Ampleforth’s Recession-Resistant Monetary System: Reducing Risk in Crypto

Documenting AMPL
8 min readMar 22, 2023

With the collapse of several traditional banks, including Silvergate, SVB, and now Credit Suisse, centralized monetary policy (as dictated by the central banks of several countries) is now at the forefront of global discussions.

It is no secret that the global economy is now beginning to feel the effects of rapid rate hikes that central banks are using to get a grip on inflation.

In the United States, this issue has been exacerbated by US Secretary of the Treasury (former chair of the Federal Reserve Bank) Janet Yellen after she publicly made comments that the government would only assist banks deemed a systemic risk to the financial system for uninsured depositors.

The deteriorating macroeconomic environment raises questions to the blockchain economy’s own resiliency from a breakdown in the traditional economy.

This paper is a continuation of the themes discussed in my previous paper, and it will discuss the current macroeconomic crisis the US is facing and how cryto communities can protect themselves from any potential fallout.

Why are Banks Failing in 2023?

The traditional economy is currently facing a potential recession following the monetary policy of the US Federal Reserve. The central bank has raised interest rates from near zero one year ago to 4.5–4.75 percent today.


When factoring in rising interest rates, many banks are now sitting on toxic investments due to unrealized losses on bond positions. When there is a bank run, several customers requesting withdrawals at once forces these banks to liquidate bond positions (at a loss), leading to bank failures. This issue is further fueled by the rapid spread of information through social media mediums, which can lead to bank failures in as little as one day.

This happened to several banks now, including SVB and now Credit Suisse. As contagion spreads and fears rise, more banks face stress. Larger banks have already begun reducing lending and insulating themselves with cash reserves.

What has this led to? Bailouts — but only for banks deemed worthy.

Credit Suisse is being consolidated within UBS, another major bank, to avert further contagion within the system. Silicon Valley Banks collapse led the US Fed to offer banks loans for up to one year in exchange for US Treasury bonds and mortgage-backed securities (two of the most popular assets on most balance sheets) if both Janet Yellen and a majority of the US Fed board approve of the loan. In other words, a bailout.


For reference, the collapse of SVB is the second largest banking failure in US history — the largest since Washington Mutual in 2008.

To expand upon Janet Yellen’s statements, fears have grown that depositors with uninsured sums (exceeding the FDIC’s $250,000 threshold) in smaller, regional banks may pull their funds in favor of larger banks that are more likely to be deemed by the Fed and US Gov as “too big to fail”.

This, in essence, would create a run on small and medium sized banks throughout the United States and abroad. The end result of such a crisis would likely be a massive consolidation of funds into a handful of mega-banks, like JP Morgan.

Why bailouts? Because a country that has added longevity to its economy through stimulus has only two choices — either let the economy contract violently to correct the problem, leading to a bursting of the debt bubble, or print more money to bailout systemically important institutions i.e. currency debasement. The latter option would make the debt more serviceable at the expense of the purchasing power of everyday families and individuals — just as the government did in 2008.

US Federal Policy Moving Forward

With the banking crisis being brought on by rising interest rates, this puts the Fed in a tough spot. If the Fed continues to raise interest rates, this is expected to result in a new recession with rising unemployment and further bankruptcies.

The Fed could also choose to pause rates, which would result in a recovery in asset prices. A rate pause would help prevent further losses within regional banks, but would also bring on additional inflation and essentially erase all progress made fighting inflation over the past year.

To summarize, the Fed is trapped between a rock and a hard place: there has been a year of tightening economic policy, but there is still inflation. Regardless of what the Fed chooses to do, there is significant risk to holders of the USD either due to bank runs or currency debasement.

Crypto Ecosystem Exposure

Crypto was born out of the idea of maintaining a separate economy for which individuals could use as insulation from harsh economic contractions associated with “bust” periods. However, crypto and the blockchain economy have a ways to go before true separation is achieved.

This was proven to be the case in the SVB collapse where USDC operator Circle held $3.3 billion in currency reserves for the stablecoin. The collapse of the bank led to the loss of these funds and a depegging of USDC. The contagion did not stop there, as other stablecoins (notably on-chain DAI) also depegged during the event. This affected user funds, outstanding debt obligations, protocol treasuries, and significantly imbalanced liquidity pools across several ecosystems.


In my previous paper, I outlined the many shortcomings of stablecoins, including the following:

  • Are subject to the same degrading forces of inflation as fiat currencies
  • Can be, in some circumstances, censored by regulators which results in the blacklisting of identified wallet addresses
  • Require third party, centralized management and bailouts during periods of stress, like black swan events

The key takeaway here is this: dependence on traditional fiat currencies means reliance on centralized monetary policy. This is how centralization has continued to creep into blockchain, and how centralized monetary policy is damaging to the crypto ecosystem during periods of stress.

