inflation consistently goes beyond 2%. The only limit to how much the market price can rise is the fact that mint price is equal to redemption price is equal to one dollar. The issuer can raise the mint price, of course, but the redemption price will have to stay the same or there will be a massive "run". If the issuer keeps the redemption price equal to total USD reserves divided by stablecoin in circulation, then redemption price will never catch up with mint price because of the large size of the initial total stablecoin in circulation (denominator in redemption price calculation).

IRMA is different

When inflation is below 2%, IRMA is just like any other stablecoin: it's 1:1 and its mint price is just equal to its redemption price. However, when inflation goes up beyond 2%, we will raise the IRMA mint price, according to how much inflation goes up beyond 2%. Redemption price stays the same at first but should rise because it's just equal to total reserve backing divided by IRMA in circulation, and because the reserve backing will increase as people buy IRMA at the new, higher mint price.

If you mint IRMA now, you would have bought at par now, then your mint price is guaranteed to be equal to the redemption price when you redeem. For example, if inflation is at 2.15% according to truflation.com when you mint, and you used USDT to mint IRMA, then your mint price is 1.0015 USDT. Your redemption price is almost guaranteed to be at least 1.0015 USDT also.

NOTES:

• You can also redeem a different stablecoin from the reserve vaults, but the price may be different; the value, however, would be almost the same.

• You may have to redeem a different stablecoin than you used to mint IRMA with if the reserve vault for the original stablecoin (that you minted IRMA with, or OSC) does not contain enough of the original stablecoin.

IRMA stands for Inflation Resistant Medium of Account

IRMA mint price goes up when USD inflation rises above 2%. Redemption price stays at 1:1 with your original stablecoin (OSC); however, you can sell your IRMA for your OSC at higher than redemption price in the market, as much as just below the mint price. Or you can hold on to it, because with IRMA, you can continue to be protected from inflation.

For example, say you exchange 1,000 USDC for 1,000 IRMA. Your 1,000 USDC becomes "reserve backing" for the IRMA you receive. We will keep your USDC, and by law we can't spend it. We may keep it with Coinbase. Let's say the following month, USD inflation according to Truflation.com goes up to 5%. Now USDC value is down by 5%, but your 1,000 IRMA protects you by 3% (inflation above 2%) because 1.0 IRMA is now 1.03 USDC. Your 1,000 IRMA is now 1,030 USDC (mint price). You can redeem at the same, original price with Rock Stable; but you can also sell IRMA at the market, for as much as just below the mint price, say at 1.029 USDC per IRMA.

Why would you sell at market?

Maybe you won't sell it at market because hey, it's probably wiser to keep IRMA. You will find that if you buy more IRMA whenever its mint price is just equal to its redemption price (like right now) you are guaranteed to be able to redeem it at the price you minted it, no matter what happens to inflation.

What about yield?

IRMA does not give you yield, just protection from inflation. Its value does not rise - the mint price goes up only with respect to the inflating base. However, new smart contracts that give you yield will appear for IRMA, in Solana.

Why would smart contract programmers want to support IRMA? Well, because by supporting IRMA, a smart contract would have supported all the stablecoins that IRMA is transparently convertible from / to: USDT, USDC, PYUSD, USDG, USDS, and FDUSD. By supporting IRMA only, the smart contract could support many, at zero additional effort and testing.

Don't expect high IRMA yields to come

Why?

A currency that does not inflate much is favorable to the lender but not to the borrower. The lenders therefore are expected to raise the price of future IRMA, meaning the interest (or yield, from the standpoint of the lender) is low. Look, the only reason yields are so high for the top stablecoins right now is because USD inflation is expected to go up. Consider this: even if yield for USDC can be as high as 4.7% with Coinbase, if inflation is at 10%, you are not really earning value, you are losing value to the tune of 3.3% (5.3% minus normal inflation of 2%). With IRMA, a yield of even just 1% is equivalent to 11% (if inflation is 10%).

Note: we are setting the IRMA mint price and redemption price manually at this time.

We are still building the IRMA program in Solana.

Why release the IRMA stablecoin now?

There is an urgency. Look at truflation.com, and you will see that the downward trend has reversed. Moreover, the Fed is under tremendous pressure to lower the prime lending rates. If the Fed lowers the prime lending rates, the banks will be incentivized to release more USD into the market, making it even more likely for inflation to remain above 2%.

by: C. Tapang

How to Safeguard Your Savings Against Inflation in a Low-Interest Environment

In today's economic landscape, many individuals are facing the harsh reality that their savings, while secure in the bank, are slowly losing value due to inflation. Even if interest rates appear attractive, they might not be enough to keep up with rising prices. This blog post will provide practical strategies that can help you protect your savings and ensure your hard-earned money maintains its value over time.

