A startup called Basis has raised $133 million from top venture capitalists to build a “stable cryptocurrency” (also called a “stablecoin”).

A stablecoin is a cryptocurrency designed to eliminate the high volatility associated with most coins. The goal is to smooth out the ups and downs so the stablecoin is usable as an everyday currency.

Basis plans to stabilize its price by controlling coin supply, increasing it when demand is high and decreasing it when demand is low. It also mentioned possibly letting the coin's price rise when the algorithms detect inflation. This is similar to how a central bank operates (or should operate).

The tagline on Basis' site reads “A Stable Cryptocurrency With an Algorithmic Central Bank.”

Here's an excerpt that describes the goal from Basis:

When demand is rising, the blockchain will create more Basis. The expanded supply is designed to bring the Basis price back down.

When demand is falling, the blockchain will buy back Basis. The contracted supply is designed to restore Basis price.

The Basis protocol is designed to expand and contract supply similarly to the way central banks buy and sell fiscal debt to stabilize purchasing power. For this reason, we refer to Basis as having an algorithmic central bank.

Basis does not plan to “peg” its price to the dollar like other successful stablecoins such as Tether (USDT) have done. Tether is currently the largest stablecoin, with a $2.3 billion market cap. (It trades within a tight range, around $1.)

Basis' coin isn't live yet, so we don't know exactly how it will work in the real world. But the venture capitalists who are investing in this project clearly see huge potential.

The first signal is how much it raised: $133 million. That's a monster round of funding for such a young company. The average funding round for a company at this stage is typically a few million dollars.