Ampleforth’s Recession-Resistant Monetary System

Blockchain needs a stable asset that is entirely on-chain, decentralized, and not subject to bank runs or other recessionary pressures. The benefits of such a currency provide:

  • Insulation from black swan events and violent economic contractions (both in crypto and traditional finance)
  • Full protection from currency debasement due to bailouts, money printing, and inflation
  • An immutable, verifiable guarantee of on-chain reserves due to a rotating collateral model

The above traits are all found in Ampleforth’s SPOT token. When viewing the Ampleforth ecosystem as a whole, there are three distinct protocols that are working together to achieve the above characteristics. They are:

  • Ampleforth Protocol — provides a set of smart contract instructions that enable the AMPL token, an inflation-adjusting, rebasing collateral token
  • Buttonwood Protocol — provides the means for which to tranche out risk into separable, rotatable bonds
  • Spot Protocol — Provides the smart contract instructions that enable the SPOT token, an inflation-resistant, decentralized SoV currency

The combination of these three protocols is what makes up the Ampleforth monetary system — an immutable, decentralized, on-chain monetary system that provides users resistance to recessions.

Implementing the Ampleforth Ecosystem and Unlocking Recession-Resistance

The Ampleforth monetary system can be accessed in several different ways through the following tokens, depending on the desired risk exposure:

  • AMPL Token — provides investable exposure to the volatility of the Ampleforth ecosystem. Expansion of the money supply (more utilization of SPOT, more investment into AMPL) leads to gains on AMPL via supply increases and vice versa
  • wAMPL Token — provides the same risk volatility exposure as AMPL, only gains and losses are visible on the price side versus the supply side of the asset. This asset is favorable for exchanges as it has no rebasing mechanism.
  • FORTH Token — serves as the governance token of the Forth DAO and allows holders to vote on proposals and changes to the Ampleforth ecosystem and DAO treasury. The token is volatile and investable, though less directly related to ecosystem performance and more directly related to DAO value speculation.
  • SPOT Token — serves as the Ampleforth ecosystem’s base currency, providing the world with an inflation-resistant, stable store of value currency that can be easily denominated in contracts or used in peer-to-peer transactions. SPOT provides insulation from ecosystem volatility.

Each asset within the Ampleforth ecosystem has its own risks and benefits. Above all, the two most important assets to understand are AMPL and SPOT.

Example: Protocol Treasury Integrates Ampleforth

To provide context, consider this example:

Say a protocol treasury chooses to adopt the Ampleforth monetary system. Immediately, the protocol benefits from the inflation-resistant properties of the system due to the fundamental design of the AMPL token (either directly or via SPOT’s collateral model), regardless of risk exposure.

During a period of economic expansion (i.e. blockchain economy is positively growing), the protocol can choose to expose its treasury more to the AMPL token and benefit from the upside of monetary expansion.

During a contractionary period, the protocol can use its AMPL to mint SPOT tokens and insulate itself from the recession.

During periods of currency debasement in the traditional economy, both assets appreciate positively as 1 SPOT = 1 AMPL by approximation. In March 2023, this is ~$1.15 USD. This is an ongoing risk today.

SPOT (green) versus AMPL (red) — Spot Token Dashboard

To summarize, a protocol treasury integrating Ampleforth gains the following benefits:

  • Treasury becomes more decentralized, durable, and sustainable
  • Protocol funds are resistant to the negative forces of traditional monetary policy, including periods of contraction and/or currency debasement due to inflation
  • Treasury risk is easily visible and defined, allowing the community to better manage funds and achieve growth

Ampleforth Value Proposition: Big Picture

The bullish proposition here is that because of the massive amounts of stimulus used to “jumpstart” the traditional economy after periods of harsh recession(i.e. 2008), the economy becomes ever-more dependent on this stimulus to achieve growth. The byproduct of this is significant currency debasement. This is in line with the emerging idea of Modern Monetary Theory (MMT), minus the obvious and substantial drawbacks.

So long as the US Fed chooses to target a positive inflation rate, the value of AMPL/SPOT will also continue to grow over time, forever protecting holders from USD devaluation.

It won’t take economy-wide adoption of Ampleforth to unlock these benefits either — any individual stablecoin user, community, or ecosystem can choose to leverage the Ampleforth monetary system for recession-resistance. This is because Ampleforth is not dependent on a positive growth cycle to achieve value or enable the features described in this paper. This is due to the fact that SPOT can safely wind down to zero users without undergoing a bank run.

In contrast, Bitcoin (and other volatile assets) must achieve a positive, sustainable growth cycle to perform well as an SoV.

SPOT does not.

Regardless of market conditions, the nature of the AMPL token ensures that it always balances back to its price target of a 2019 USD adjusted for inflation. This makes the asset durable and reliable, no matter the overall adoption level.


The Ampleforth monetary system provides a recession-resistant solution for individuals and communities seeking to protect themselves from the negative effects of traditional monetary policy.

By leveraging the Ampleforth Protocol, Buttonwood Protocol, and Spot Protocol, users gain access to an immutable, decentralized, on-chain monetary system that provides resistance to recessions, protection from currency debasement, and verifiable on-chain reserves.

With ongoing fears in the traditional economy, it is never too late to insulate your project or yourself from centralized monetary policy.

To learn more, explore Ampleforth and Buttonwood documentation in the links below: