Aug 24, 2021
$AMPL — The Most Likely “Stablecoin” to Succeed Long-Term
Regulators are coming after stablecoins. Period. That’s the hard truth.
The stablecoins we know and love today might not be around tomorrow. And even if they are, there’s a good chance they will be highly regulated, censored, and controlled by the government and Federal Reserve.
I touched on this in my previous article — “It’s Regulation Season. The Target: Stablecoins” — if you haven’t read it yet, check it out.
In this follow-up piece, I dive deep into the why and how $AMPL will thrive in a regulatory clampdown on stablecoins. I explain how $AMPL is decentralized and uncensorable. And I dive into how $AMPL is like a stablecoin, but better.
There’s a lot to unpack here. Let’s get to it!
$AMPL is Like a Stablecoin
As stated by Brandon Iles, the CTO and co-founder of Ampleforth:
“$AMPL is not a stablecoin by conventional standards, but it can fulfill many of the same roles. You get a stable unit of account and safe denomination of debt.”
$AMPL — a Stable Unit of Account
$AMPL has a target price of ~$1.05 — the CPI-adjusted 2019 Dollar. $AMPL frequently fluctuates around this target price and can extend far above or beyond that during network growth or contraction periods.
However, no matter how far the $AMPL price strays, it always reverts to its price target. So, even when supply is volatile, $AMPL can be used as a stable unit of account.
$AMPL — a Safe Denomination of Debt
$AMPL provides a safe denomination of debt because when you borrow $AMPL, you always know how much you owe. Your debt is denominated in fixed $AMPLs. It doesn’t change, no matter what happens to the Ample network’s expansions or contractions.
With these stablecoin-like traits described above, $AMPL is well suited to be used as a composable DeFi building block that can be used to denominate stable contracts. Plus, $AMPL brings even more to the table that stablecoins do not.
$AMPL is Better than a Stablecoin
$AMPL is Decentralized
The Ampleforth protocol is built atop the Ethereum blockchain and inherits the same decentralization and security guarantees as Ethereum. Additionally, Ampleforth integrates Chainlink’s decentralized and reliable price data feeds for its CPI-adjusted target price and Volume Weighted Average Price (VWAP) of AMPL/USD.
$AMPL is Unbreakable
$AMPL has been live for more than two years now and continues to operate as expected. Unlike other rebasing assets that have come and gone, $AMPL is an independent financial primitive that does not rely on centralized collateral or lenders of last resort. In this way, $AMPL is like Bitcoin, except it can be used in contracts.
$AMPL is Censorship Resistant
$AMPL is 100% censorship resistant because the team has removed the upgradeability function for its $AMPL token forever. This means that no one can introduce contract upgrades that can change $AMPL, disable transfers of $AMPL, or tamper with $AMPL in any way. The removal of this function was the final step to making $AMPL genuinely decentralized and censorship-resistant, like Bitcoin.
Thriving in a Highly Regulated Crypto Environment
If you’re scared or worried about a heavily regulated crypto industry, stop what you’re doing and slap yourself.
The entire crypto industry was built on the ethos of decentralization and censorship resistance. If your favorite crypto project doesn’t stay true to these values, then I’m sorry, you’re out of luck. But if your favorite crypto project was built with decentralization and censorship resistance at its core, you’re gonna make it.
Now think about this:
Crypto is a multi-hundred billion dollar industry and it got to this point without financial institutions, without traditional companies, without banks, and without government funding. It’s actually kind of mind-boggling, and there’s nothing else like it, except for maybe the internet itself.
That said, it’s past the point of no return. The cat’s out of the bag. Crypto isn’t going anywhere.
Now, how did crypto get to where it is today?
One word: Speculation.
No matter what happens regarding regulation, crypto is ripe for speculating. It’s the primary driving factor of the industry. And the #1 thing speculators like to do is… use leverage.
How do speculators use leverage? They do it via borrowing and lending.
In today’s crypto market, speculators use stablecoins to lever up, and they use decentralized lending platforms like Aave to do it. They borrow stablecoins to further speculate on the market, and they do this a lot!
The largest pools on Aave are stablecoins, and they have by far, the most borrowing demand — over 95% of borrowed assets on Aave are stablecoins.
Now, picture this:
What if governments and regulators decide they want to put an end to this speculation? Or maybe they just outright prohibit stablecoins other than CBDCs.
What would happen?
They couldn’t shut down Aave because it’s decentralized, but they could ban centralized stablecoins from interacting with Aave. Depending on the extent of their regulatory power, they may be able to freeze certain funds, terminate accounts, and report accounts to the authorities.
In this scenario, stablecoins could go away. But the desire to lever up on crypto would remain.
$AMPL can Save AAVE & DeFi
Even if stablecoins really do go away. People will still want to borrow and lend.
This is where $AMPL shines.
$AMPL is an unbreakable, decentralized, and censorship-resistant asset that borrows and lends like a stablecoin because it provides a stable unit of account and safe denomination of debt.
Not only that, but $AMPL has outstanding borrowing and lending demand due to its elastic supply and dynamic but rules-based nature, enabling extremely high APYs on both the borrowing and lending side.
Take the deep dive into $AMPL on Aave by reading:
- AMPL is a New Asset Class for Aave — A World’s First
- Deep Dive — Borrowing Demand on Aave — Stables, Other Crypto’s and $AMPL
- How Lending $AMPL During Negative Rebase Periods Offsets Losses + Increases Your % of Supply
What’s more than being decentralized and censorship-resistant, is that $AMPL is secure, time-tested, and unbreakable.
Let me explain:
$AMPL effectively maintains price stability without centralized collateral, without lenders of last resort, and without variations of bonds or fractional reserve mechanisms.
It does away with all of these things because they’re a liability. And assets with liabilities can break and they have trouble scaling. Period.
$AMPL, on the other hand, is maintained entirely by 100% free-market incentives and is governed by the dynamic but rules-based Ampleforth protocol. It doesn’t break (time-tested for 2+ years), and it scales infinitely without the need for layer 2s (supply is elastic and baked into the protocol).
In this way, $AMPL differs from the centralized, decentralized, and algorithmic stablecoins that have liabilities (i.e., collateral, coupons, bonds, fractional reserves, back doors, regulatory pressure, etc.).
No matter what happens, $AMPL will always be there for people to borrow and lend.
$AMPL just wins.
