Inflation is the measure of how prices increase over time, reflecting how the public experiences a change in cost of living from year to year. Although a healthy amount of annual inflation is believed to help an economy grow—the United States Federal Reserve estimates this to be around 2%—high inflation can be detrimental to day-to-day life. For instance, imagine if the price of eggs increased by 30% or more in just one year.
This is exactly what happened in the early 2020s, and it is why inflation came to the forefront of dinner table conversations, the news media, and the political arena. By mid-2022, inflation reached more than 9% in the US and more than 11% in the European Union, based on measurements by government bodies.
The Consumer Price Index (CPI) is a popular measure of national inflation published by the US Bureau of Labor Statistics (BLS). Unfortunately, while it's clear that inflation is important, calculating inflation is difficult. The CPI has been criticized for being flawed and even outdated—it was developed in 1921—and many have called for updating available measures and more transparency in their calculation.
Truflation is a project that uses blockchain technology and a DePIN network (called the Truflation Stream Network, or TSN) to collate accurate, real-world economic data. While the CPI relies primarily on periodic surveys and visits to a selection of stores to confirm the prices of certain goods, Truflation aims to use real-time, updated information provided electronically across a wide network of data providers. The primary purpose of this is to use price data to better represent real (or “true”) inflation. However, the economic data Truflation collects can also be used in prediction markets, the creation of synthetic assets (like stablecoins), lending protocols, and more.
The TRUF token is used by Truflation’s TSN for three purposes: 1) to pay for consumption of data, 2) as part of a voting escrow program to facilitate community governance, and 2) to allow nodes to participate on the network.
How was Truflation developed?
Truflation is developed by Tru Labs, led by founder and CEO Stefan Rust. A serial entrepreneur, Rust earned a degree at Northwestern’s Kellogg School of Management before beginning a long career in tech. He is an ex-CEO of bitcoin.com, and along with his position at Tru Labs, he holds simultaneous leadership positions in multiple related projects including Laguna Labs, its “flatcoin” product Nuon, and the staking solution Trusted Node.
In May 2021, Coinbase CTO Balaji Srinivasan posted a challenge to the crypto community to build “a censorship-resistant inflation feed.” The Truflation team won the challenge, claiming a $200,000 prize. In the following years, it gained support from multiple crypto-based and venture capital sources including Chainlink and Cogitent Ventures. In early 2024, the project raised $6 million through a Series A funding round.
While Truflation only originally used the Ethereum mainnet, in May 2022 it used Chainlink’s interoperable network to launch nodes and smart contracts on Avalanche, Polygon, and BNB Chain. Its expanding efforts continued a couple of months later, when it announced it would begin publishing a UK inflation index (in addition to its US index).
How does Truflation work?
At its most basic level, Truflation seeks to crowdsource economic data in order to create a reliable source of data for decentralized finance (DeFi) products and third-party customers. It accomplishes this through its Truflation Stream Network (TSN). Truflation uses Chainlink’s oracle network to deliver economic data collected off-chain and deliver it to blockchain networks like Ethereum, Avalanche, and others.
The TSN is a tailor-made blockchain that is specific to its application (also called an “app-chain”) that uses a network of nodes to reach consensus through a mechanism called Byzantine Fault Tolerance. This secures the network against malicious actors who may seek to submit falsified transactions or otherwise act selfishly. It has four main components:
- Adapters – programs that operate on-chain like smart contracts who help process incoming data (from data providers) so it can be appropriately stored and aggregated on the network. Adaptors publish an event log that is called the Events Context.
- Events Context – the stored collection of data on the TSN. Events (data) are stored in chronological order, creating a reproducible framework.
- Data streams – the primary form of TSN’s data output that creates a way for consumers to receive the up-to-date information stored and verified by the network’s nodes. Examples include US inflation and pricing data for digital assets.
- Indexes – examples of aggregated data that the TSN can make available for consumers oncde internal processing and calculations are performed. For instance, in early 2024, Truflation announced it would be publishing its own version of a Big Mac Index including data starting in 2010.
Truflation’s initial goal was to create a more accurate, up-to-date measure of inflation (as compared with measures like the CPI). It published a 20-page explanation of its methodology for calculating US inflation using its data providers. Although much of the methodology matches the CPI, the weights of various aspects differ, and more than half of the calculation is reported to be from alternative sources.
How is the TRUF token used?
TRUF is an Ethereum-based ERC-20 token used for three primary purposes: fees, governance, and staking. The latter two are closely related, which theoretically ensures that those with the most investment (financial and otherwise) in Truflation guide its development.
- Fees – Data consumers pay the network to obtain the information they need, paid in TRUF.
- Governance – TRUF holders can stake and lock their tokens for pre-determined amounts of time. In doing this, they are rewarded with veTRUF (voting escrow TRUF), which grants them voting rights. This model was pioneered by Curve.
- Staking – TSN node operators must stake TRUF tokens to participate in network activities such as data facilitation and provision, and this generates veTRUF they can use in governance.
Tokenomics and token distribution
The maximum total supply of TRUF is 1 billion tokens. Most of these (60%) are reserved for the ecosystem and released slowly over the course of 8 years. The number of tokens released per month is set to decrease slightly over time, creating—intentionally, but perhaps also poetically—a disinflationary supply.
The remaining TRUF has been allocated to investors (25%), the development team (13%), and advisors (2%) with vesting over the course of 2 years.
Conclusion
- Truflation is a blockchain-based project that seeks to collect economic data from various sources in order to offer that data to on-chain services. Its primary goal has been to publish accurate inflation data.
- The Truflation Stream Network uses four components—Adapters, Events Context, Data Streams, and Indexes—to collate, process, aggregate, validate, and deliver economic data to DeFi platforms and other consumers.
- TRUF is an Ethereum-based token that is used to pay fees for data, reward Truflation’s nodes, and govern the network’s development through a voting escrow system.