Author: Gamals Ahmed, CoinEx Business Ambassador
ABSTRACT
Decentralized finance (DeFi) is all the rage in 2020 as projects in the field continue to explode. The total value locked in lending protocols has skyrocketed throughout the year.
And while there are plenty of exciting projects, this research report presents a protocol with unique features.
The project in question is Ampleforth (AMPL). It addresses a few problems that even Bitcoin, being the primary and most widely adopted and perhaps, understood, cryptocurrency, has.
Decentralized Finance (DeFi) following the success of several lending platforms such as Compound ($COMP), Aave ($LEND), dYdX, etc. Ampleforth is a DeFi protocol that aims to reinvent money both within and beyond the cryptocurrency space. While centralized finance (CeFi) and DeFi as we know today have their own unique sets of problems, the Ampleforth protocol is here with the aim to address them.
1.INTRODUCTION
The smart commodity money with a unique elastic supply protocol. AMPL supply expands and contracts in response to it’s price deviating from a 1 USD target. Deviations result in a supply change of AMPLs once every 24 hours, increasing or decreasing the number of tokens in each holder’s wallet pro-rata. Ampleforth is the only asset in the world with this elastic supply property, and therefore could have counter-cyclical trading pressure and is uncorrelated with other digital assets such as Bitcoin.
Short term use: diversification in cryptocurrency portfolios.
Medium term use: a reserve collateral in decentralized finance systems such as Maker DAO.
bLong term use: An alternative to central-bank money, like bitcoin but macro-economically friendly.
Non-dilution: own a fixed percentage of the network as changes to the supply of AMPLs go directly into the wallets of holders.
Investors: Some of the most reputed names in crypto, including Pantera Capital, Brian Armstrong (co-founder and CEO of Coinbase), Slow Ventures, Huobi Capital and FBG, back the project.
Advisors: Ampleforth is advised by Augur co-founder Joey Krug, Pantera Capital’s Paul Veradittakit and renowned economic historian Dr. Niall Ferguson, (Stanford, Harvard and Oxford Universities; Senior Fellow at the Hoover Institute.)
1.1 OVERVIEW ABOUT AMPLEFORTH PROTOCOL
Evan Kuo, an engineering graduate of UC Berkley, created Ampleforth. He was also the former CEO of Pythagoras Pizza, the first pizzeria to tokenize its franchise.
Kuo’s motivation for creating Ampleforth was twofold. The death of his father, which made him want to leave a legacy after his passing, and his passion for tech and finance which brought him into the cryptocurrency industry.
He recognised two things that cryptocurrency was trying to reinvent: money and banking. Of the two, money was a lot easier to work with and so that became his focus.
Pantera Capital, True Ventures, Huobi exchange and Brian Armstrong, then funded the Ampleforth Foundation. Most of the members of the foundation consist of “engineers, academics, investors, and enthusiasts” from Ivy League universities.
Ampleforth raised a total of nearly $10 million USD in 2 Initial Coin Offerings (ICO) and an Initial Exchange Offering (IEO).
Ampleforth is a self-billed “Smart Commodity Money” initially deployed on Ethereum as an ERC20 token. Founded with a mission to create fair, politically independent money, the creators noticed that commodity-monies like gold and silver are naturally fair and independent.
But unfortunately, these commodity-monies can’t efficiently respond to changes in demand, making them a poor substitute for central-bank-money.
Ampleforth’s token AMPL is somewhat like Bitcoin, gold, or silver but with a unique elastic supply that constantly seeks price-supply equilibrium. When AMPL price changes, the system seeks a new equilibrium point by universally expanding to, or contracting from all holders.
In brief
Ampleforth (AMPL) is a cryptocurrency protocol with an elastic supply that can expand and contract based on market demand
The protocol’s unique token dynamics make it a promising form of collateral for DeFi
AMPL is not entirely a stablecoin because it doesn’t eliminate volatility — its protocol aims to reduce volatility
Ampleforth describes itself as “adaptive money built on sound economics,” aiming to combine the scarcity of Bitcoin with the elasticity of fiat
Ampleforth is a cryptocurrency attempting to reinvent money. The protocol’s native token, AMPL, is designed to be used as collateral for decentralized banking systems and as an alternative base-money for the crypto-economy. AMPL operates as an ERC-20 token on top of the Ethereum blockchain.
