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Λmpleforth

Smart Commodity Money
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Commodity Money
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1. What is Ampleforth?

Ampleforth is a digital-asset-protocol for smart commodity-money.

2. What makes it special?

The Ampleforth protocol receives exchange-rate information from trusted oracles, and propagates that to holders of its units (Amples) by proportionally increasing or decreasing the number of tokens each individual holds.

For traders, these changes in exchange-rate and quantity translate into changes in Ample’s market capitalization. Traders with short time horizons, especially those using automated or algorithmic approaches, will thus have to devise new strategies to trade Amples.

Ultimately, unique trader behavior in response to the protocol’s incentives, is expected to produce a step-function-like movement pattern with lower correlation to Bitcoin than existing digital assets. This makes Amples uniquely suited for the following near, medium, and long term uses.

1. near-term use
For diversification in cryptocurrency portfolios
2. medium-term use
As reserve collateral in decentralized banks such as Maker DAO
3. long-term use
An alternative to central-bank money, like bitcoin but macroeconomically friendly

* Please note: Amples should not be thought of as a stablecoin. To learn more read: Why aren't Amples a stablecoin?

 

3. Why was it created?

Founded with a mission to create fair, politically independent money, the protocol’s creators noticed that commodity-monies like gold and silver are naturally fair and independent.

Unfortunately, such commodity-monies cannot efficiently respond to changes in demand, making them a poor substitute for central-bank-money.

To address this shortcoming, the project's founders designed a synthetic commodity-money that propagates price-information into supply, much like how thermal expansion propagates nearby kinetic energy into a material’s volume in the natural world.

4. How does it work?

The Ampleforth protocol always seeks a price-supply equilibrium, and will automatically enter a state of unrest until it finds one. To illustrate this, we can walk through a simple example:

>> Equilibrium 1:
Alice has 1 Ample worth $1.

>> Demand Doubles:
Alice has 1 Ample worth $2.

>> Equilibrium 2:
Alice has 2 Amples each worth $1.

When demand changes, the system seeks a new equilibrium point by universally expanding to, or contracting from holders.

In the case above, when demand suddenly increases, the system seeks a new price-supply equilibrium, such that Alice ends up with 2 Amples each worth $1. And the opposite would be true if demand decreased.

* Please note: Although Amples have an equilibrium price-target, they cannot be thought of as a stablecoin initially. Specifically:

1. User balances can gain or lose value.
2. The time to reach equilibrium is market dependent.

To learn more read: Why aren't Amples a stablecoin?

5. What are the benefits of seeking Equilibrium?

Whether Alice holds 1 Ample worth $2, or 2 Amples each worth $1, makes no difference in terms of net balance, but there are two key benefits to seeking price-supply equilibrium:

1. It applies countercyclical pressure
2. It encourages a stable unit price

Together these properties allow Amples to avoid the monetary problems of fixed-supply commodities, without requiring a central authority.

6. A Distinct Movement Pattern

Unlike current-generation cryptocurrencies, gains and losses in the Ampleforth network are attributed to supply in addition to price. Thus it benefits traders to take both information signals into consideration. Common technical analysis methods like Simple Moving Average will not paint the full picture. Imagine the price and supply series below:

A trader looking only at price cannot differentiate between selling at t < O and t > O because by all appearances the price series chart is symmetric. However, a trader looking at price × supply sees an asymmetric opportunity and can capitalize on it.

As a result, the movement pattern of Amples will be distinct from today’s cryptocurrencies, and therefore has the potential to be uncorrelated with existing digital assets. For a complete explanation, see the whitepaper.

7. The Evolution of Risk & Reward

Thus far, digital assets like Bitcoin have been uncorrelated with all other asset classes, making them uniquely useful for modern portfolio construction. But over time, as the market adoption of Bitcoin increases, both risk and reward will naturally decrease, changing its utility to become a more reliable store of value.

Like Bitcoin, Amples also evolve in utility alongside risk / reward. However in its final state, Amples become a macroeconomically friendly commodity-money that can be used as an alternative to central-bank-money, rather than a digital-silver or digital-gold.

8. Advanced Reading - The Red Book

The Ampleforth Red Book is a sequenced list of foundational reading material on the Ampleforth protocol, and its units (Amples). Due to the unorthodox nature of Amples, we felt it made sense to present a comprehensive view of what Amples are, how they can be traded, and how they fit into the broader economic landscape. Any interested reader will be able to follow the topics covered.

The first course discusses how to trade and interact with Amples, beginning with the protocol. The second course discusses current-generation cryptocurrencies in a broader economic context and the motivation for the Ampleforth solution.

Course 1 - Trading

Course 2 - Economics



start reading: course 1