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Why AMPL Is Essential for DeFi Users in 2023 and Beyond

By Zacharias | Zacharias | 13 Sep 2023


Back in 2020 and 2021, AMPL found itself often compared to speculative assets like Bitcoin. On a superficial level, both were speculative, volatile, and magnetic for potential investors.

Yet, a crucial difference separated them: while Bitcoin’s price was subject to volatility, AMPL’s unique feature was its fluctuating supply. Despite the challenges posed by its supply volatility, AMPL consistently gravitates towards a price target tethered to a CPI-adjusted 2019 USD.

So, at a glance, AMPL might seem akin to Bitcoin — a speculative commodity. But herein lies the question: what makes AMPL worth attention in 2023?

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AMPL’s CPI-tracking is clear in its price target growth - Ampleforth Dashboard

The Value Proposition of AMPL in 2023

While Bitcoin's volatility impedes its viability as a consistent medium of exchange, AMPL stands apart thanks to its CPI-adjusting rebase mechanism. Its dynamic supply expands or contracts in response to demand, ensuring inflation or ownership dilution remains a non-issue. A stake in the AMPL network today will retain its proportional value tomorrow.

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Price volatility (left) versus supply volatility (right) - SPOT Documentation

AMPL's demand is underpinned by its present-day role as a dynamic (or "elastic") collateral asset. The elasticity of AMPL paves the way for cutting-edge on-chain financial derivatives. A noteworthy innovation hailing from ButtonWood is tranching, a risk segmentation method that breaks down the rebase risk inherent in AMPL tokens. 

This mechanism forms the foundation for the newly introduced flatcoin, SPOT. A rotating collateral system ensures low-risk AMPL tranches are consistently interchanged as SPOT's backing.

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The ButtonTranche protocol can segment risk associated with rebasing assets into Senior and Junior tranches - SPOT Documentation

Owing to this rotating, low-risk collateral mechanism, SPOT not only reaps the benefits of AMPL — inflation resistance and a robust unit of account — but also distinguishes itself as a stable value store. Investing in SPOT today guarantees equivalent purchasing power in the foreseeable future.

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SPOT’s rotating collateral vault ensures maturing tranches are always replaced with fresh AMPL tranches - SPOT Documentation

SPOT's beauty lies in its solution to the stablecoin conundrum: it offers a decentralized, stability-focused currency safeguarding users from fiat's primary flaw—currency debasement/inflation. Yet, it sidesteps the pitfalls of over-collateralization (like DAI), unreliable mechanisms (like Terra), or sheer centralization (like USDC). In essence, SPOT is DeFi's dream asset

Why You Should Be Paying Attention to AMPL

AMPL's trajectory is intrinsically linked to SPOT's market cap growth. In its nascent stages, AMPL shared Bitcoin's challenges, being a tricky token for practical currency use beyond speculation. 

However, as SPOT's demand escalates, so will AMPL's, fueled by the necessity to back more SPOT. Over time, as the ecosystem flourishes, it promises enhanced stability and predictability.

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SPOT (green) versus AMPL (red) price action - SPOT Dashboard

The potential for regular positive daily rebases could mirror the general inflation rate observed in fiat currencies like the USD, albeit with a twist. Instead of debasing the currency as with the USD, the system's CPI-tracking adjustments will continually ensure purchasing power remains intact.

CPI-tracking tokens, i.e. flatcoins, are already becoming a driving narrative for many within the DeFi space as the next iteration of stablecoins. And, thanks to years of hard work and innovation, AMPL and SPOT are the first to provide the market with a tangible solution.

Learn more at spot.cash

This article was originally posted on the DocumentingAMPL Medium Page - https://documentingampl.medium.com/why-ampl-is-essential-for-defi-users-in-2023-and-beyond-6eff7e64a008 

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Zacharias
Zacharias

I like DeFi, philosophy, and economics | Founder of RekTimes


Zacharias
Zacharias

My raw thoughts, ideas, and research

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