The Ampleforth protocol’s implementation of “countercyclical” economic policy sets it apart from other DeFi protocols. Simply put, this means if the demand for AMPL increases, the supply of the tokens also increases to offset changes in price. This countercyclical nature is desirable from an investment perspective, as it gives AMPL a low correlation to the likes of BTC and ETH.
A system like this is optimal in establishing a stable price medium of exchange over long time frames. Ampleforth’s goal is to bring back commodity money without the hard limitations imposed by commodities with capped supply and issuance, like BTC and gold.
In straightforward terms, AMPL is a digital currency that adjusts its supply based on market conditions. It’s essentially a decentralized protocol that will inflate or deflate the existing AMPL tokens in circulation based on the current market conditions.
A common misconception is that AMPL is a stablecoin. It’s not. The protocol intends to keep the price relatively stable at around $1. Unlike existing stablecoins, however, its value isn’t pegged to the US Dollar. Instead, the protocol adjusts the supply of AMPLs on the market to either increase or decrease its current market price.
In other words, your wallet balance will change based on the current price of AMPL every day. Currently, some of the major exchanges supporting AMPL trading are KuCoin and Bitfinex, and holding AMPL there or in any other ERC-20 wallet will allow you to take advantage of the rebase.
What this means for AMPL’s market capitalization is that as long as there’s a demand for it, the number will be going up. And as the protocol matures and increases in market capitalization, the price will fluctuate less and less.
Ampleforth brings an incredible degree of disruption to the way that we conceive cryptocurrencies. It changes the model from a price-based trading strategy to a supply-based strategy that guarantees more independence from the performance of other cryptocurrencies like Bitcoin.
The independence of Ampleforth leads to a lot of important applications in diversifying portfolios and creating a replacement for centralized-bank currency that isn’t subject to the woes of deflation and truly benefits everyone fairly. It’s patently clear that there’s huge demand for something like this; the $5 million, 11-second IEO speaks for itself. Ampleforth presents an incredibly promising view for a future with supply-based cryptocurrencies, guaranteeing a more diverse, fair, and independent market.
1.1.1 WHAT’S THE GOAL OF AMPLEFORTH?
AMPL takes the concept of flexible supply from fiat currencies and eliminates the totalitarian control over this supply.
Think of it as gold that increases and decreases in supply as and how the market dictates. The key aspect of Ampleforth is that the market, not the founders or a government, gets to decide what supply should look like.
Imagine if the world was never taken off the gold standard. Gold’s limited issuance per year would’ve limited growth because its price can only scale so much. Now imagine if gold was a digital commodity whose supply expands in times of high demand and shrinks in times of muted demand. All while using data and sentiment as a yardstick rather than the opinions of experts who make up a “board of directors.” That’s Ampleforth in a nutshell.
Further, by creating an asset whose value counters traditional boom-bust cycles, AMPL can become a crucial addition to cryptocurrency portfolios — and one day, perhaps even global macro portfolios.
1.1.2 THE PROBLEMS THAT AMPLEFORTH (AMPL) POSES TO SOLVE
1. Supply meets demand with no dilution
There are situations where more money is simply needed. However, unlike the fiat money-printing machine, which dilutes those who hold cash, AMPL doesn’t do it.
If more AMPLs are needed, they will be supplied, but the adjustments are applied universally and proportionally across every wallet’s balance. This simply means that your percent ownership of the network remains fixed — much like Bitcoin.
2. It solves the inelasticity issue of Bitcoin and gold
On the other hand, there’s no predetermined amount of AMPLs to ever be in supply. This means that there can be as many as there’s a need for.
This tackles the inelasticity issue that store of value assets like Bitcoin and Gold have, making AMPL a viable means of exchange as well.
3. Scalability
According to the project’s Whitepaper, the Ampleforth Protocol is chain-agnostic. While it’s currently deployed as an ERC-20 standard token, it can exist simultaneously on many platforms.
1.1.3 THE FEATURES IN AMPLEFORTH
The inherent qualities of the protocol make AMPL a unique value proposition for a range of different purposes.
1. Diversify Your Portfolio in the Short Term
Since the current DeFi market craze is attracting more and more interest, the demand for AMPL heavily outweighs the daily rebases. This has created a continuous cycle of perpetual rebases, fueling more and more AMPL tokens to the wallets of those who hold them.
This apart, AMPL has demonstrated unique uncorrelation with the rest of the cryptocurrency market.