Why Aren't Amples a Stablecoin?
It's a misunderstanding to think that because Amples have an equilibrium price target, they can be thought of as interchangeable with modern day stablecoins. This is not the case. Below we identify the most common functional associations with stablecoins today, and explain why they don't apply to Amples.
1. Stablecoins remove volatility.
Ampleforth does not remove volatility from the system. In fact, by design it allows volatility. Amples are not a risk free asset, users can gain and lose value in the network.
2. Stablecoins are used as base trading-pair tokens on cryptocurrency exchanges.
Since Amples will likely be volatile, exchanges are better served using dollar-backed coins (or actual dollars) for the base trading pair use case.
3. Stablecoins are ideally suited for payments.
Using Amples for payments will be more like using Bitcoin or ZCash for payments, as we expect both price and supply to be volatile at launch.
Broadly, people think of stablecoins as a stand-in for the dollar on the blockchain, and while we believe this can one day be true of Amples in the future—just as some believe it will be true of Bitcoin—it is not the case today.
Amples are a new kind of digital asset that will move differently from today's cryptocurrencies. They are designed to be suitable for use as a "base-money," a form of collateral to be used as part of a centralized or decentralized banking system, similar to how gold was used before the collapse of bretton woods except macroeconomically friendly.
Other stablecoin related questions
We tend to get a lot of questions that are specific to stablecoins, but don't quite apply to the Ampleforth protocol—still we've tried to address them below.
1. Are Amples vulnerable to peg breaking?
The notion of peg-breaking is assumed in the Ampleforth protocol. It's what what causes the network to expand or contract and thus exists by design.
2. Are Amples vulnerable to death spirals?
First we'd like to reiterate that Amples are not a stablecoin, and we'll remind the user that people tend only to talk about death-spirals in this context, but far less often when thinking about floating price tokens.
There isn't really the notion of a death-spiral present in Amples in the sense that, there isn't some core utility token whose value is being upheld by a separate token where beneath some threshold, the core utility token loses all value. Amples are not a bank, they are a commodity-money that algorithmically promises to expand and contract in response to demand.
However there will be momentum, just as there is with floating price tokens. When traders are bullish it's likely there will be positive price action that pushes forward until resistance is met. And when traders are bearish, there will likely be negative price action that pulls until a support level is met.
The protocol accelerates discovery of supply and demand equilibria to an extent, but it's important to remember that the more the network contracts, the cheaper it becomes to accumulate support, and the less valuable it becomes for a given trader to exit their position—just as it is with floating price tokens. The role of the trader is to sell at peaks and avoid "falling on the knife" so to speak.
To the extent there's a remote possibility floating priced tokens like BTC can fall to zero if the market loses all faith, this remote possibility exists for Amples as well—but not in the uniquely devastating manner typically associated with the notion of a stablecoin death-spiral.