Understanding Inflation and Its Impact on Savings

Inflation refers to the rate at which the overall prices for goods and services increase, which diminishes the purchasing power of money. For example, if your savings account offers a 1% interest rate while inflation is at 3%, you effectively lose 2% of your purchasing power every year.

This disparity underscores the crucial need to understand how inflation impacts your savings. For instance, in the last decade, prices for everyday items such as groceries have increased by more than 25%, which means that the same amount of savings can buy you significantly less than before. Protecting your savings from this threat is essential for maintaining financial health.

Diversifying Your Investment Portfolio

A key way to combat inflation is by diversifying your investment portfolio. Relying solely on savings accounts may not yield returns high enough to outpace inflation. Instead, consider allocating a portion of your savings into assets that have historically performed well during inflationary periods. Some effective options include:

• Stocks: Historically, equities have returned around 10% annually, significantly higher than the 1% in standard savings accounts. Companies that can increase prices alongside inflation, such as those in the consumer staple sector, can help maintain your purchasing power.

  
  

• Real Estate: Property values and rental income often increase with inflation. According to the National Association of Realtors, home prices rose by 14% over the last year, which illustrates real estate as a solid hedge against inflation.

  
  

• Bitcoin or Gold: Bitcoin is very volatile and can drop in price as soon as you buy it. Gold is not as volatile as Bitcoin and is therefore a better hedge against inflation.

  
  

• IRMA: IRMA will not give you yield, but it is probably the most effective instrument for fighting inflation. It does not provide any yield, but other programs in Solana will be built that can provide yield to IRMA holders.

  
  

By diversifying your investments, you can create a balanced portfolio that not only mitigates risk but also enhances your growth potential.

Exploring Inflation-Protected Securities

Investing in inflation-protected securities, like Treasury Inflation-Protected Securities (TIPS) or Inflation Resistant Medium of Account (IRMA), is another option worth considering.

TIPS are government bonds designed to increase in value with inflation, helping your investment keep pace with rising prices.

TIPS provide a fixed interest rate, but their principal is adjusted based on the Consumer Price Index (CPI). For example, if inflation rises by 3%, the principal of your TIPS increases by that percentage as well, preserving your purchasing power over time.

IRMA, on the other hand, does not provide yield or interest, but is programmatically designed to keep its value even when its reserve backing (made up of the top stablecoins) inflates with USD.

Utilizing High-Interest Savings Accounts and CDs

Although traditional savings accounts may offer low-interest rates, many banks provide high-interest savings accounts or certificates of deposit (CDs) with better returns. For example, some high-yield savings accounts currently offer interest rates upwards of 4%, which can help you earn more on your savings.

When assessing high-interest accounts or CDs, compare rates and terms from various banks. Look for options with competitive interest rates and minimal fees, as these factors play a significant role in your overall returns.

Embracing Alternative Investments

In a low-interest environment, exploring alternative investments can be a savvy strategy to protect your savings from inflation. Opportunities such as peer-to-peer lending, real estate crowdfunding, or investing in small businesses can provide higher returns compared to traditional options.

IRMA presents an alternative unlike any other. While IRMA does not provide yield like TIPS, it's like cash in your hands because you can invest it in upcoming DeFi or will be added by liquidity providers in existing DeFi.

While alternative investments come with their own risks, they can present chances for growth that may exceed the rates sustained by inflation. Always conduct thorough research and assess your risk tolerance before diving into these investment avenues.

Keeping an Eye on Your Budget

Another vital aspect of protecting your savings against inflation is staying mindful of your budget. Regularly reviewing your expenses and identifying areas to cut back can free up funds for savings or investments.

Consider adopting a frugal lifestyle by prioritizing needs over wants. This practice not only helps you save more but also allows you to channel more funds into investments that can outperform inflation.

Staying Informed About Economic Trends

Keeping track of economic trends and inflation forecasts helps you make informed decisions about your savings and investments. Understanding the broader economic landscape can guide you in adjusting your financial strategies accordingly.

Follow reputable financial news sources, subscribe to economic newsletters, and consider consulting with a financial advisor to gain insights into market trends and potential investment opportunities.

Final Thoughts

In a low-interest environment, taking proactive measures to safeguard your savings against inflation is crucial. By diversifying your portfolio, considering inflation-protected securities, utilizing high-interest accounts, and exploring alternative investments, you can protect your hard-earned money from inflation's erosive effects.

Additionally, maintaining a budget and staying informed about economic trends will empower you to make intelligent financial decisions. While inflation may seem intimidating, implementing these strategies can help ensure your savings not only survive but thrive in the face of rising prices.

Prof Larry White on Stablecoins