Target Price
Last updated
Last updated
The Consumer Price Index (CPI) is one of the popular tools for measuring inflation. The Bureau of Labor Statistics as a reference for calculating the CPI defines it as follows:
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
PARSE token uses CPI to peg itself to the 2022 USD. Lanch time CPI is stored at the contract as abaseCPI variable and the contract calculates the target price by comparing the base and current CPI.
While the current and the base CPI are equal, the target price is one USD. In an inflationary situation, the CPI increases; thus, the target price rises up.
PARSE token, unlike other stablecoins, becomes an inflation-proof asset due to its targeting policies. Anyone can protect their purchasing power against inflation by using the PARSE token.
The contract gets the current Price of PARSE from the oracle. It calculates the normalized price from the current and target price.
It is clear that if the normalized price is pegged to one, the current price will be pegged to the target.
In Tax and Rebase protocols, the first step is to calculate the normalized price and then use it for other calculations as a price of PARSE. For the sake of simplicity in the rest of this document, "price" is used instead of "normalized price".