Ampleforth Ecosystem (AMPL, SPOT) Aims to Provide Non-Discretionary Monetary Policy

By Zacharias | RekTimes | 15 Jun 2022

15 June 2022: A major shortcoming often addressed when considering the cryptoeconomy is the lack of a suitable, on-chain stable asset with which to limit volatility and external inflation. Most cryptocurrencies have struggled to accurately and efficiently play the role of money. To be considered money, it must serve as:

unit of account
medium of exchange
store of value

Many blockchain-based assets, including Bitcoin, Ethereum, & others, fall short in efficiently meeting all three of there parameters. Attempting to eliminate volatility has also been proven foolish with the failed attempt by Terra Luna. Volatility within the cryptocurrency market is often cited as a major downside of the space for long term adoption.

Stablecoins offer some solutions but introduce a high degree of centralization and exposure to external monetary policy that is inappropriate for DeFi's long term future. This is where AMPL's stable unit of account SPOT comes in. The underlying monetary mechanics of the AMPL/SPOT ecosystem offers both blockchain-based entities & emerging markets a unique opportunity.

Ampleforth (AMPL) & SPOT

Ampleforth (AMPL) is an Ethereum-based rebasing token and is the very first cryptocurrency to successfully implement protocol volatility into supply rather than price.

This means that the existing supply of AMPL is fluid, automatically adjusting daily to move the price of one AMPL to its fixed price target of a CPI-adjusted 2019 USD (currently valued at $1.10 USD). This is called rebasing.

Because of the 2019 USD price target, AMPL is a non-discretionary, algorithmic unit of account. The AMPL protocol offers protection from both inflationary & deflationary environments, depending on the direction of the PCE / CPI. It also cannot be altered or upgraded, meaning the base protocol of AMPL is entirely decentralized.

Despite the price being relatively price stable, AMPL itself is not a stablecoin. Stablecoins attempt to remove volatility entirely while AMPL simply transfers this volatility to supply. Because of this, AMPL serves as the perfect collateral for a coming stablecoin called SPOT.

SPOT will be an on-chain stablecoin, similar to DAI, except it will be collateralized with AMPL and associated derivatives. In this regard, AMPL is like a decentralized central bank (automatically adjusting money supply) with the FORTH token being used as governance over the protocol DAO.

How SPOT Stablecoin Functions

SPOT will be collateralized with AMPL and other derivatives to give the coin stability as a SoV. Considering the strength of AMPL alone, SPOT can maintain real price stability through the splitting of the AMPL rebase itself into senior & junior tranches.

This would act very similar to that of bonds or mortgage-backed securities, where the senior tranches are mature and lower risk whereas the junior tranches carry higher risk.

So now consider the asset AMPL - just like any other assets in the market, it is subject to contractions in market cap.

However, during periods of extended selling and heightened market fear, the asset can only contract so much (for AMPL, historically no more than 80%). The remaining 20% of AMPL that cannot contract would be representative of the senior tranche.

Taking these senior tranches, combined with the unbreakable nature of the AMPL protocol, and collateralizing a stablecoin (SPOT) with it offers some truly unique advantages over other cryptocurrencies AND other state-backed currencies.

Key Benefits to Consider of AMPL/SPOT Adoption

Should an emerging market or blockchain-based entity (applications, exchanges, etc.) adopt and implement blockchain technology & the Ampleforth ecosystem, AMPL/SPOT as a currency of trade offers:

Non-Discretionary Monetary Policy - AMPL being non-discretionary means it is protected from changes to PCE / CPI due to shifts in monetary policy, protecting adopters from both inflation & deflation that may impact economic growth. This provides unmatched stability for an emerging economy to leverage.

Unbreakable Collateralization - AMPL doesn't have to worry about a depegging event simply because it has no collateral creating such a peg. AMPL can algorithmically adjust simultaneously in every wallet across blockchains each day. SPOT using AMPL as collateral inherits this durability, reinforcing its status as a stable asset. This is elevated further with the introduction of low risk derivatives like a senior tranche.

Economic Decentralization - Utilizing foreign currencies places monetary control outside of would-be adopters and crypto stablecoins are generally either highly centralized or risky. The Ampleforth ecosystem offers adopters a decentralized currency that provides all of the base functions of money and the benefits of distributed ledger technology without sacrificing monetary control to another entity.

Global Interoperability - Currently, many emerging markets lack a desirable currency to facilitate trade & cross-border transactions directly with. The Ampleforth ecosystem offers adopters a decentralized currency that is globally transferable, leveraging the distributed Ethereum blockchain network that can be used for cross-border transactions, near- instantaneously, anywhere in the world at any time.

Any entity utilizing an Ethereum-based unit of account opens up the country to further liquidity & financial options within the Ethereum ecosystem. This offers access throughout what is now a ~$1 trillion economy. As the cryptoeconomy continues to mature & develop, adopters will already be positioned as a world leader within the new digital financial system.